Sunday, December 22, 2013
Benchmarks rose after RBI boosted investor sentiments by keeping key rates unchanged in its mid-quarter monetary policy review. The Sensex shut shop gaining 1.75% while the Nifty rose 1.71% for the week ended December 20, 2013.
Major Headlines for the week:
November WPI Inflation at 7.52%
Forex reserves up $4.4 bn as of December 6
RBI mid-quarter policy review; keeps repo rate unchanged
External borrowings drop to US$1.93bn in October 2013
Welcome to the ‘Weekly Market Wrap’ for December 21, 2013. Indian stocks surged after the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review on Wednesday, December 18, 2013. Investor sentiment was also boosted by stock market regulator Securities and Exchange Board of India's (Sebi) decision to rationalize the rules on trading of thinly-traded stocks. The barometer index, the S&P BSE Sensex, regained the psychological 21,000 mark. The market fell in three out of five trading sessions in the week just gone by.
The BSE Mid-Cap index rose 3.17% and the BSE Small-Cap index rose 2.62%. Both these indices outperformed the Sensex.
The S&P BSE Sensex rose 364.14 points to 21,079.72. The 50-unit CNX Nifty rose 105.85 points to 6,274.25.
1. India's headline inflation surged past analysts' expectations to a 14-month high of 7.52 percent in November, government data showed on Monday, after food prices rose at the fastest clip since June 2010.
2. RBI's stance turned out to be a pleasing surprise to the street which had factored in a 25bps repo rate (the rate at which RBI lends money to commercial banks) hike and was speculating on whether the RBI would hike cash reserve ratio (CRR), which is the minimum fraction of the total deposits which commercial banks have to keep with RBI. Repo rate remained unchanged at 7.75%, reverse repo rate stayed at 6.75%, MSF and Bank rate at 8.75% and CRR at 4%
Weekly market trend from December 16, 2013 – December 20, 2013:
1. Indian shares ended choppy session in red on December 16, 2013; as higher-than-expected November wholesale price inflation upped the probability of a rate hike by the RBI. The BSE Sensex slipped 0.27% and the Nifty was down by 0.22%. Markets slumped for a fifth consecutive session on Monday as investors pared positions in blue-chip stocks raising expectations of a rate hike by the central bank when it meets on December 18 for monetary policy review and the U.S. Federal Reserve's policy meetings later this week. The S&P BSE Sensex shed 56.06 points to close at 20659.52 while Nifty slipped 13.70 points to end at 6154.70
2. Indian shares fell for a sixth consecutive session on December 17, 2013; as rate sensitive stocks such as HDFC Bank continued to tumble a day before the RBI is widely expected to raise interest rates at its policy review. The BSE Sensex slipped 0.23% and the Nifty was down by 0.25%. Benchmarks ended flat with a negative bias on Tuesday as investors turned cautious and booked profits in bank shares on fears that the RBI might hike key rates by over 25 basis points on the back of rising inflation levels. The S&P BSE Sensex shed 47.38 points to close at 20612.14 while Nifty slipped 15.65 points to end at 6139.05
3. Indian shares snapped 6-day losing streak on December 18, 2013; led by gains in rate-sensitive stocks after the central bank surprised investors by keeping rates on hold despite talking tough on inflation. The BSE Sensex rose 1.20% and the Nifty was up by 1.27%. Benchmark closed on strong note as hope rally pushed frontline stocks to higher levels on Wednesday. Indices were euphoric as Government bonds and stock markets rallied after the Reserve Bank of India (RBI) surprised investors by keeping rates on hold despite surging in retail and wholesale price inflation, but it kept the door open to more rate hikes saying further moves will be data-driven. The Sensex closed at 20,859.86, up by 247.72 points, while the Nifty rose by 78.10 points to close at 6,217.15
4. Indian shares fell on Thursday, December 19, 2013; marking their seventh losing session out of eight as blue chips such as ICICI Bank fell after the U.S. Federal Reserve announced the start of its tapering, raising concerns about foreign investor sales. The BSE Sensex slipped 0.73% and the Nifty was down by 0.81%. Benchmark shares indices ended lower amid fears that foreign institutional investor would reduce their allocations to emerging markets including India thereby hurting incremental inflows after the US Federal Reserve Bank announced gradual reduction in its monetary stimulus measures. The S&P BSE Sensex shed 151.24 points to close at 20708.62 while Nifty slipped 50.50 points to end at 6166.65
5. Indian shares marked their biggest single-day gain in nearly a month on Friday December 20, 2013; as Reliance Industries jumped after the government allowed it to charge higher prices for gas from April. The BSE Sensex rose 1.79% and the Nifty was up by 1.74%. Benchmark indices ended firm with Sensex closing above 21,000 mark led by buying in heavyweight sectors like oil & gas, banks and technology. Gains in IT and Oil and Gas heavyweights helped the indices to remain in the positive territory for the entire day. The Sensex closed at 21,079.72, up by 371.10 points, while the Nifty rose by 107.60 points to close at 6,274.25
Majority of the global markets closed on a positive note except Shanghai Comp which fell by 5.07% and Hang Seng dropped by 1.87%. Top Gainers: Dax100 rose by 4.37%, CAC 40 surged 3.30% and Nikkei gained 3.03%.
