Tata Communications jumps on talks to sell stake in Neotel

Key benchmark indices edged higher on the first trading day of October 2013 as the rupee nudged higher against the dollar after data released by the Reserve Bank of India (RBI) on Monday, 30 September 2013, showed a lower-than-expected current account deficit in Q1 June 2013. Gains in Asian and European stocks aided upmove on the domestic bourses. The barometer index, the BSE Sensex, garnered 137.38 points or 0.71%, off 15.76 points from the day's high and up 252.43 points from the day's low. The market breadth, indicating the overall health of the market, was positive. Bond prices rose after the Reserve Bank of India (RBI) on Monday, 30 September 2013, said will infuse Rs 10000 crore into the banking system through open-market operations next week to ease liquidity constraints.

Indian stocks snapped two-day losing streak today, 1 October 2013. The Sensex had lost has 514.08 points or 2.58% in two trading sessions to settle at 19,379.77 on Monday, 30 September 2013, from a recent high of 19,893.85 on 26 September 2013. The Sensex garnered 760.05 points or 4.08% in September 2013. The Sensex has gained 90.44 points or 0.47% in calendar 2013 so far (till 1 October 2013). From a 52-week high of 20,739.69 on 19 September 2013, the Sensex has declined 1,222.54 points or 5.89%. From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 2,068.44 points or 11.85%.

Coming back to today's trade, capital goods pivotals and bank stocks gained on renewed buying. Realty stocks also edged higher on renewed buying. JSW Steel rose after the company announced its plan to set up a second steel processing center in Pune (Maharashtra) with its JV partner Marubeni Itochu Steel Inc. Tokyo, (MISI). Shares of state-run oil marketing companies (PSU OMCs) fell after announcing revision in fuel prices on Monday, 30 September 2013. Metal stocks declined as official Chinese factory gauge rose less than economists forecast in September. Steel stocks rose.

Tata Communications surged after Vodacom and the shareholders of Neotel announced that they have entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom SA. Tata Communications has a strategic investment in Neotel.

The stock market remains closed tomorrow, 2 October 2013, on account of Mahatma Gandhi Jayanti.

The S&P BSE Sensex garnered 137.38 points or 0.71% to settle at 19,517.15, its highest closing level since 27 September 2013. The index jumped 153.14 points at the day's high of 19,532.91 in late trade. The index declined 115.05 points at the day's low of 19,264.72 in morning trade, its lowest level since 6 September 2013.

The CNX Nifty advanced 44.75 points or 0.78% to 5,780.05, its highest closing level since 27 September 2013. The index hit a high of 5,786.45 in intraday trade. The index hit a low of 5,700.95 in intraday trade, its lowest level since 6 September 2013.

The total turnover on BSE amounted to Rs 1485 crore, lower than Rs 1785.71 crore on Monday, 30 September 2013.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,320 shares rose and 1,007 shares fell. A total of 159 shares were unchanged.

The BSE Mid-Cap index rose 0.57% and the BSE Small-Cap index rose 0.47%. Both these indices underperformed the Sensex.

Among the sectoral indices on BSE, the S&P BSE Realty index (up 2.69%), the S&P BSE Bankex (up 2.67%), the S&P BSE Capital Goods index (up 1.53%), the S&P BSE Auto index (up 0.9%) outperformed the Sensex.

The S&P BSE Consumer Durables index (up 0.63%), the S&P BSE Teck index (up 0.39%), the S&P BSE Healthcare index (up 0.28%), the S&P BSE IT index (up 0.09%), the S&P BSE FMCG index (up 0.05%), the S&P BSE PSU index (down 0.18%), the S&P BSE Metal index (down 0.3%), the S&P BSE Power index (down 0.59%) and the S&P BSE Oil & Gas index (down 0.62%) underperformed the Sensex.

Among the 30-share Sensex pack, 16 stocks rose and rest of them fell.

Index heavyweight Reliance Industries shed 0.08%.

