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Sunday, April 13, 2014

Market jumps as BJP promises investor-friendly regime

Market edged higher last week after the main opposition party -- the Bharatiya Janata Party (BJP) -- in its Lok Sabha polls manifesto released early this week promised more business-friendly policies if the party comes to power after elections. Strong buying by foreign institutional investors (FIIs) also propelled shares higher.

The Sensex garnered 269.46 points or 1.21% to settle at 22,628.96. The 50-unit CNX Nifty garnered 81.95 points or 1.22% to settle at 6,776.30.

The S&P BSE Mid-Cap index gained 140.84 points or 1.96% to settle at 7,338.46. The S&P BSE Small-Cap index rose 258.13 points or 3.55% to settle at 7,523.18. Both these indices outperformed the Sensex.

Foreign institutional investors (FIIs) have bought shares worth a net Rs 6941.90 crore in April 2014 so far (till 9 April 2014). FIIs purchased shares worth a net Rs 20077.20 crore in March 2014. FIIs have bought shares worth a net Rs 29137.70 crore in this calendar year so far (till 9 April 2014). FIIs bought shares worth a net Rs 113135.70 crore in 2013 calendar year.

Coming back to equity market, high volatility was witnessed on Monday, 7 April 2014, as key benchmark indices erased a lion's part of the intraday losses. The S&P BSE Sensex shed 16.05 points or 0.07% to setttle at 22,343.45. The CNX Nifty rose 0.70 points or 0.01% to settle at 6,695.05.

The stock market was shut on Tuesday, 8 April 2014, on account of Ram Navami. Key benchmark indices surged Wednesday, 9 April 2014, after the BJP, in its Lok Sabha polls manifesto, promised more business-friendly policies if the party comes to power after elections. The S&P BSE Sensex garnered 358.89 points or 1.61% to settle at 22,702.34. The CNX Nifty garnered 101.15 points or 1.51% to settle at 6,796.20.

Small gains took the key benchmark indices to record closing high on Thursday, April 10, 2014. The S&P BSE Sensex garnered 12.99 points or 0.06% to settle at 22,715.33. The CNX Nifty edged up 0.20 points to settle at 6,796.40.

Key benchmark indices edged lower in choppy trade on Friday, 11 April 2014 after the latest data showed that India's merchandise exports fell for the second month in a row in March 2014. The S&P BSE Sensex was down 86.37 points or 0.38% to 22,628.96. The CNX Nifty was down 20.10 points or 0.3% to 6,776.30.

Among the 30 Sensex shares, 23 rose and the remaining shares declined.

Drug major Sun Pharmaceutical Industries was the top Sensex gainer last week. The stock jumped 9.77% to Rs 627.75. Ranbaxy Laboratories gained 1.51% to Rs 466.50. The two companies in a joint statement issued on Sunday, 6 April 2014, announced that they have entered into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. As per the share swap ratio, Ranbaxy shareholders will receive 8 shares of Sun Pharma for every 10 equity shares of Ranbaxy. This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on 4 April 2014.

The combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world and the largest pharmaceutical company in India. The combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. On a pro forma basis, the combined entity's revenues are estimated at $4.2 billion with EBITDA of $1.2 billion for the twelve month period ended December 31, 2013. The transaction value implies a revenue multiple of 2.2 based on 12 months ended 31 December 2013.

Sun Pharma at the fag end of the trading session on Wednesday, 9 April 2014, issued clarification in response to various reports on Silverstreet's investment in Ranbaxy. This pertains to purchase of shares of Ranbaxy Laboratories by Silverstreet Developers LLP and it does not violate insider trading rules, Sun Pharma said. Mr. Sudhir Valia is not and was not a partner of Silverstreet Developers LLP when purchase of shares of Ranbaxy Laboratories was affected by LLP. Silverstreet Developers LLP has two partners. Both are 100% subsidiaries of Sun Pharma. Hence, all the benefits flowing from the investment in Ranbaxy shall accrue to Sun Pharma, Sun Pharma said in a statement.

Another pharmaceutical major Dr. Reddy's Laboratories declined 2.86% to Rs 2,570.20.

Bank shares were in demand. State Bank of India (SBI) (up 4.73%), Axis Bank (up 4.64%), HDFC Bank (up 1.66%) and ICICI Bank (up 0.42%), edged higher.