Sectoral and stock screening:
All the 13 sectoral indices closed in the green zone in the week gone except S&P BSE Bankex down 0.61%. The topmost gainers were - S&P BSE IT surged by 5.79%, followed by S&P BSE HC which rose 5.25%, S&P BSE Teck up 4.86% and S&P BSE Auto gained 2.68%.
Looking at the 'A' group stocks, the top three gainers of the week were - Aurobindo Pharma up by 26.97%, GlaxoSmithKline Pharma rose 19.99% and Jammu & Kashmir Bank up by 12.55%. The top three losers of the week were - Sobha Developers fell by 9.23%, Pipavav Defence slipped by 9.06% and Gitanjali Gems dipped by 7.31%.
The foreign institutional investors (FIIs) have been the net buyers of the Indian stocks to the tune of Rs5188.00 crore and the domestic investors bought Indian shares worth a net of Rs465.70 crore as on December 19, 2013.
Market Outlook for the coming week!
In the coming week, the markets may remain volatile in a truncated trading week as traders roll over positions in the futures & options (F&O) segment from the near month December 2013 series to January 2014 series.
The stock market remains closed on Wednesday, 25 December 2013, on account of Christmas.
The near month December 2013 derivatives contract expire on Thursday, December 26, 2013.
AXIS Bank will replace Jindal Steel & Power as a constituent of the S&P BSE Sensex with effect from Monday, December 23, 2013.
Trend in investment by foreign institutional investors will be closely observed in the near term after the Federal Open Market Committee (FOMC). The US central bank is poised to continue winding down its stimulus measures gradually over the next year. Trend in other global emerging markets and the movement of rupee against the dollar hold key.
Financial Technologies (India), GMR Infrastructure, Jammu & Kashmir Bank and Karnataka Bank are among the other gainers.
Commodity exchange operator MCX surged 10.43% to Rs 458.40. The stock topped the gainers in the BSE's 'A' group.
On Thursday, 19 December 2013, Euronext N. V. sold 5.65 lakh shares of MCX at Rs 427.02 each on NSE. As on 30 September 2013, Euronext, which runs leading bourses in the US and Europe, held 4.73% stake or 24.12 lakh shares of MCX.
On Wednesday, 18 December 2013, MCX announced that FMC has approved Blackstone GPV Capital partners (Mauritius) VI FII to increase its stake in MCX upto 4.99% through secondary market transaction. As on 30 September 2013, Blackstone GPV Capital Partners Mauritius VI FII held 10.19 lakh shares, or 2% stake, in MCX.
Financial software maker Financial Technologies (India) (FTIL) spurted 7.42% to Rs 173. The stock was second biggest gainer in 'A' group.
On Thursday, 19 December 2013, shares of FTIL fell 3.45% to Rs 161.05 and shares of MCX fell 1.48% to Rs 415.10 after commodity market regulator ordered FTIL to sell most of its holding in MCX.
