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Thursday, February 20, 2014

Sensex drifts lower as Fed stimulus cuts to remain

Key benchmark indices edged lower on concern foreign capital inflow will slow after a Federal Reserve report on Wednesday, 19 February 2014, showed support for a plan to reduce monetary stimulus for the US economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets over the past few years. Data showing weakness in China's manufacturing sector this month also hit sentiment on the domestic bourses adversely as stocks fell across Asia and Europe. The barometer index, the S&P BSE Sensex, lost 186.33 points or 0.9%, off 126.02 points from the day's high and up 14.60 points from the day's low. The market breadth, indicating the overall health of the market, was negative.

Indian stocks snapped four-day winning steak today, 20 February 2014. The Sensex had jumped 529.62 points or 2.62% in four sessions to settle at 20,722.97 on Wednesday, 19 February 2014, from a recent low of 20,193.35 on 13 February 2014. The Sensex has risen 22.79 points or 0.11% in this month so far (till 20 February 2014). The Sensex has declined 634.04 points or 2.99% so far in calendar 2014 (till 20 February 2014). From a record high of 21,483.74 on 9 December 2013, the Sensex has declined 947.10 points or 4.4%. From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 3,087.93 points or 17.69%.

Coming back to today's trade, index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight and cigarette maker ITC also dropped. Bank stocks fell across the board. Among pharma stocks, Dr. Reddy's Laboratories scaled record high.

The market edged lower in early trade on weak Asian stocks. A bout of volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday low in morning trade. Volatility continued as key benchmark indices weakened once again after trimming intraday losses in mid-morning trade. Weakness continued on the bourses in afternoon trade. A bout of volatility was witnessed as key benchmark indices trimmed losses soon after hitting fresh intraday low in mid-afternoon trade. The Sensex extended losses and hit fresh intraday low in late trade.

Asian and European stocks edged lower on Thursday, 20 February 2014, after a Chinese manufacturing index dropped more than estimated this month and after US Federal Reserve minutes signaled stimulus cuts will continue.

The S&P BSE Sensex lost 186.33 points or 0.9% to settle at 20,536.64, its lowest closing level since 17 February 2014. The index dropped 200.93 points at the day's low of 20,522.04 in late trade. The index fell 60.31 points at the day's high of 20,662.66 in mid-morning trade.

The CNX Nifty shed 61.30 points or 1% to settle at 6,091.45, its lowest closing level since 17 February 2014. The index hit a low of 6,086.45 in intraday trade. The index hit a high of 6,129.10 in intraday trade.

The BSE Mid-Cap index rose 0.08 points to settle at 6,377.02. The BSE Small-Cap index shed 10.35 points or 0.16% at 6,361.85. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 1799 crore, higher than Rs 1676.81 crore on Wednesday, 19 February 2014.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,480 shares fell and 1,192 shares rose. A total of 148 shares were unchanged.

The S&P BSE FMCG index (down 1.01%), the S&P BSE Metal index (down 1.05%) and the S&P BSE Bankex (down 1.63%) underperformed the Sensex. The S&P BSE Power index (up 0.24%), the S&P BSE Capital Goods index (up 0.12%), the S&P BSE Healthcare index (down 0.01%), the S&P BSE Consumer Durables index (down 0.12%), the S&P BSE Realty index (down 0.17%), the S&P BSE Auto index (down 0.47%), the S&P BSE IT index (down 0.61%), the S&P BSE Teck index (down 0.66%) and the S&P BSE Oil & Gas index (down 0.89%) outperformed the Sensex.

Among the 30-share Sensex pack, 26 stocks fell and rest rose.

Index heavyweight Reliance Industries (RIL) fell 0.99% at Rs 804.50. The scrip hit high of Rs 813.75 and low of Rs 803.40.

Another index heavyweight and cigarette maker ITC dropped 1.45%.

Dr. Reddy's Laboratories rose 2.09% to Rs 2,720.50, a record high for the counter.

Tata Power Company rose 1.03% to Rs 78.50, with the stock reversing initial fall in volatile trade. The stock hit a high of Rs 79.80 and low of Rs 76.10.