Vedanta group firm Sesa Sterlite rose 3.13% to Rs 195.90. The company unveiled production data for Q4 and year ended 31 March 2014 during trading hours on Thursday. 10 April 2014. In Karnataka, the company resumed iron ore mining on 28 December 2013 and optimized its approved annual capacity of 2.29mtpa, which resulted in a production of 1.5mt in FY 2014. However, only 27 kt was sold during the year. At Goa, the company participated in e-auctions of inventory and sold 0.3 million tonnes in Q4 March 2014 but these were not accounted for as sales since the dispatches did not take place during the quarter. These dispatches have commenced in April.

Regarding mining in Goa, the Expert committee appointed by the Supreme Court submitted its second interim report to the Court on 24 March 2014. The Expert committee, in its report, recommended that 27.5mtpa was a sustainable extraction level in the state, but suggested that the ideal permissible limit be 20mtpa until a scientific study is completed within 12 months. The decision of the Supreme Court is awaited on this matter, the company said.

The company said that production of pig iron rose 28% to 133,000 tonnes in Q4 March 2014 over Q4 March 2013. Production of met coke rose 27% to 119,000 tonnes in Q4 March 2014 over Q4 March 2013.

Prodcution of copper cathodes rose 14% to 98,000 tonnes in Q4 March 2014 over Q4 March 2013. The full year production was 17% lower due to the temporary closure in Q1 June 2013, the comapny said.

Total aluminum production rose 2% to 200,000 tonnes in Q4 March 2014 over Q4 March 2013. Total aluminum production rose 3% to 794,000 tonnes in FY 2014 over FY 2013.

Total power sales fell 21% to 2,093 million units in Q4 March 2014 over Q4 March 2013. Total power sales fell 7% to 9,374 million units in FY 2014 over FY 2013.

Among other metal shares, Tata Steel (up 4.53%), Hindalco Industries (up 2.07%), edged higher.

Shares of power generation firms were in demand. Tata Power (up 4.48%) and NTPC (up 3.32%), edged higher.

IT shares were mostly higher. Wipro (up 2.66%) and TCS (up 1.13%), edged higher. However, IT major Infosys fell 2.40%.

India's largest car maker by sales Maruti Suzuki India rose 0.34% to Rs 1,933.75. The company on Friday, 11 April 2014, said it will proactively replace 'fuel filler neck' of 1.03 lakh vehicles which includes 42,481 units of Dzire, 47,237 units of Swift and 13,593 units of Ertiga manufactured between 12 November 2013 and 4 February 2014. This exercise is limited to vehicles within the above specified range and does not pertain to any other vehicle of the company, Maruti said. In the affected vehicles there is a possibility of fuel smell and in extreme condition there may be some fuel leakage, if fuel is filled upto the fuel cap, beyond 'Auto cutoff level', Maruti said.

Maruti Suzuki dealers will contact owners of all vehicles in the above mentioned range. The company will replace the 'fuel filler neck' free of cost. As part of its quality tests in the manufacturing process, the company noticed the problem. The new filler neck is being progressively despatched to the dealer workshops, Maruti said. Considering the number of vehicles impacted, the company is building up stock of the required component at its dealer workshops, before inviting customers, Maruti said.

Commercial vehicles maker Tata Motors rose 4.48% to Rs 423.25. The company's British luxury car unit Jaguar Land Rover (JLR) on Thursday, 10 April 2014, said its sales rose 3% to 55,183 units in March 2014 over March 2013. Jaguar sales jumped 19% to 11,731 units in March 2014 over March 2013. In March, Land Rover sold 43,452 vehicles, in line with prior year, with strong performances across the range, JLR said in a statement.

JLR's sales rose 8% to 124,776 vehicles in Q1 March 2014 over Q1 March 2013. Jaguar sales rose 19% to 24,031 vehicles in the Q1 March 2014 over Q1 March 2013. Land Rover sales rose 6% to 100,745 vehicles in Q1 March 2014 over Q1 March 2013.

India's largest motorcycle maker by sales Hero MotoCorp fell 3.49% to Rs 2,171.55. It was biggest Sensex loser last week.

Another two-wheeler maker Bajaj Auto fell 1.38% to Rs 2,005.

India's merchandise exports fell 3.15% to $29.57 billion in March 2014 over March 2013, data released by the Ministry of Commerce and Industry on Friday, 11 April 2014, showed. Imports declined 2.11% to $40.08 billion in March 2014 over March 2013. Oil imports jumped 17.7% to $15.78 billion in March 2014 over March 2013. Non-oil imports fell 11.8% to $24.3 billion in March 2014 over March 2013. The trade deficit widened to $10.50 billion in March 2014, from $10.4 billion in March 2013.

