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Sunday, June 22, 2014

Market slides as crude rises

The key benchmark indices declined last week as crude oil prices rose and as the rupee fell against the dollar, which stoked concerns of fuel price inflation and increase in India's current account deficit and fiscal deficit. The latest data showing increase in inflation based on the wholesale price index in May 2014 also weighed on sentiment. Selling was focused on large-caps, as mid and small-cap indices on BSE ended the week on a positive note.

The S&P BSE Sensex fell 122.66 points or 0.49% to 25,105.51. The 50-unit CNX Nifty fell 30.65 points or 0.41% to 7,511.45.

The S&P BSE Mid-Cap index rose 26.03 points or 0.29% to 8961.96 and the S&P BSE Small-Cap index rose 86.64 points or 0.90% to 9,761.22. Both these indices outperformed the Sensex.

Foreign portfolio investors (FPIs) have bought shares worth a net Rs 14353.90 crore in this month so far (till 18 June 2014). FPIs bought shares worth Rs 14006.15 crore in May 2014. FPIs have bought shares worth a net Rs 60158.30 crore in this calendar year so far (till 18 June 2014). FPIs bought shares worth a net Rs 113135.90 crore in 2013 calendar year.

Key benchmark indices registered small losses on Monday, June 16, 2014. The S&P BSE Sensex shed 37.69 points or 0.15% to settle at 25,190.48. The CNX Nifty shed 8.55 points or 0.11% to settle at 7,533.55.

After moving in a narrow range for most part of the trading session, Indian stocks rallied during the last one and half hour of trade on Tuesday, 17 June 2014, as crude oil prices futures eased in volatile trade and as Reserve Bank of India Governor Raghuram Rajan's comments that India is currently better prepared to deal with any shocks on the external front compared to last year triggered recovery in rupee against the dollar. Gains in Asian and European stocks aided the rally on the domestic bourses. The S&P BSE Sensex garnered 330.71 points or 1.31% to settle at 25,521.71. The CNX Nifty garnered 98.15 points or 1.3% to settle at 7,631.70.

Banking and realty stocks led decline as Indian stocks Wednesday, 18 June 2014, gave away a lion's portion of Tuesday's gains as crude oil prices rose and the rupee fell against the dollar after a flare up of militant violence in Iraq, a key oil exporter. The S&P BSE Sensex lost 274.94 points or 1.08% to settle at 25,246.25. The CNX Nifty shed 73.50 points or 0.96% to settle at 7,558.20.

Key benchmark indices declined in choppy trade on Thursday, 19 June 2014, as macroeconomic worries resurfaced along with increase in crude oil prices. India imports majority of its crude oil requirements. The S&P BSE Sensex shed 44.45 points or 0.18% to settle at 25,201.80. The CNX Nifty shed 17.50 points or 0.23% to settle at 7,540.70.

Key benchmark indices dropped on Friday, June 20, 2014, amid high intraday volatility. The S&P BSE Sensex was down 96.29 points or 0.38% to 25,105.51. The CNX Nifty was down 29.25 points or 0.39% to 7,511.45.

Among the 30 Sensex shares, 17 fell and the remaining shares rose.

Tractor major Mahindra & Mahindra (M&M) was the biggest loser in the Sensex pack last week. The stock fell 7.12% to Rs 1,141.90.

Two-wheeler major Hero MotoCorp fell 2.66% to Rs 2,520. Car major Maruti Suzuki (India) fell 1.60% to Rs 2,365.50.

Motorcycle maker Bajaj Auto rose 0.39% to Rs 2,175.90.

Most banking stocks declined. ICICI Bank (down 2.15%), HDFC Bank (down 1.25%) and State Bank of India (down 0.99%), edged lower. However, Axis Bank rose 2.67%.

Index heavyweight Reliance Industries (RIL) fell 4.08% to Rs 1,037.85. Chairman Mukesh Ambani said at the company's annual shareholders' meeting on Wednesday, 18 June 2014, that RIL is investing over Rs 1.8 lakh crore in its businesses in the current three years' investment cycle.

Ambani said that RIL is making efforts to maximize production from its existing oil and gas fields. With regard to the international oil and gas business, Ambani said that RIL is looking to expand its presence beyond the United States.

Ambani said there will be a phased launch of fourth generation broadband services by Reliance Jio Infocomm in 2015.

Ambani said that RIL is at inflection point in its journey to create value for its stakeholders, based on three-year investment cycle, greater competitive advantage and higher diversity and sustainability of growth and profitability of all its businesses.

Oil upstream company ONGC fell 1.12% to Rs 417.70 on concerns its subsidy burden will rise along with increase in crude oil prices. ONGC shares part of the under-recoveries of state-run oil refining-cum-marketing firms (PSU OMCs) arising from the government-imposed price caps on prices three key fuels -- diesel, LPG for domestic use and kerosene.

ONGC also slipped after media reports suggested that the petroleum ministry has proposed that higher gas price as per the Rangarajan formula could be allowed only for incremental production over and above the current levels. This is an alternative to applying the formula unconditionally from 1 July 2014. Restricting the higher price to additional output, the ministry feels, would incentivise production while also protecting the interests of consuming industries like power and fertilisers, reports said.

Shares of state-run gas transmission and distribution company GAIL (India) was biggest Sensex gainer last week. The stock surged 5.42% to Rs 439.40 on buzz that a foreign brokerage has raised the price target on the stock. The brokerage remains optimistic about the performance of the company's key business segments barring the petrochemicals business, as per reports. According to the brokerage house, with the new reform-oriented government at the helm, the macro outlook is fast improving. GAIL's gas transmission volumes should start to improve, and trading earnings can rebound after the weak Q4 March 2014. The brokerage did not factor any tariff increase by the company, and highlighted that a 15% tariff increase can boost GAIL's target price by a further 10%.

IT stocks gained after the US Federal Reserve on Wednesday, 18 June 2014, gave a positive assessment of the world's largest economy and committed to retaining its accommodative monetary policy. Infosys (up 4.21%), TCS (up 3.24%) and Wipro (up 1.39%), edged higher. US is the biggest outsourcing market for the Indian IT firms.

Increase in crude oil prices has sparked worries about India's macroeconomic situation as India imports majority of its crude oil requirements. Increase in crude oil prices has raised concerns of increase in fuel price inflation and increase in India's current account deficit and fiscal deficit.

Militant violence in Iraq which is a key oil exporter in the world, has sent crude prices higher over the past few days. Brent crude futures for August delivery were down 19 cents at $114.87 a barrel in Asian trade on Friday, 20 June 2014. The contract gained 80 cents to settle at $115.06 a barrel on Thursday, 19 June 2014, the highest close since 6 September 2013.

The annual rate of inflation based on the monthly wholesale price index (WPI) accelerated to 6.01% for the month of May 2014, from 5.2% in April 2014, data released by the government on Monday, 16 June 2014, showed. The WPI inflation for March 2014 was revised upwards to 6%, from 5.7% reported earlier. Non-food manufacturing inflation edged up to 3.8% in May 2014, from 3.4% in April 2014.

Meanwhile, the monsoon has covered half of the country four days behind the usual schedule. Meanwhile, all India seasonal rainfall from 1 to 18 June 2014 was 45% below long period average, the India Meteorological Department said on its website on Thursday, 19 June 2014. The weather office has forecast below average rainfall in 2014 due to fears of El Nino, a weather event marked by the warming of sea surface temperatures in the Pacific Ocean that can lead to droughts in the Asia Pacific region including India.