Commodity market regulator Forward Markets Commissions (FMC) on Tuesday, 17 December 2013, said Jignesh Shah and his firm FTIL are not 'fit and proper' to run any exchange in the country.
FMC removed its fit and proper designation for both FTIL and its chief executive, Jignesh Shah - a status needed to operate an exchange in India. The loss of the designation means neither FTIL nor Shah can run MCX.
The regulator said National Spot Exchange's (NSEL) payment troubles made FTIL an unfit operator of commodities exchanges and ordered it to cut its stake of 26% in MCX to less than 2%. It did not prescribe how it should dispose of the holding and did not provide a deadline.
NSEL is a separate commodities exchange owned by FTIL that is under investigation by the police and other regulators after struggling to settle outstanding contracts worth more than Rs 5500 crore.
GMR Infrastructure jumped 6.98% to Rs 23. The stock was third biggest gainer in 'A' group.
Jammu & Kashmir Bank, which is controlled by the State Government of Jammu & Kashmir, climbed 6.97% to Rs 1,419.50. The stock was fourth biggest gainer in 'A' group. The stock hit a 52-week high of Rs 1431 in intraday today.
Private sector lender Karnataka Bank rose 6.85% to Rs 105.30. The stock was fifth biggest gainer in 'A' group.
Indian stocks surged after the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review on Wednesday, 18 December 2013. Investor sentiment was also boosted by stock market regulator Securities and Exchange Board of India's (Sebi) decision to rationalize the rules on trading of thinly-traded stocks. The barometer index, the S&P BSE Sensex, regained the psychological 21,000 mark. The market fell in three out of five trading sessions in the week just gone by.
The S&P BSE Sensex garnered 364.14 points or 1.75% to 21079.72, its highest closing level since 11 December 2013. The 50-unit CNX Nifty garnered 105.85 points or 1.71% to 6,274.25, its highest closing level since 11 December 2013.
The BSE Mid-Cap index rose 3.17% and the BSE Small-Cap index gained 2.62%. Both these indices outperformed the Sensex.
Trading for the week started on a downbeat note. Fears of a hike in its main lending rate viz. the repo rate by the Reserve Bank of India (RBI) after a monetary policy review later in the week weighed on the bourses on Monday, 16 December 2013, after the latest data showed acceleration of inflation based on the wholesale price index (WPI) to a 14-month high of 7.52% in November 2013. The S&P BSE Sensex lost 56.06 points or 0.27% to settle at 20,659.52 on that day, its lowest closing level since 28 November 2013.
Key benchmark indices edged lower in choppy trade on Tuesday, 17 December 2013, as European stocks dropped. The S&P BSE Sensex lost 47.38 points or 0.23% to settle at 20,612.14 on that day, its lowest closing level since 28 November 2013.
Key benchmark indices surged on Wednesday, 18 December 2013, as the Reserve Bank of India's (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review on Wednesday, 18 December 2013. It was widely expected that the central bank will raise repo rate by 25 basis points to rein in inflation after data this month showed that both consumer prices and wholesale prices accelerated last month. The Sensex garnered 247.72 points or 1.2% to settle at 20,859.86 on that day, its highest closing level since 12 December 2013.
Key benchmark indices edged lower in choppy trade on Thursday, 19 December 2013, as the US Federal Reserve's move to cut its bond-buying program rekindled concerns of slowing foreign inflows. The S&P BSE Sensex shed 151.24 points or 0.73% to settle at 20,708.62 on that day, its lowest closing level since 17 December 2013.
Key benchmark indices surged on Friday, 20 December 2013, after stock market regulator Securities and Exchange Board of India (Sebi) on Thursday, 19 December 2013, relaxed the rules on trading of thinly-traded stocks. The market sentiment was also boosted by data showing that foreign funds made heavy purchases of Indian stocks during the previous trading session on Thursday, 19 December 2013. Heavy FII buying coming a day after the US Federal Reserve's decision to gradually reduce monetary stimulus for the US economy, helped the market shrug off fears of slowdown in foreign inflows. The S&P BSE Sensex garnered 371.10 points or 1.79% to settle at 21,079.72, its highest closing level since 11 December 2013.
