Thursday, July 18, 2013
That Indians are in love with fancy houses and precious metals is no secret. This only gets affirmed by the sharp rise over the past five years in the share of national savings diverted from financial assets, such as bank deposits, bonds, mutual funds, equities and insurance & pension funds, to physical ones — land, buildings and precious metals. This diversion has led to a corresponding fall in the flow of capital to productive sectors, affecting the capex cycle and economic growth.
According to Central Statistics Office (CSO) data, nearly half (46.4 per cent) of the country’s gross domestic savings in 2011-12 were in physical assets — a nine-year high. At the peak of India’s economic boom when GDP growth stood at 9.3 per cent in 2007-08, the corresponding ratio was a 12-year low of 29.3 per cent. The skew towards physical assets is even worse for households, including individuals who account for the bulk of total savings. In the past 10 years, households accounted for 72.6 per cent of India’s gross domestic savings on an average.
ArcelorMittal has decided to scrap the 12-million-tonne-a-year plant in Odisha following delays in getting land and securing captive iron ore resources. (BL)
At a time when the Prime Minister’s Office is busy paving the way for fuel linkage to new power projects, India’s largest electricity generation company, NTPC Ltd, is claiming that capacities worth nearly 5000 MW are lying idle due to lack of demand.(BL)
The transportation infrastructure business segment of L&T has bagged an order worth Rs20.85bn from the Transport Ministry of Oman for the construction of Al Batinah Expressway Package 4. (BL)
Lanco Resources Australia has secured conditional approval from the Environmental Protection Authority of Western Australia to develop a coal-handling berth at Bunbury port. (BL)
The benchmark indices swung in and out of positive territory but managed to close in the green powered by buying in FMCG counters especially HUL. The market opened gap up after the government hiked foreign direct investment in 13 sectors, including 100% in telecom and higher caps in insurance and defence sectors. However, the indices saw a free-fall post lunch. It staged a stellar recovery from the day's lows thanks to index heavyweight Hindustan Unilever.
The FMCG behemoth shot up over 9% on account of FTSE rebalancing. From July 22, its float increases to 33% from 24% in FTSE's All-World and All Emerging indices. Meanwhile, the company has hiked prices of some of its best selling products in the soap category by up to 15%.
If we exclude the rally in Hindustan Unilever, the overall market breadth was weak. Interest rate sensitives like banking, auto and realty continued to witness heavy selling post measures announced by the Reserve Bank to curb the rupee's volatility on Monday. The central bank curbed speculation in the currency market by making short-term funds more expensive for commercial banks to access. The move is aimed at making the debt markets more attractive to foreign investment.
The other major laggards were capital goods, metals and healthcare stocks.
The Sensex closed at 19, 948, up 97 points, while the Nifty shut shop at 5, 973, up 18 points, over Tuesday's close. The BSE Smallcap and Midcap indices ended lower by 0.2% and 0.5%, respectively.
The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,288 stocks declined against 1,032 advances, while 146 stocks remained unchanged.
It was a volatile day of trade as gauged by the intra-day range of the India VIX. It ended up 2% at 19.36 after hitting a high of 19.59 and low of 17.76.
On the earnings front, HDFC Bank's Q1 FY14 results were in line with IIFL’s expectations. However, the stock plummeted 2.36% at Rs. 662.65 on asset quality issues.
The Axis Bank scrip declined 3% to close at Rs. 1,193 ahead of its Q1 FY14 results on Wednesday. Commenting on the same, Amar Ambani, Head of Research at IIFL, sees Axis Bank posting a net interest income of Rs. 27.87bn, a gain of 27.9% year-on-year. On the net interest margin front, Ambani sees a 23 bps YoY rise at 3.6%. He forecasts a 24.4% YoY growth in net profit at Rs. 14.35bn.
Stocks in News:
The gainers pack was led by Hindustan Unilever, Asian Paints, Ambuja Cements, NTPC, ITC, Tata Power, ACC and Reliance Industries while Tata Steel, Bank of Baroda, Axis Bank, Ranbaxy, HDFC Bank, Cairn India, NMDC and IndusInd Bank lost out.
Ranbaxy closed at Rs. 331.9, down Rs. 9.5 or 2.7%, on reports that its Toansa and Mohali plants in Punjab are under the US Food and Drug Administration's scanner.
Telecom shares, which were in the spotlight for the last couple of days saw huge profit-booking. The government raised the FDI cap in telecom sector to 100%. Bharti Airtel and Reliance Communications dipped 2% each while Idea Cellular tanked 4.2%. MTNL bucked the trend and ended in the green up 1.4%.
I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant – Alan Greenspan
Choosing not to spook markets, the US Federal Reserve's chairman, Ben S Bernanke, reiterated his stance that the Fed remains committed to its easy money policy and there were no plans to taper its $85bn per month bond buying program anytime soon. Asset purchases depend on economic and financial developments, but they are by no means on a preset course, he affirmed.
Given that global markets are mostly higher, we have a positive opening in store. The indices may remain in a narrow range with action continuing on corporate announcing their numbers. TCS will be in focus but the numbers are expected after market hours.
