The markets edged up 3% last week with the Nifty closing at 4976 and the Sensex at 16741. The coveted 5000 mark in the Nifty was crossed in intraday terms Thursday, but couldn’t close above the mark. The main reason for the continuation of the rally was much better than expected advance tax numbers that started creeping in on Tuesday, 15th September.
The advance tax numbers that the markets get form various sources are not authentic but past experience is that these numbers are usually in sync with the actual numbers that are reported later in the quarterly numbers. There are grave risks in averaging such numbers and taking them as a fair representative of the sample is still more risky. But nevertheless, these numbers do tell you that corporate India did pretty well last quarter.
While Shipping Corporation’s advance tax seems to be 6.5% larger than last quarter, SBI registered a sharp rise of more than 1000%. The average QoQ rise for the 16 companies for which the markets got the estimates was 170%.
Apparently the markets have discounted these numbers in advance, otherwise the rise in the markets would have been much larger than 3%. I think the market’s reluctance to go entirely by these hush-hush numbers is understandable. The first reason is obviously the fact that the sample is not fully representative of the universe.
But second and more important reason is this that the markets would like to see the quality of these earnings. Are the profits, which these advance tax figures indicate, only a function cost cutting and other income or the result of some solid rise in sales? I think, if it is established later by the quarterly results that sales growth was healthier than expected, there is further room for the markets to surprise us going forward.
This week is holiday shortened as well. The markets will be closed today on account of Eid holiday. That will leave only two more trading sessions before the final trading session on Thursday for the September series. The open interest at Rs 1,18,177 Cr is the highest we have seen since January 2008. The 5000 strike price has attracted both Call as well as Put writing.
If past is any experience, the bulls are known to have held on to their bullish ways in the final week if the going has been good in the penultimate week. Crossing the 5000 mark in the Nifty and going beyond the 5100 mark are with in the realm of possibilities.
The second important event of the week was the selling of Treasury stock by Reliance. Petroleum Trust sold a portion of RIL shares it owned at an average price of about Rs 2,125 a piece to rake in Rs 3188 Cr. While a section of the market reads it as an act done at an opportune time, others see an acquisition of oil assets ahead for the company, may be in Brazil.
But the comment by the Director General Hydro Carbons, Mr V K Sibal on Saturday, which was covered by the pink papers Sunday, could move the markets Tuesday. Mr Sibal is said to have commented that each well in the D-6 fields of Reliance Industries in the Krishna-Godavari (KG) Basin can produce about 6 to 7 mmscmd. This is almost four times the official estimates.
It is normal for the DGH to cut down on estimates of companies and not increase them suo motto. While this is not an official stamp on the estimates, nothing is left to imagination either.
Peak gas production of Reliance from D-6 fields, which was estimated to be around 80 mmscmd is now being indicated at 360 mmscmd. What does this mean for the company and the rest of the markets.
While no doubt that the stock may get positively impacted when the markets open, in reality it may be difficult to monetize this kind of gas even by 2012. Why? A simple reason, Where is the demand and where are the pipelines?
If this is the kind of gas that we would have in the future, companies that lay and own the pipelines will do well in the future and the user industries will also breath easier as it’s costs will go down. That calls for some delicious kheer on Eid. |
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