From 30-share Sensex pack, 26 stocks rose and only four fell in the week ended Friday, 20 December 2013.
Metal stocks rose on renewed buying. Hindalco Industries (up 0.29%), Sesa Sterlite (up 5.74%) and Tata Steel (up 0.59%) gained. Jindal Steel & Power dropped 3.54%.
Bank stocks were mixed. ICICI Bank gained 0.17%.
HDFC Bank dropped 3.65%. The stock was the biggest loser from the Sensex pack. The bank on Wednesday, 18 December 2013, said that it has filed an application with the Foreign Investment Promotion Board (FIPB) seeking approval for increasing foreign shareholding limit in the bank in accordance with the now prevailing guidelines as the total foreign shareholding in the bank (FII and FDI) has crossed 49%.
The Reserve Bank of India had recently notified that the foreign shareholding through Foreign Institutional Investors (FIIs)/Non Resident Indians (NRI)/Persons of Indian Origin (PIO)/Foreign Direct Investment (FDI)/ADRs/GDRs in HDFC Bank has crossed the overall limit of 49% of its paid-up capital and that no further purchases of shares of HDFC Bank would be allowed through stock exchanges in India on behalf of FII/NRI/PIO/FDI/ADRs/GDRs.
Total foreign shareholding in the bank as on 13 December 2013 was 52.18% of its paid-up capital. This includes investments through the FDI route in ADRs/GDRs of 17.01% which were raised in accordance with the then applicable guidelines, and other foreign holdings made under the FII route of 35.17%. Necessary approval from the shareholders is in place for FII investments up to 49%, HDFC Bank said in a statement.
State Bank of India (SBI) rose 0.48%. A day after RBI governor Raghuram Rajan decided to hold rates, SBI on Thursday, 19 December 2013, slashed home loan rates by up to 35 basis points for new borrowers and has unveiled a further discount of 5 basis points for women customers. Loans of up to Rs 75 lakh would be available to fresh borrowers at 10.15% against the existing rate of 10.50%. For women borrowers, the rate of interest after an additional concession of 0.05% would be 10.10% for home loans of up to Rs 75 lakh. With regard to loans of above Rs 75 lakh, the new rate would be 10.30%. For women borrowers it is 10.25%.
The Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review on Wednesday, 18 December 2013, contrary to market expectations of a 25 basis point increase. The central bank said its decision to keep the repo rate unchanged was a close call. The RBI said while it has maintained status quo now, the central bank can help guide market expectations through a clearer description of its policy reaction function: if the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank of India will act, including on off-policy dates if warranted, so that inflation expectations stabilise and an environment conducive to sustainable growth takes hold. The Reserve Bank's policy action on those dates will be appropriately calibrated, the central bank said.
The Reserve Bank of India early this week released on its website a Discussion Paper on 'Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy'. The Discussion Paper outlines a corrective action plan that will incentivize early identification of problem cases, timely restructuring of accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.
With the slowdown of the Indian economy, a number of companies/projects are under stress. As a result, the Indian banking system has seen increase in NPAs and restructured accounts during the recent years. Not only do financially distressed assets produce less than economically possible, they also deteriorate quickly in value, the central bank said in a statement. Therefore, there is a need to ensure that the banking system recognises financial distress early, takes prompt steps to resolve it, and ensures fair recovery for lenders and investors, the RBI said. 'Improving the system's ability to deal with corporate distress and financial institution distress by strengthening real and financial restructuring as well as debt recovery' has been indicated by the Governor, RBI as one of the five pillars on which Reserve Bank of India's developmental measures will be built for improving the financial system over the next few quarters. This Discussion Paper is a step in that direction, the RBI said.
HDFC shed 0.86%. The hoursing finance major on Thursday, 19 December 2013, announced a cut of up to 50 basis points in home loan rates in its "special winter bonanza". The new rates for HDFC's home loans up to Rs 75 lakh will be 10.25 per cent per annum. "This is a limited period offer and is valid for all new applications submitted before 31 January 2014 and first disbursement taken by 28 February 2014," HDFC said in a statement.