Shares of state-run oil marketing companies (PSU OMCs) fell after announcing revision in fuel prices on Monday, 30 September 2013. HPCL (down 0.97%) and Indian Oil Corporation (IOCL) (down 1.71%) edged lower. PSU OMCs reduced petrol price by a sharp Rs 3.05 per litre, the first reduction in rates in over five months and raised diesel prices by 50 paise a litre. The price change by oil companies are excluding local sales tax or VAT and are effective from Tuesday, 1 October 2013. Alongside, oil firms also raised rates of non-subsidised domestic cooking gas (LPG) that households buy after exhausting their quota of 9 subsidised or cheaper cylinder. Price in Delhi was hiked by Rs 71.50 per 14.2-kg cylinder to Rs 1,004.

State-run oil marketing companies (PSU OMCs) incur under-recoveries on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. In January, 2013, the government also allowed oil marketing companies to raise diesel prices in small measures periodically.

Bharat Petroleum Corporation (BPCL) fell 0.88%. The company said during market hours today, 1 October 2013, that Shri S. Varadarajan, Director-Finance has been appointed by the competent Authority as Chairman & Managing Director of the company, effective 1 October 2013 in the place of Shri. R. K. Singh who has laid down office on superannuation on 30 September 2013.

Index heavyweight and cigarette maker ITC rose 0.76% to Rs 342.90, off the day's low of Rs 337.95.

FMCG major Hindustan Unilever (HUL) fell 1.82% to Rs 616 after parent company Unilever Plc warned on Monday, 30 September 2013, that a slowdown in its emerging markets accelerated in the July-September quarter and it now expects underlying sales growth of just 3% to 3.5% in the period as against estimates of 6%.

Unilever attributed the emerging markets slowdown to a significant currency weakening. Unilever said developed markets remained 'flat to down,' representing no change to its previous forecast.

In April-June quarter, Unilever had reported underlying sales growth of 5% with volume growth of 3%, while Hindustan Unilever's (HUL) domestic consumer business grew at 7% with 4% underlying volume growth.

Asian Paints declined 0.83%. The company said during market hours that Asian Paints (International) (APIL), Mauritius -- a wholly owned subsidiary of the Company -- currently owns about 90.44% of the total number of issued shares of Berger International, Singapore together with the valid acceptances received in terms of its delisting offer for Berger International, Singapore. On 21 August 2013, Asian Paints had informed about the acquisition of additional shares and voluntary unconditional cash offer for the remaining shares of Berger International (BIL), Singapore by APIL, Mauritius. Further APIL had also announced its intention to acquire the balance 24.18% shares of BIL with an intention to make BIL a wholly owned subsidiary of APIL and delist from the Singapore Exchange Securities Trading (SGX-ST).

The closing date for the offer is 9 October 2013 at 5.30 pm (Singapore time) or such later date(s) as may be announced from time to time by APIL. The announcement has already been made on the Singapore Exchange by BIL. BIL has no operations in India.

Capital goods pivotals gained on renewed buying. Bhel (up 2.8%) and L&T (up 1.7%), rose.

Bank stocks rose on renewed buying. Among private bank stocks, HDFC Bank (up 2.92%), Yes Bank (up 2.77%), Axis Bank (up 3.84%) and ICICI Bank (up 3.29%), gained.

Kotak Mahindra Bank rose 1.56%. The bank said after market hours on Monday, 30 September 2013, that the bank has decided not to transfer any SLR security from AFS/HFT to HTM as permitted under Reserve Bank of India (RBI) circular though there is sufficient headroom to do so. Reserve Bank of India, vide its circular dated 23 August 2013 had, as a onetime measure, permitted banks to transfer SLR securities from AFS/HFT to HTM category during the current year up to the limit of 24.50% of net demand and time liabilities (NDTL). To mitigate impact of mark to market losses incurred by banks due to abnormal market conditions, the RBI also gave banks the option of valuing these securities for the purpose of such transfer, as at the close of business of 15 July 2013. Such transfers were to be done no later than 30 September 2013.