Bharti Airtel fell 2.08%. Bharti Airtel after market hours said the company is not satisfied with the judgment of the Court of Appeal, Lagos delivered on 14 February 2014 and will lodge an appeal against that decision at the Supreme Court of Nigeria. Bharti Airtel said that the judgment has no impact on the equity holding of Bharti Airtel or of the other shareholders in Airtel Networks Limited, Nigeria (Airtel Nigeria). Bharti Airtel owns 79.06% stake in Airtel Nigeria.

Airtel Nigeria has already launched an appeal before the Supreme Court of Nigeria against the Judgment of the Court of Appeal in Kaduna in the matter relating to Econet's claim for 5% shares in Airtel Nigeria. These shares in any case are held in an escrow account and do not affect Bharti Airtel's 79.06% stake in Airtel Nigeria, Bharti Airtel said in a statement.

Bharti Airtel and Airtel Nigeria have full confidence in the laws of the land, and believe the Supreme Court in Nigeria will determine the appeals on merits, Bharti Airtel said. Bharti Airtel wishes to assure its customers, employees and business partners that these judgments will in no way affect operations of Airtel Nigeria, the company said. "As regards the quantum of the claim as mentioned in some media reports, we would like to unequivocally state that neither of these orders of the Court of Appeals in Lagos and in Kaduna deal with the quantum of damages and no such quantum has been determined," Bharti Airtel said in a statement.

Metal stocks edged lower after a Chinese manufacturing index dropped more than estimated this month. China is the world's largest consumer of copper and aluminum. Sesa Sterlite (down 0.75%), Steel Authority of India (Sail) (down 2.42%), NMDC (down 0.69%), Hindalco Industries (down 1.67%), Hindustan Copper (down 1.18%), JSW Steel (down 0.39%), National Aluminum Company (down 0.93%), Jindal Steel & Power (JSPL) (down 1.39%) and Tata Steel (down 1.88%) declined. Hindustan Zinc rose 2.01%.

IT stocks edged lower. HCL Technologies declined 1.58%. Infosys shed 0.77%.

TCS slipped 0.12%. TCS after market hours today, 20 February 2014, announced that it has partnered with the Finnish Wheelchair Curling Team, supporting the team in their quest for Olympic glory at the Paralympic Winter Games in Sochi. TCS will serve as a partner to the team for one year and provide support for the team towards their equipment, logistics and digital devices such as smart phones at Sochi.

Earlier, TCS during market hours announced that Diageo, the world's leading premium spirits maker, has selected the company as its new global IT provider. The decision by Diageo to partner with TCS is the latest milestone in a programme to transform the way it provides IS services to around 36,000 employees, operating in 100 countries across the world, TCS and Diageo said in a joint statement. In the future, TCS will manage Diageo's global IT infrastructure, data centres and servers, in addition to providing service desk support to employees. This solution will provide a greater level of flexibility and differentiation of services to meet market needs, allow for swift adoption of future technology trends, and an enhanced current self-serve capability to deliver an improved end user experience, the two companies said.

Ivan Menezes, Chief Executive Officer, Diageo plc, commented: "Our partnership with Tata Consultancy Services is the latest milestone in our strategy to create a world-class IT service to support Diageo's global strategy and deliver efficient growth. Working together, I believe that we can make a significant step change in the way that IS supports our 36,000 employees around the world, giving them the freedom and agility to drive growth for Diageo in each of our markets".

Natarajan Chandrasekaran, Chief Executive Officer and Managing Director of Tata Consultancy Services, commented: "Globally businesses are embracing technology to enhance customer experience, drive innovation and propel their growth. Smarter IT -- from the data centre to the end user's experience -- is critical in this context and we are delighted to work with Diageo to help enable this transformation using our strong industry expertise and technology capabilities".

Wipro rose 0.04%.

Financial Technologies (India) (FTIL) rose 4.41%. Tech Mahindra fell 0.63%. Financial Technologies (India) after market hours on Wednesday, 19 February 2014, in a clarification to the stock exchanges with reference to the news item titled "Tech M and FT Come Closer on Deal Talks" said, "As a policy of the company, we do not wish to comment on any speculative news article; hence we would not like to offer any comments on the said news reporting and also on the price rise of the company's share".

FTIL further clarified, "We have no comments. It is not our policy to comment on market rumours or speculation. Any definitive development of any substantive nature will be first notified to the stock exchanges in full compliance with Listing Agreement, so as to ensure uniform and simultaneous disclosure to all the investors".