Capital goods stocks edged higher. Bhel jumped 6.91%. The stock was the second biggest gainer from the Sensex pack.
L&T rose 1.15%. L&T on Wednesday, 18 December 2013, said that the Power Transmission & Distribution Business of L&T Construction has secured a major international EPC order valued at Rs 2935 crore from Qatar General Electricity & Water Corporation for the supply, construction and commissioning of 18 EHV (extra high voltage) substations and 151 km of EHV cabling in Qatar. The project is scheduled to be completed in 22 months.
This order is part of the Qatar Power Transmission System Expansion- Phase XI - Stage 1 and is the single largest order for L&T in the power transmission & distribution business, L&T said.
Index heavyweight Reliance Industries (RIL) rose 3.51%. As per reports, the government has allowed the company to charge higher prices for gas from April after the company offered financial guarantees to the government to settle any claims against it over a shortfall in its gas output. The government in June this year approved a move to higher, market-related rates for locally-produced gas from April 2014, but the finance ministry later said prices for RIL should be capped because the company's gas production from the offshore D6 block was far below its supply commitment. RIL, which operates the D6 block off India's eastern coast, has reported a sharp decline in gas output since 2010. Falling output had already prompted the government to disallow proportionate cost recovery to Reliance, leading to arbitration proceedings over the issue.
RIL's subsidiary Reliance Retail on Monday, 16 December 2013, said it has decided to discontinue its non-vegetarian food offering, 'Delight', with immediate effect. Reliance Retail on Monday said that echoing consumer sentiments, Reliance Retail has decided to discontinue its non-vegetarian food offering, 'Delight', with immediate effect. Reliance Retail said that the company has decided to focus on vegetarian offerings only, within its retail portfolio.
Index heavyweight and cigarette major ITC rose 0.05%.
Coal India rose 0.25%. The state-run coal miner after trading hours on Monday, 16 December 2013, said that the company's board of directors at its meeting held on Monday, 16 December 2013, approved an additional 10% increase on the notified price for subsidiaries other than Western Coalfields (WCL), applicable with effect from 28 May 2013, on the existing notified price of non-coking coal of WCL of G-6 to G-17 bands with effect from 17 December 2013. Due to this increase, WCL will earn additional revenue of about Rs 139.84 crore for the balance period of financial year 2013-14.
Coal India's board of directors at its meeting held on Monday, 16 December 2013, also approved revision of raw non-coking coal sizing charges for different sizes and rapid loading charges with effect from 17 December 2013. This will be applicable to all subsidiaries of Coal India for regulated and non-regulated sectors. Due to this revision, Coal India will earn additional revenue of about Rs 197.21 crore for the balance period of financial year 2013-14.
GAIL (India) rose 1.02%. ONGC advanced 1.37%. GAIL (India) on Friday, 20 December 2013, said that the media reports on Thursday, 19 December 2013, indicating that the company had doubled margin on gas sourced from ONGC are factually incorrect and does not reflect the issue in the right perspective. GAIL (India) clarified that it is charging marketing margin on APM and non-APM gas at different rates. The company said that it charges a uniform marketing margin on non-APM gas consumers on a Pan-India basis since the commencement of non-APM supplies and that there is no discrimination amongst the customers.
The customers in Mumbai region, alleging higher marketing margin being charged by GAIL, are new to supply of non-APM gas since November 2013, GAIL said. In fact, RCF, Thal in Mumbai region is taking non-APM gas supplies since February 2012 and is being charged marketing margin at the same rate as all other non-APM customers, GAIL (India) said in a statement. Further, producers may not be charging marketing margin as their risks and returns associated with exploration and production are included in the Gas Producer Price, the company said.
IT stocks rose as the Federal Reserve's decision to slow the pace of its bond purchases boosted investor confidence in the US economic recovery. The US is the biggest outsourcing market for Indian IT firms.