State Bank of India (SBI) rose 1.78%. The bank last week said that it has repurchased a principal amount of $147 million of $1 billion 3.25% bonds due 2018 (the 2018 Bonds). The 2018 Bonds were issued by SBI on 18 April 2013 and are listed on the Singapore Exchange Securities Trading. The repurchase of the Bond took place between 26 August 2013 and 26 September 2013. The bank is in the process of cancelling the repurchased 2018 Bonds and the aggregate outstanding principal amount of the 2018 Bonds following such cancellation will be $853 million, SBI said in a statement.

Punjab National Bank advanced 0.05%. The bank said after market hours on Monday, 30 September 2013 that the bank has decided to provide interest at uniform rate of 9% on all NRE term deposits of tenure 3 years and above up to 10 years, considering recent relaxations permitted by the Reserve Bank of India (RBI). These changes shall be effective from 1 October 2013.

Bank of Baroda rose 1.3%. The bank has decided to revise the rates of interest payable on term deposits of below Rs 1 crore and Rs 1 crore and above of some maturities with effect from 1 October 2013.

Bank of India jumped 5.45%. The state-run bank after market hours today, 1 October 2013, said that the bank has completed the allotment of Rs 500-crore BASEL-III compliant unsecured Tier-II Bonds of 10 years at a coupon rate of 9.8% per annum on private placement basis. The state-run bank also clarified that the present issue is in addition to the earlier issue of Rs 1000 crore completed on 25 September 2013. Both the issues have been rated AAA by CRISIL, the bank said.

IT stocks were mixed. HCL Technologies (down 1.31%), and Wipro (down 0.75%), declined. TCS (up 0.98%) and Infosys (up 0.05%) rose.

Metal stocks declined as official Chinese factory gauge rose less than economists forecast in September. China is the world's largest consumer of copper and aluminum. Jindal Steel & Power (down 1.42%), Sesa Sterlite (down 2.99%), Hindalco Industries (down 1.52%), and Hindustan Zinc (down 0.86%) declined.

However some steel stocks bucked trend. Tata Steel rose (up 1.44%) and Sail (up 3.01%) gained.

JSW Steel rose 3.25% after the company during market hours announced its plan to set up a second steel processing center in India's automobile hub Pune (Maharashtra) with its JV partner Marubeni Itochu Steel Inc. Tokyo, (MISI). The 1st Phase of the project is expected to come on stream by FY 2014 with an installed capacity of 1.8 lakh tonnes per annum and will be scaled upto 3.6 lakh tonnes per annum in Phase 2. The project will be set up at a capital cost of Rs 204 crore and will be funded through 50% equity and 50% debt element.

Seshagiri Rao, Joint Managing Director, JSW Steel & Group Chief Financial Officer, said: "The rapid growth of the Indian steel industry offers tremendous opportunity for supply of high end processed steel. We can leverage the global sales network of expertise of Service Center Operations of MISI and the World Class Technology Products manufactured by JSW.”

The joint venture company is equipped to process flat steel products such as hot rolled, cold rolled and coated products with a view to offer just in time solutions to the automotive, white goods, construction and other value added segments.

In 2011, JSW Steel and Marubeni Itochu Steel Inc. formed a JV to set-up a Steel Processing center near Palval (Haryana), under the name of "JSW MI Steel Service Center". JSW Steel & MISI both have a history of cooperation in areas of mutual interest which will further strengthen going forward.

Maruti Suzuki India rose 1.7% after the company said its total sales rose 11.7% to 1.04 lakh units in September 2013 over September 2012. Maruti Suzuki India said its domestic sales rose 1.8% to 90,399 units in September 2013 over September 2012. Exports surged 180.8% to 14,565 units in September 2013 over September 2012.

Mahindra & Mahindra (M&M) rose 0.58% after the company announced during trading hours today that its total auto sales rose 14% to 43,289 units in September 2013 over August 2013. M&M's total sales declined 10% to 43,289 units in September 2013 over September 2012. The sales of passenger vehicle segment (which includes utility vehicles and Verito) declined 21% to 18,916 units in September 2013 over September 2012. The company's domestic sales fell 10% to 40,574 units in September 2013 over September 2012. Exports declined 12% to 2,715 units in September 2013 over September 2012.