Shares of Financial Technologies (India) stock turned ex-dividend today, 20 February 2014, for third interim dividend of Rs 2 per share for the year ending 31 March 2014.

Meanwhile, Tech Mahindra in a clarification to the exchanges on the aforesaid news item clarified, "the report is speculative in nature and therefore the answers to both your questions is in negative".

eClerx Services jumped 7.85% to Rs 1,324.50 after hitting a record high of Rs 1,370.05 in intraday trade today, 20 February 2014.

NIIT Technologies gained 2.88% to Rs 448.50 after hitting a record high of Rs 466.30 in intraday trade today, 20 February 2014.

Hexaware Technologies fell 2.55% as the stock turned ex-dividend today, 20 February 2014, for interim dividend of Rs 7.50 per share for the year ended 31 December 2013.

Bank stocks fell across the board. Among private sector banks, ICICI Bank (down 2.01%), Yes Bank (down 1.76%), Federal Bank (down 1.95%), HDFC Bank (down 0.84%), Kotak Mahindra Bank (down 2.6%) and AXIS Bank (down 0.83%), declined.

Among PSU bank stocks, State Bank of India, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed 1.65% to 3.66%.

Shares of two-wheeler companies were mostly lower. TVS Motor Company fell 0.54%.

Hero MotoCorp lost 1.24%. The company early this week said it has decided to pass on the entire benefit of the excise duty reduction to customers. Hero MotorCorp said it has judiciously spread out the price cut across the product portfolio ranging from 2% going up to 5% with the maximum reduction being Rs 4,500 per unit. The government reduced excise duty on two-wheelers to 8% from 12% for a period up to 30 June 2014 in the Interim Budget for 2014-15 announced early this week.

Bajaj Auto rose 1.15% after the company said on Wednesday, 19 February 2014, that it would deepen partnerships with Japan's Kawasaki Heavy Industries and Austria's KTM AG.

Mahindra & Mahindra (M&M) dropped 0.8% after the company after market hours on Wednesday, 19 February 2014, announced a reduction in prices of its passenger vehicle portfolio ranging from Rs 13,000 to Rs 49,000. The company will also reduce prices of its premium SUV, the Rexton by up to Rs 92,000. The reduction is due to the lower excise duties announced in the Interim Budget and would be effective immediately, M&M said in a statement.

Commenting on the price reduction, Pravin Shah, Chief Executive, Automotive Division, M&M said: "We are delighted at the Interim Budget announcements which have been taken to boost the automotive industry. We are confident that the reduction in prices by Mahindra as well as other auto companies would provide the much needed fillip to the auto industry. The prices of our range of commercial vehicles are also being reduced".

The government reduced excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motorcycles and scooters for the period up to 30 June 2014 in the in the Interim Budget for 2014-15 announced on Monday, 17 February 2014. The excise duty on small cars, two-wheelers and commercial vehicles has been reduced to 8% from 12%. The excise duty on SUVs has been reduced to 24% from 30%. The excise duty on large cars has been cut to 24% from 27%. The excise duty on mid-segment cars has been cut to 20% from 24%.

Capital goods pivotals edged higher. Bhel (up 0.2%) and L&T (up 0.25%) gained.

ABB India fell 0.31% on profit taking after recent strong gains triggered by the company's impressive Q4 results. The company during market hours said that it has won orders worth about Rs 310 crore ($56 million) from Power Grid Corporation of India to supply power transformers and shunt reactors for substations being built to support the country's ultrahigh voltage transmission grid development. The orders were booked in the fourth quarter of 2013 and in the first quarter of 2014, ABB India said.

ABB India's net profit surged 249.37% to Rs 58.59 crore on 5.72% rise in total income to Rs 2204.56 crore in Q4 December 2013 over Q4 December 2012. The result was announced during trading hours on Tuesday, 18 February 2014. The company said at the time of announcement of Q4 results that it is well positioned with an order backlog of Rs 7709 crore as on 31 December 2013, providing necessary visibility to future revenue.

Adani Ports and Special Economic Zone (APSEZ) rose 0.61%. APSEZ after market hours said that the company has received Letter of Award from Ennore Port for the development of a container terminal at Ennore Port on DBFOT basis.

