Market mirrors decline in global shares
The market fell last week in tandem with global stocks as uncertainty regarding the quantum and timing of interest rate hikes in the United States spooked investors. Profit booking added fuel to the fire as Indian shares had risen ahead of the Reserve Bank of India's (RBI) monetary policy review on Tuesday, 5 April 2016. Shares corrected after RBI cut its benchmark lending rate by 25 basis points, in line with market expectations.
The Sensex fell 595.80 points or 2.36% to settle at 24,673.84 in the week ended on Friday, 8 April 2016. The losses for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty fell 157.85 points or 2.05% to settle at 7,555.20. The BSE Mid-Cap index fell 0.45%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index rose 0.23%, outperforming the Sensex.
Meanwhile, foreign portfolio investors (FPIs) purchased stocks worth a net Rs 3364.96 crore from the secondary equity markets in this month so far (till 6 April 2016).
In global market, contradictory comments from Federal Reserve policy makers have added to uncertainty about the quantum and timing of interest rate hikes in the United States. During speech at a conference on cybersecurity, Boston Fed President Eric Rosengren on Monday, 4 April 2016, said rate-hikes may come sooner than the market is expecting. Rosengren is a voting member of the Fed policy committee this year. On 1 April 2016, Federal Reserve Bank of Cleveland President Loretta Mester cautioned that waiting too long to raise rates could be a risk to the economy. She is a voting member of the Fed's rate-setting policy committee. In a speech in New York on 29 March 2016, Federal Reserve Chairwoman Janet Yellen stressed a need for a cautious stance on interest-rate increases in the backdrop of global economic slowdown.
Back home, trading for the week began on a positive note. Telecom stocks and index heavyweight Infosys led upmove for key benchmark indices a day ahead of the Reserve Bank of India's (RBI) monetary policy review on Monday, 4 April 2016. The barometer index, the S&P BSE Sensex, rose 130.01 points or 0.51% to settle at 25,399.65. The gains for the Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty rose 45.75 points or 0.59% to settle at 7,758.80.
Banking, telecom, auto stocks and index heavyweights Infosys and ITC led losses for key benchmark indices, with the barometer index, the S&P BSE Sensex, falling below the psychologically important 25,000 level on Tuesday, 5 April 2016. The Sensex fell 516.06 points or 2.03% to settle at 24,883.59. The Nifty fell 155.60 points or 2.01% to settle at 7,603.20. The weakness on the domestic bourses was a part of weakness in global stocks triggered by uncertainty regarding the quantum and timing of interest rate hikes in the United States.
Meanwhile, on that day the Reserve Bank of India's (RBI) announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) after a monetary policy review came in line with market expectations. The central bank also announced the fine-tuning of its liquidity management framework. While retaining the accommodative stance of the monetary policy, RBI Governor Raghuram Rajan indicated in his monetary policy statement that the RBI may cut the repo rate further in the coming months if macroeconomic and financial developments provide room for further rate cut.
Gains for metal, auto and telecom stocks offset losses for stocks of public sector banks and index heavyweight Infosys, with the two key benchmark indices registering small gains on Wednesday, 6 April 2016. The barometer index, the S&P BSE Sensex, rose 17.04 points or 0.07% to settle at 24,900.63. The Nifty 50 index rose 11.15 points or 0.15% to settle at 7,614.35.
IT, telecom stocks and index heavyweights HDFC and ITC led losses for the two key benchmark indices on Thursday, 7 April 2016. The barometer index, the S&P BSE Sensex, fell 215.21 points or 0.86% to settle at 24,685.42. The Nifty fell 67.90 points or 0.89% to settle at 7,546.45. The Sensex failed to retain the psychologically important 25,000 level which it had crossed at the onset of the trading session. After languishing in negative zone almost throughout the trading session, the two key indices extended losses in late trade as European stocks reversed gains. The Sensex and the Nifty, both, hit 3-week closing low.
After seeing a rangebound movement in intraday trade, the two key benchmark indices settled near the flat line on Friday, 8 April 2016. The barometer index, the S&P Sensex, lost 11.58 points or 0.05% to settle at 24,673.84. The Nifty 50 index rose 8.75 points or 0.12% to settle at 7,555.20. The Sensex hit its lowest closing level in more than three weeks.