Speaking on the monthly performance, Pravin Shah, Chief Executive, Automotive Division, Mahindra & Mahindra said: "While there has been a growth over August 2013, it is not to the extent that makes us comfortable especially as we approach the festive season. Factors such as increase in input and raw material costs and the depreciating rupee have not helped. To compensate to some extent we have taken a price increase effective today. The auto industry is definitely in need of a trigger in terms of a stimulus to boost consumer sentiments leading to a turnaround in the sector as well as a revival of the economy in general".

Mahindra & Mahindra (M&M) today, 1 October 2013, also announced its tractor sales data for the month just gone by. The company's total tractor sales jumped 33% to 26,637 units in September 2013 over September 2012. The company's domestic tractor sales jumped 37% to 25,922 units in September 2013 over September 2012.

Speaking on the monthly performance, Rajesh Jejurikar, Chief Executive, Tractor and Farm Mechanization, M&M said: "On the back of a good monsoon, we are delighted with a 37% growth in tractor sales despite traditionally low buying period in September. We see a healthy growth continuing over the next few months".

Atul Auto surged 5.03% after the company said its total sales rose 23.43% to 3,366 units in September 2013 over September 2012. The company announced the sales numbers during trading hours today, 1 October 2013.

Two-wheeler makers were mostly higher on a sharp reduction in petrol price announced by PSU OMCs on Monday. Bajaj Auto rose 2.23%. Hero MotoCorp shed 0.69%.

TVS Motor Company jumped 8.15% to Rs 39.80 after the company said its total sales rose 16% to 1.97 lakh units in September 2013 over September 2012. The company announced the monthly sales data during trading hours today, 1 October 2013. Total two wheeler sales rose 15% to 1.89 lakh units in September 2013 over September 2012. Domestic two-wheeler sales rose 13% to 1.68 lakh units in September 2013 over September 2012. Motorcycles sales jumped 30% to 83,043 units in September 2013 over September 2012. Scooters sales rose 8% to 43,201 units in September 2013 over September 2012. The company's three-wheeler sales jumped 56% to 7,800 units in September 2013 over September 2012.

The company's total exports jumped 47% to 27,577 units in September 2013 over September 2012. Exports of two wheelers jumped 32% to 21,011 units in September 2013 over September 2012.

TVS Motor strengthened its scooter portfolio with the launch of TVS Jupiter in September 2013. TVS Jupiter is targeted at the male customer. The metal bodied TVS Jupiter is powered by a next generation noise-free, all-aluminum, low-friction engine that delivers an amazing mix of power, superior acceleration and best in class fuel efficiency, the company said in a statement. TVS Jupiter delivers high performance ride quality and superior ride comfort making it a perfect, sensible runabout, TVS Motor said.

Zee Entertainment gained 1.34% to Rs 231.45. A block deal of 2.5 lakh shares was executed in the counter on BSE at Rs 230.50 per share at 12:14 IST.

Tata Communications surged 7.66% to Rs 202.50 after Vodacom and the shareholders of Neotel announced that they have entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom SA. Tata Communications which has a strategic investment in Neotel, made the announcement after market hours on Monday, 30 September 2013.

Vodacom and Neotel said that the finalisation of the transaction is subject to the successful conclusion of commercial negotiations and receiving the requisite regulatory and corporate approvals. This transaction, if concluded, would stimulate greater competition in the South African fixed telecommunications sector and will accelerate the provision of high speed data links. It would also result in the combined entity being able to offer an expanded product range and, as a consequence, enhanced customer choice, a joint statement from the two companies said.

Vodacom is an African mobile communications company providing voice, messaging, data and converged services to around 50 million active customers, Vodacom is majority owned by Vodafone, one of the world's largest mobile communications companies by revenue. Vodacom is listed on the JSE and its head office is in Johannesburg, South Africa.

Neotel is South Africa's first converged communications network operator. It provides a range of value-added voice, internet and data services for businesses, wholesale network operators and providers and retail customers using its IP Next Generation Network, powered by Neotel's high-performance fibre optic backbone. Neotel connects the major centres in South Africa to each other and to the world, directly linking its infrastructure into Tata Communications' global Tier 1 network.