Rural Electrification Corporation (REC) dropped 5.13% as the stock turned ex-dividend today, 20 February 2014, for interim dividend of Rs 7.75 per share for the year ending 31 March 2014.

Bajaj Corp declined 1.97% as the stock turned ex-dividend today, 20 February 2014, for interim dividend of Rs 6.50 per share for the year ending 31 March 2014.

Hospitality shares rallied on renewed buying. EIH (up 5.7%), Hotel Leelaventure (up 4.96%), Taj GVK Hotels & Resorts (up 5.54%), EIH Associated Hotels (up 5%) surged.

Indian Hotels jumped 13.1% to Rs 68.20 after hitting a 52-week high of Rs 69.80 in intraday trade.

Apollo Tyres gained 3.6% to Rs 123.85 after hitting a record high of Rs 124.65 in intraday trade today, 20 February 2014.

DCM Shriram Consolidated surged 13.52% after the company said that its board will meet on 22 February 2014 to consider various options for rewarding shareholders, including share buyback, bonus issue and dividends. The company made the announcement after market hours on Wednesday, 19 February 2014. DCM Shriram Consolidated announced that a special meeting of the board of directors will be held on 22 February 2014 to consider the report of sub committee of the board to look at all options including share buyback from the existing shareholders, review of dividends policy, bonus issues, etc for rewarding shareholders.

Esab India tumbled 9.5% after net profit fell 33% to Rs 7.06 crore on 10.5% decline in net sales to Rs 109.30 crore in Q4 December 2013 over Q4 December 2012. The result was announced after market hours on Wednesday, 19 February 2014. Esab India's net profit fell 12.3% to Rs 33.12 crore on 13.3% decline in net sales to Rs 429.75 crore in the year ended December 2013 over the year ended December 2012.

Rhodia Specialty Chemicals India rose by maximum permissible 10% upper limit to Rs 797.50 on BSE after Solvay SA, one of the promoter of the company, pegged an indicative offer price of Rs 675 per share to delist shares of the company. The company made the announcement after market hours on Wednesday, 19 February 2014.

Rhodia Specialty Chemicals India has received a communication from Solvay SA, pursuant to letter dated 19 February 2014 informing that, after considering the prevailing market conditions, the indicative price at which the acquirer may be willing to accept the equity shares tendered in the delisting offer is Rs 675 per equity share, Rhodia Specialty said in a statement.

On 14 November 2013, the company had determined the floor price of Rs 442.64 per share for the proposed delisting.

The company said, this indicative offer price should in no way be construed as a ceiling or maximum price for the purposes of the reverse book building process and the public shareholders are free to tender their equity shares at any price irrespective of the indicative offer price.

The promoter proposed to acquire up to 2.92 lakh equity shares, representing 8.673% stake, held by public shareholders in the company.

As on 31 December 2013, promoters held 91.33% stake in Rhodia Specialty Chemicals India. Of the total promoter holding, Rhodia UK held 72.93% stake and Solvay Participations France held 18.39% stake.

Opto Circuits (India) rose 3.57% after the company said its Powerheart G5 automated external defibrillator received market clearance from the US drug regulator. The company made the announcement during trading hours today, 20 February 2014.

Cardiac Science Corporation, a group company of Opto Circuits (India) and a global leader in automated external defibrillators (AEDs), announced that its Powerheart G5 AED has received 510(k) market clearance from the US Food and Drug Administration (USFDA), allowing the company to begin selling the AED later this year along with its successful Powerheart G3 product line, Opto Circuits (India) said in a statement.

"This news is a testament to the commitment shown by our employees who have spent many years of developing, testing and refining the Powerheart G5 so that seasoned and first-time rescuers will have the most reliable, easy-to-use AED in the U.S. marketplace," said Vinod Ramnani, Chairman and Managing Director, Opto Circuits (India). "Our product portfolio is now the envy of the AED industry."

The Powerheart family of AEDs is designed to enable rescuers to swiftly provide effective, life-saving therapy to aid a person who has suffered sudden cardiac arrest (SCA), a condition in which the heart suddenly stops beating due to inregularities in its electrical system. The condition strikes as many as 360,000 Americans annually with the majority of cases being fatal, according to the American Heart Association, the company said.