The country's merchandise exports rose 3.98% to $312.35 billion in year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013). Imports declined 8.11% to $450.94 billion in FY 2014 over FY 2013. Oil imports rose 2.2% to $167.62 billion in FY 2014 over FY 2013. Non-oil imports fell 13.3% to $283.32 billion in FY 2014 over FY 2013. The trade deficit declined sharply to $138.59 billion in FY 2014, from $190.33 billion in FY 2013.

A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. The 36 days long voting process began on 7 April 2014 and will conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.

Investors are betting that the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) will be able to form the next government at the centre with support from some regional parties after Lok Sabha elections which conclude in mid-May this year. Various opinion polls have forecast that BJP led NDA is leading the race to Parliament. The opinion polls have also forecast that the NDA will be unable to form the government on its own and that it will have to rely on support from smaller regional parties to form the government. A party will need 272 MPs to form government at the Centre, which is a simple majority in 543-member Lok Sabha.

The Bharatiya Janata Party (BJP) has promised more business-friendly policies if it wins Lok Sabha polls. In its election manifesto released on Monday, 7 April 2014, the BJP attacked the incumbent Congress-led government for using 'tax terrorism' against companies. The BJP said it would provide a non-adversarial administration and simplify the country's complicated tax laws. The BJP said that economic revival will be the party's priority if it comes to power after elections. In its manifesto, the BJP has promised faster infrastructure development, job creation and measures to control inflation. The BJP said that it will bring on board all state governments in adopting the GST, addressing all their concerns. The party also promised a massive low cost housing program.

With regard to physical infrastructure development, the BJP said Public Private Partnership would be encouraged to tap into private sector resources as well as expertise. An institutional framework would be established for the same; while regulators would be given greater autonomy as well as accountability. Work on the freight corridors and attendant industrial corridors will be expedited, the BJP said. This will result in the faster movement of people and goods, it said. National Highway construction projects will be expedited, especially border and coastal highways, the BJP said. Every village will be connected through all-weather roads, it said.

The BJP said that if the party comes to power after elections, major steps will be undertaken in Transport and Housing for 'Urban Upliftment'. The BJP said it will initiate building 100 new cities enabled with the latest in technology and infrastructure and adhering to concepts like sustainability, walk to work etc, and focused on specialized domains.

A full-fledged programme for 'Rural Rejuvenation' will be made and implemented which will comprise of integrated strategies for personal, economic and social well being of the villagers, the BJP said. BJP's major thrust area for rural development would be to improve village level infrastructure in terms of roads, potable water, education, health, supply chain, electricity, broadband, job creation, security in rural areas and linkage to markets. Agriculture is the engine of India's economic growth and the largest employer, and BJP commits highest priority to agricultural growth, increase in farmer's income and rural development, the party's manifesto states. The BJP said it will increase public investment in agriculture and rural development.

The BJP said it will strictly implement fiscal discipline, without compromising on funds availability for development work and asset creation. The BJP said that it will allocate resources efficiently and effectively to re-energize the engines of growth. The party said it will re-visit the policy framework for investments both foreign and domestic to make them more conducive. The BJP said that the current accounts deficit will be brought down aggressively by focusing on exports and reducing the dependency on imports.

The BJP has said that it will encourage savings as an important driver of investment and growth.

The BJP said that it will ensure that a conducive, enabling environment is created making 'doing business' in India easy. The party's manifesto states that it will ensure logistics infrastructure, including stable power. The attempt will be to move towards a single-window system of clearances both at the centre and also at the state level through a Hub-spoke model. The party said it plans to put in place a mechanism that will ensure that the Central and state governments work in close coordination and synergy while giving clearances to mega projects. The BJP said that decision-making on environment clearances will be made transparent as well as time-bound. The party said it will set up world class investment and industrial regions as Global Hubs of Manufacturing.

The party said it wouldn't allow foreign direct investment (FDI) in multi-brand retail in India -- a sign a BJP government would rollback a key liberalization of the Congress government. Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise, BJP's manifesto stated. The BJP is committed to protecting the interest of small and medium retailers, SMEs and those employed by them, it said. The FIPBs (Foreign Investment Promotion Board) functioning shall be made more efficient and investor friendly, the manifesto stated.