Sunil Joshi, Neotel CEO, said, "We believe this presents an exciting and attractive opportunity for all parties, especially our customers to whom we will be able to offer more meaningful and innovative products and services. This transaction, if concluded, would further enable Neotel to extend its footprint in South Africa and add the mobile capability that our customers require for their business' growth in a new world of converged communications. If completed and approved, this transaction will support Government's ICT priorities to increase investment in the next generation of telecommunications services and facilitate growth in the broader economy."

Speaking about the transaction, Vodacom Group CEO Shameel Joosub said, "There are a number of important steps that we still need to complete in order to conclude the transaction. If the deal is implemented, Vodacom intends to put significant investment into the combined entity to provide high-speed fixed connectivity to many more businesses and consumers. By further building on the capabilities within Neotel, we would also aim to develop entirely new services such as fibre to the home and business. Neotel has access to over 15,000km of fibre-optic cable, including 8,000km of metro fibre in Johannesburg, Cape Town and Durban. Spectrum is also an important consideration as the combined entity could use this resource more efficiently, and in doing this we can keep pace with South Africa's rapidly growing demand for mobile data. This transaction is all about providing greater choice and better infrastructure for South Africa's businesses and consumers."

Separately, Tata Communications before market hours today, 1 October 2013, announced an agreement with Arkadin, one of the world's largest and fastest growing collaboration service providers. Arkadin has become an official APAC provider of Tata Communications' recently launched jamvee conferencing -0 an on-demand unified communication service which enables, for the first time, anyone, anywhere, to instantly access a business video meeting on any device. The partnership agreement with Arkadin will first roll-out in Australia and New Zealand followed by the rest of the Asia Pacific region, Tata Communications said in a statement.

Unichem Laboratories declined 1.7% to Rs 164.50. Two block deals were executed on the counter on BSE. One block deal of 3 lakh shares was struck at Rs 165 per share at 10:57 IST and another of 50,000 shares was executed at Rs 165 per share at 10:57 IST.

Realty stocks edged higher on renewed buying. DLF (up 6.58%), Sobha Developers (up 2.38%), HDIL (up 0.42%), Omaxe (up 0.44%), Indiabulls Real Estate (up 3.61%) and Unitech (up 0.64%) gained.

Shipping stocks fell after the Baltic Dry Index, which tracks rates to ship dry commodities, fell 2.1% in London on Monday, 30 September 2013. Mercator (down 0.7%), Great Eastern Shipping Company (down 2.22%) and Shipping Corporation of India (down 2.93%) edged lower.

India received 6% higher rainfall than normal in the 2013 monsoon season ended on September 30, the Indian Meteorological Department (IMD) said on Tuesday, strengthening prospects of a bumper farm output that could boost farmers' earnings. Monsoon rains are vital for 55% of the country's farmlands that lack irrigation facilities, and can make the difference between India being an exporter or importer of staples such as rice and sugar.

Factory activity in India shrank for a second month in September, albeit not as sharply as in August, on a dearth of new orders which pushed firms to cut staff, a survey showed on Tuesday. The HSBC Manufacturing PMI, compiled by Markit, rose to 49.6 in September from 48.5 in August, but remaining below the watershed 50 mark that separates growth from contraction. The new orders sub-index rose to 49.6 last month from 47.5 in August.

In the foreign exchange market, the rupee edged higher against the dollar, with the Indian currency finding support from data showing a lower-than-expected current account deficit in Q1 June 2013. The partially convertible rupee was hovering at 62.43, compared with its close of 62.60/61 on Monday, 30 September 2013.