However, the American Heart Association notes that at least 20,000 lives could be saved annually by prompt use of AEDs. Ultimately, with broad deployment of AEDs among trained responders, as many as 50,000 deaths due to SCA could be prevented each year-a cause Cardiac Science is firmly behind, the company said.

"Cardiac Science has been working to reduce SCA fatalities since we introduced the first fully automated external defibrillator," said Al Ford, Cardiac Science General Manager and Senior Vice President of Sales / Marketing. "The Powerheart G5 and G3 provide a one-two punch in our mission to provide every company, school and public place with a potentially life-saving AED."

The Powerheart G5 will be available for purchase in the United States later this year, the company said.

Cardiac Science designs, manufactures and markets Powerheart automated external defibrillators (AEDs) and related services that facilitate successful deployments. Its growing list of AED placements include Fortune 500 businesses, physician offices, schools, restaurants, malls, airports, sports fields and other public places to combat sudden cardiac arrest (SCA), the leading cause of the death in the United States.

The Reserve Bank of India next undertakes monetary policy review on 1 April 2014. Citing price pressures, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.

European stocks dropped on Thursday, 20 February 2014, as business activity in the euro zone sputtered this month due to weakness in France. Key benchmark indices in France, Germany and UK were off 0.29% to 1.06%.

Asian stocks edged lower on Thursday, 20 February 2014, after a Chinese manufacturing index dropped more than estimated this month. Key benchmark indices in Taiwan, Singapore, Japan, Hong Kong and South Korea were off by 0.07% to 2.15%. Indonesia's Jakarta Composite rose 0.12%.

China's Shanghai Composite fell 0.18%. A Chinese manufacturing index fell to the lowest level in seven months in February, adding to challenges for Communist Party officials grappling with risks to the financial system from trust defaults and soured loans. The preliminary February reading of 48.3 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics compares with January's final figure of 49.5. A number below 50 indicates contraction.

Japan's trade deficit widened more than expected to ¥2.79 trillion ($27.2 billion) in January, compared to December's ¥1.30 trillion, data released by the Japanese government today, 20 February 2014, showed. Imports rose 25% from a year earlier and outbound shipments gained 9.5%.

Singapore's economy expanded last quarter after a pick-up in manufacturing at the year end, with the government predicting an improvement in overseas demand in 2014 amid a global recovery. Gross domestic product rose an annualized 6.1% in the three months through December from the previous quarter, when it climbed a revised 0.3%, the trade ministry said in a statement today.

Trading in US index futures indicated that the Dow could drop 21 points at the opening bell on Thursday, 20 February 2014. US stocks edged lower on Wednesday, 19 February 2014, after data showed US housing starts sank last month by the most in almost three years and after the Federal Reserve indicated stimulus cuts will likely continue. Construction on new US homes tumbled 16% in January to a seasonally adjusted annual rate of 880,000, with drops for single-family homes and apartments, according to Commerce Department. Building permits, a sign of future demand, fell to the lowest rate since August. US producer prices rose in January under the government's new formula for measuring wholesale inflation, the Labor Department said on Wednesday, 19 February 2014.

Federal Reserve policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5%, according to minutes of their January meeting released on Wednesday, 19 February 2014. With joblessness falling faster than expected even as other labor-market indicators show weakness, policy makers agreed it would "soon be appropriate" to revise their guidance about how long the era of record-low interest rates will remain, the minutes showed. "Several" Federal Reserve officials said that in "the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace" of bond buying at each meeting, the minutes showed.

Ahead of the release of the Fed minutes, Atlanta Federal Reserve President Dennis Lockhart on Wednesday, 19 February 2014, said he expects a mid-2015 interest-rate hike.

Federal Reserve Chairwoman Janet Yellen said last week that US growth has strengthened and that only a "notable change in the outlook" for the economy would prompt policy makers to slow the pace of cuts to the monthly bond-buying program.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 18-19 March 2014. After a monetary policy review, the FOMC on 29 January 2014 announced it will reduce monthly bond purchases by another $10 billion to $65 billion.

The International Monetary Fund, in a staff report prepared for central bankers and finance ministers from the Group of 20, said Wednesday, 19 February 2014, that significant downside risks remain for the world economy. Risks of prolonged market turmoil in emerging markets and of deflation in the euro area are threatening the world's improved economic prospects, IMF staff wrote in the report. The ministers meet this weekend in Sydney.