In the 30-share Sensex pack, 23 stocks declined and the remaining shares rose.
Adani Ports and Special Economic Zone (APSEZ), India's biggest port developer and operator, was the biggest loser in the Sensex pack last week. The stock fell 9.80% to Rs 218.95.
Car major Maruti Suzuki India lost 7.91% to Rs 3,428.85 on reports that a foreign brokerage has cut target price on the stock while retaining its hold rating stating that valuations are still undemanding for the stock. The foreign brokerage has reportedly said that yen benefit has started to reverse and is a significant headwind in the near term for Maruti Suzuki India. According to reports, every 1% appreciation in yen affects 15-20 basis points (bps) margin for the company. Yen hit 17-month high against dollar on Thursday, 7 April 2016.
Maruti Suzuki India after market hours on Wednesday, 6 April 2016, announced that it has introduced the automatic transmission option for the Zeta petrol variant of its premium hatchback Baleno. The Baleno Zeta (automatic CVT) petrol variant is priced at Rs 7.47 lakh ex-showroom Delhi. With this automatic transmission options are available on Delta and Zeta trim of Baleno. Maruti said it has sold over 44,000 Baleno cars through its premium retail channel NEXA across India. The model has pending orders for 55,000 units. Baleno is also the first model by Maruti Suzuki to be exported to Japan. Going forward Maruti Suzuki plans to export the model to more than 100 countries from India.
Tata Motors fell 1.94% to Rs 372.20. The company announced that its total commercial and passenger vehicles sales rose 1% to 53,057 units in March 2016 over March 2015. The company announced the monthly sales volume data after market hours on Friday, 1 April 2016. Domestic sales of Tata commercial and passenger vehicles declined 1% to 46,701 units in March 2016 over March 2015. Exports rose 17% to 6,356 units in March 2016 over March 2015. Tata Motors passenger vehicles fell 44% to 8,454 units in March 2016 over March 2015. The company's sales of commercial vehicles in the domestic market rose 20% to 38,247 units in March 2016 over March 2015.
Two-wheeler major Hero MotoCorp fell 1.04% to Rs 2,920.30. The company's total sales rose 14% to 6.06 lakh units in March 2016 over March 2015. The announcement was made after market hours on Friday, 1 April 2016.
Bajaj Auto fell 0.51% to Rs 2,404.75. The company's total sales rose 22% to 3.05 lakh units in March 2016 over March 2015. The company announced the sales volume data during market hours on Monday, 4 April 2016. Motorcycles sales rose 26% to 2.64 lakh units in March 2016 over March 2015. Sales of commercial vehicles rose 2% to 41,551 units in March 2016 over March 2015. Exports rose 3% to 1.01 lakh units in March 2016 over March 2015.
Bank shares witnessed selling pressure. ICICI Bank (down 7.21%), State Bank of India (down 6.44%), Axis Bank (down 6.24%) and HDFC Bank (down 0.58%), edged lower. The S&P BSE Bankex fell 4.07% last week. The decline in this index was higher than the Sensex's decline in percentage terms.
India's largest cigarette maker by sales ITC dropped 4.36% to Rs 321.35 after the company said that it has been compelled to shut its cigarette factories with effect from 1 April 2016 until clarity emerges in the current uncertain state of the rules on health warning. The announcement was made on Saturday, 2 April 2016. ITC said that the implementation of any change in the health warnings on the cigarette packages is an elaborate process for the manufacturers, entailing months of preparation involving substantial cost and effort. Since the matter of new health warning was under the Parliamentary Committee's consideration, and the Government had itself held out that it would await the Committee's report, the industry was led to believe that the Government would re-notify new health warnings after considering the Committee's recommendations, the company said.
Further, the question of the legality of the new warnings has been and continues to be pending before the Court, it added. In this situation, the company, as any prudent person would, did not commit to wasting substantial resources in creating the large number of cylinders and other tools necessary for a change-over of the warnings. As a result, the company is at present not in readiness to print the health warnings as now once again notified, ITC said. In 2009, the Central Government introduced pictorial health warning on cigarette packages.