India's current account deficit (CAD) widened to $21.8 billion or 4.9% of GDP in Q1 June 2013 from $16.9 billion or 4% of GDP in Q1 June 2012, data released by the Reserve Bank of India (RBI) after trading hours on Monday, 30 September 2013, showed. The CAD was $18.1 billion in Q4 March 2013. The RBI said that the year-on-year rise in CAD in Q1 June 2013 was due to a rise in imports and some decline in merchandise exports. Merchandise trade deficit (balance of payments basis) widened to $50.5 billion in Q1 June 2013 from $43.8 billion in Q1 June 2012. The trade deficit, coupled with a slow recovery in net invisibles (income and services), led to widening of CAD on year-on-year basis in Q1 June 2013, the RBI said. On balance of payments (BoP) basis, there was a slight drawdown in foreign exchange reserves of $0.3 billion in Q1 June 2013 as against an accretion of $0.5 billion in Q1 June 2012.

Bond prices rose after the Reserve Bank of India (RBI) on Monday, 30 September 2013, said will infuse Rs 10000 crore into the banking system through open-market operations next week to ease liquidity constraints. The yield on the federal benchmark paper 7.16% GS 2023 was hovering at 8.7365%, lower than its close of 8.7658% on Monday, 30 September 2013. Bond yield and bond prices are inversely related.

Based on the current assessment of prevailing and evolving market conditions, the RBI will purchase government securities for an aggregate amount of Rs 10000 crore on 7 October 2013, the RBI said in a press release on Monday, 30 September 2013.

The government's fiscal deficit for the April-August period has reached about three-fourths of its target for the year ending March, data released after trading hours on Monday, 30 September 2013, showed. By the end of August, the gap between the government's revenue and expenses has reached 74.6% of its target for the fiscal year, according to data released on Monday. Expenses during the first five months were about 40% of the aim for the year, while revenue was way short at 23% of the target. The government aims to limit the deficit within 4.8% of gross domestic product, compared with 4.9% last year.

The combined output of the eight core infrastructure sectors rose 3.7% in August 2013, supported by strong growth in coal and cement production and electricity generation, data released by the government after trading hours on Monday, 30 September 2013, showed. It was the highest growth in core sector output in seven months.

European stocks were mostly higher on Tuesday, 1 October 2013, with data showing the euro-zone manufacturing sector expanded for a third month in September. The final manufacturing purchasing managers' index came in at 51.1, unchanged from a preliminary reading. Key benchmark indices in France and Germany were up 0.62% to 0.75%. However, UK's FTSE 100 was down 0.19%.

Euro-area unemployment unexpectedly retreated from a record, as the currency bloc's economic recovery gained momentum. The jobless rate fell to a revised 12 percent in July from a record 12.1 percent a month earlier, and held at that level in August, the European Union's statistics office in Luxembourg said today.

Asian stocks rose on Tuesday, 1 October 2013, as a report showed confidence among large Japanese manufacturers increased. Key benchmark indices in Japan, South Korea, Taiwan, Indonesia, and Singapore rose 0.1% to 0.69%. China's local markets are shut from today, 1 September 2013 till 7 October 2013 for National Day holidays.

A Chinese factory gauge rose less than economists forecast in September, signaling limits on the nation's rebound from a two-quarter economic slowdown. The Purchasing Managers' Index was at 51.1, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with 51 in August.

The Bank of Japan's quarterly Tankan index for big manufacturers rose to 12 in September, the highest since 2007, from 4 in June.

The Reserve Bank of Australia kept official interest rates at a record low 2.5% for the second month in a row on Tuesday, saying that the impact of its earlier cuts were still filtering through the economy.

Trading in US index futures indicated that the Dow could gain 56 points at the opening bell on Tuesday, 1 October 2013. US stocks closed lower on Monday with just hours to go before a midnight deadline to avert a federal government shutdown.

The US government began a partial shutdown on Tuesday for the first time in 17 years after lawmakers could not break a political stalemate that sparked new questions about the ability of a deeply divided Congress to perform its most basic functions. Some US government offices and national parks will be shuttered, but spending for essential functions related to national security and public safety will continue, including pay for US military troops.

There are also fears that the conflict could spill over into the more crucial dispute over raising the federal government's borrowing authority. A failure to raise the $16.7 trillion debt ceiling would force the country to default on its obligations, dealing a potentially painful blow to the economy and sending shockwaves around global markets.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus amid concerns about the strength of the economic recovery.