Precious metals fall from recent price gains and slight gains in the U.S. dollar index
Bullion metal prices ended moderately lower on Wednesday, 17 July 2013 at Comex. Gold prices ended the U.S. day session modestly lower as prices fell from recent price gains and on slight gains in the U.S. dollar index on the day. Gold pushed to its daily high after the release of prepared remarks from Federal Reserve Chairman Ben Bernanke, who spoke before the U.S. House of Representatives later in the morning.
Gold for August delivery ended lower by $12.9 (1%) at $1,277.5 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday.
September silver ended lower by $0.52(2.6%) at $19.42 an ounce on Wednesday.
Prepared remarks from Ben Bernanke's testimony in front of the House Financial Services Committee provided an opening boost to stocks today. Mr. Bernanke's comments were in-line with previous statements, indicating the Federal Reserve plans to base its decisions on the incoming data. The Fed Chairman expounded on this by saying asset purchases could be scaled back if economic conditions improve faster than expected, and inflation rises towards the Fed's objective. However, if financial conditions were to tighten, the current pace of purchases could be maintained or increased.
Also of note, The Federal Reserve's July Beige Book was generally in-line with reports from prior months. The Beige Book indicated that pricing pressures remain contained and housing continues on a ‘moderate to strong' pace.
The U.S. dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.08% on Wednesday.
Among economic data expected at Wall Street today, housing starts hit an annualized rate of 836,000 units during June. Market had expected for housing starts to hit an annual rate closer to 958,000. The large miss was mostly due to 26.2% decline in multi-family units while single-family starts declined by 0.8%.
Separately, today's weekly MBA Mortgage Index decreased 2.6% to follow last week's decline of 4.0%. While the weekly reading can be quite volatile, this was the fifth negative reading in a row and the ninth decline out of the past ten weeks.
At the MCX, gold prices for August delivery closed lower by Rs 122 (0.5%) at Rs 26,347 per ten grams. Prices rose to a high of Rs 26,798 per 10 grams and fell to a low of Rs 26,240 per 10 grams during the day's trading.
At the MCX, silver prices for September delivery closed lower by Rs 866 (2.1%) at Rs 40,154/Kg. Prices opened at Rs 41,150/Kg and fell to a low of Rs 39,931/Kg during the day's trading.
Trading of CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 17 points at the opening bell. Software major TCS unveils its Q1 June 2013 results today, 18 July 2013. Axis Bank and Kotak Mahindra Bank will also declare their Q1 June 2013 results today, 18 July 2013. Asian markets dropped on Thursday, 18 July 2013, after China's Finance Minister Lou Jiwei said the government is unlikely to provide a big fiscal stimulus this year.
The Reserve Bank of India on Wednesday, 17 July 2013, said it has decided to conduct a special 3-day repo at an interest rate of 10.25% for a notified amount of Rs 25000 crore with a view to enabling banks to meet the liquidity requirements of mutual funds. This facility will be made available for a temporary period until further notice, RBI said.
Steel stocks will be in focus after Luxembourg-based ArcelorMittal on Wednesday, 17 July 2013, said it has decided to scrap the 12-million-tonne-a-year steel plant in Orissa due to delays in acquiring land, uncertainties over iron-ore supplies and deteriorating market conditions. ArcelorMittal signed its initial agreement with Orissa's government to construct the plant in December 2006, but it hasn't been able to acquire any land for the project because of protests by local people. ArcelorMittal plans to build two other plants in Jharkhand and Karnataka, and it plans to continue with those projects despite facing delays there too, the company said.
Mahindra & Mahindra turns ex-dividend today, 18 July 2013, for total dividend of Rs 13 per share for the year ended 31 March 2013 (FY 2013).
IDFC turns ex-dividend today, 18 July 2013, for dividend of Rs 2.60 per share for the year ended 31 March 2013 (FY 2013).
Glenmark Pharmaceuticals turns ex-dividend today, 18 July 2013, for dividend of Rs 2 per share for the year ended 31 March 2013 (FY 2013).
Key benchmark indices logged modest gains in a volatile trading session of trade on Wednesday, 17 July 2013, after the on Tuesday, 16 July 2013, said it would liberalize foreign-investment rules in several sectors as part of efforts to boost economic growth that hit a decade-low of 5% in the fiscal year ended 31 March 2013. The S&P BSE Sensex was up 97.50 points or 0.49% to 19,948.73, its highest closing level since 15 July 2013.
Foreign institutional investors (FIIs) sold shares worth a net Rs 26.09 crore on Wednesday, 17 July 2013, as per provisional data from the stock exchanges.
Asian markets dropped on Thursday, 18 July 2013, after China's Finance Minister Lou Jiwei said the government is unlikely to provide a big fiscal stimulus this year. China is the world's second biggest economy after the United States. Key benchmark indices in China, Hong Kong, Singapore and South Korea were down 0.53% to 1.05%. Key benchmark indices in Japan, Taiwan and Indonesia were up 0.32% to 0.49%.
US stocks ticked higher on Wednesday, 17 July 2013, after the Federal Reserve Chairman Ben Bernanke said the central bank's monthly bond purchases weren't on a "pre-set course" and could be curbed or extended, depending on economic conditions. In prepared testimony to the House Financial Services Committee, Bernanke said that there is no set timetable for slowing US monetary stimulus. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth.
The Fed chief is due to speak before the Senate later on Thursday, 18 July 2013.