IT major Infosys rose 5.29% to Rs 3,552.30. The stock hit record high of Rs 3,569.90 in intraday trade on Friday, 20 December 2013. Infosys announced after market hours on Thursday, 19 December 2013, that Mr. Subrahmanyam (Subu) Goparaju, Member of the Executive Council has conveyed his intention to resign from the services of the company.
Tata Consultancy Services (TCS) rose 5.82%. TCS after market hours on Thursday, 19 December 2013, announced the launch of TCS Insurance Telematics Solution, a mobile application that turns consumers' smartphones into mobile telematics devices. Facilitating usage-based insurance (UBI) practices that more closely align consumer driving patterns and habits with auto insurance premiums, the TCS Insurance Telematics Solution minimizes the need for a separate, potentially expensive, telematics device provided by the insurer, TCS said in a statement.
TCS Insurance Telematics Solution is the latest in a series of product innovations from the company's Insurance Innovation Lab -- a state-of-the-art environment for customers to test new ideas and trial new solutions, TCS said.
Wipro gained 5.78% to Rs 548.95. The stock hit 52-week high of Rs 552 in intraday trade on Friday, 20 December 2013.
Auto stocks edged higher on renewed buying. Tata Motors (up 0.76%), Mahindra & Mahindra (M&M) (up 2.23%) gained.
Shares of car maker Maruti Suzuki India hit record high as the Japanese yen touched its lowest level in more than five years against the dollar. The stock jumped 7% to Rs 1,809.95. The stock was the biggest gainer from the Sensex pack. The stock hit a record high of Rs 1,829.90 in intraday trade on Friday, 20 December 2013. The yen's weakness could reduce import costs for Maruti as the car major sources a large portion of its parts from Japan.
Shares of two wheeler makers rose. Bajaj Auto (up 0.76%) and Hero MotoCorp (up 3.12%) gained.
National Thermal Power Corporation (NTPC) fell 1.24%. The Ministry of Power on Wednesday, 18 December 2013, said that NTPC has tied up a fixed interest term loan facility for euro 55 million with KfW, the German government developmental financial institution to part finance the capital expenditure on Electro Static Precipitators and other selected packages of its Mouda Stage-II power project. The facility has a door to door maturity of 12 years including availability period of 4 years. The loan is on a standalone basis without sovereign guarantee reflecting the trust and confidence reposed by the German financial institution in NTPC's strong credit quality and professional management. KfW has in the past provided financial support to NTPC's renovation and modernization and emission reduction schemes.
NTPC has also signed a financing agreement with KfW-Germany to set up of Solar Thermal and Photovoltaic Lab at NETRA under the aegis of Indo-German Research Cooperation through a Grant of euro 5 million and matching contribution from NTPC. These world class labs are being setup with assistance from German R&D institutions M/s DLR, Cologne and ISE, Fraunhofer for characterization of Solar Thermal and Photovoltaic prototypes and components.
Pharma stocks rose. Cipla (up 6.3%), Dr Reddy's Laboratories (up 4.41%), and Sun Pharmaceutical Industries (up 1.35%) advanced.
Sebi on Thursday, 19 December 2013, said it has rationalized the periodic call auction mechanism by modifying how it classifies illiquid stocks. A stock would now be classified as illiquid if its average daily turnover is less than Rs 2 lakh in the previous two quarters and if it is classified as illiquid at all the exchanges where it is traded. Earlier, a stock was classified to be illiquid if its average daily trading volume in a quarter was less than 10,000, the average daily number of trades was less than 50 in a quarter and if it was classified as illiquid by all the exchanges where it traded.
Henceforth, call auctions will not apply to shares where a company is profitable in at least two of the past three years and not more than 20% of promoters' shareholding is pledged in the latest quarter and the book value is three times or more than the face value. The new rules also exclude companies with a market capitalisation of at least Rs 10 crore or which have paid a dividend in at least two of the past three years.
From now, stock exchanges will determine the number of call auction sessions for illiquid stocks. Exchanges will, however, have at least two sessions in a trading day, with one uniform closing session across the exchanges. So far, periodic call auction sessions of one hour each were conducted throughout trading hours, with the first session starting at 9:30 IST.