Housing finance major HDFC dropped 2.92% to Rs 1,079.05 after the company proposed to make an additional one-time special provision of Rs 450 crore in Q4 March 2016. The announcement was made after market hours on Wednesday, 6 April 2016. HDFC said that the special provision is being done voluntarily and not on account of any regulatory requirement. The provision is on standard assets and it added that the company holds adequate security in respect of all loans. The company added that regulatory provision on standard assets and provision for non-performing loans will continue to be made as per current practices in the quarterly accounts. The company will announce its Q4 results on 2 May 2016.
The company believed that with the objective of further strengthening balance sheet it will be prudent to utilise a part of the exceptional gains to build an additional buffer against any unexpected risk in the future. The company made profit on sale of investments of Rs 1520 crore (net of tax of Rs 1220 crore) in Q4 March 2016 compared with Rs 225 crore in Q4 March 2015. The current quarter's profit includes the profit on sale of shares in HDFC Standard Life Insurance Company to Standard Life (Mauritius Holdings) 2006 Limited. The capital gains tax on the sale of shares is Rs 300 crore.
Income from dividend for Q4 March 2016 was Rs 192 crore compared to Rs 179 crore in the corresponding quarter of the previous year. Meanwhile, under the loan assignment route, HDFC sold loans amounting to Rs 4799 crore in Q4 March 2016 to HDFC Bank compared to Rs 5000 crore during corresponding quarter of the previous year. Loans sold in the preceding twelve months amounted to Rs 12773 crore.
On the economic front, the outcome of a monthly survey showed that growth in India's services sector accelerated last month on the back of a marked and accelerated increase in new business. On the flip slide, the latest data indicated that businesses still operated below capacity, as backlogs declined at the quickest rate in seven years. The seasonally adjusted Nikkei India Services purchasing managers' index (PMI) edged higher to 54.3 in March from 51.4 in February. Sub-sector data indicated that the services sector activity rose in five out six categories, with the sole exception being Transport & Storage. Services input costs and output charges rose at relatively weak rates. Indian services companies remained optimistic that activity will increase further over the coming 12 months. The level of confidence was at a nine-month high, with positivity linked to favourable government policies and forecasts of a pick-up in demand.
The outcome of a monthly survey showed that the growth in India's manufacturing accelerated last month. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) hit eight-month high of 52.4 in March 2016, data showed on Monday, 4 April 2016. The index rose from 51.1 in February 2016. Despite gathering momentum, growth of production and new orders still remained below trend rates. The latest monthly survey showed that inflationary pressures in India's manufacturing are on the upside, with cost burdens rising at the quickest pace in three months in March and output charge inflation reaching a 16-month high in the month just gone by. The build-up in inflationary pressures may lead the Reserve Bank of India to hold off from cutting rates, especially as solid growth was seen in March, said Pollyanna De Lima, Economist at Markit.
The Sensex fell 595.80 points or 2.36% to settle at 24,673.84 in the week ended on Friday, 8 April 2016. The losses for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty fell 157.85 points or 2.05% to settle at 7,555.20. The BSE Mid-Cap index fell 0.45%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index rose 0.23%, outperforming the Sensex.
Meanwhile, foreign portfolio investors (FPIs) purchased stocks worth a net Rs 3364.96 crore from the secondary equity markets in this month so far (till 6 April 2016).
In global market, contradictory comments from Federal Reserve policy makers have added to uncertainty about the quantum and timing of interest rate hikes in the United States. During speech at a conference on cybersecurity, Boston Fed President Eric Rosengren on Monday, 4 April 2016, said rate-hikes may come sooner than the market is expecting. Rosengren is a voting member of the Fed policy committee this year. On 1 April 2016, Federal Reserve Bank of Cleveland President Loretta Mester cautioned that waiting too long to raise rates could be a risk to the economy. She is a voting member of the Fed's rate-setting policy committee. In a speech in New York on 29 March 2016, Federal Reserve Chairwoman Janet Yellen stressed a need for a cautious stance on interest-rate increases in the backdrop of global economic slowdown.
Back home, trading for the week began on a positive note. Telecom stocks and index heavyweight Infosys led upmove for key benchmark indices a day ahead of the Reserve Bank of India's (RBI) monetary policy review on Monday, 4 April 2016. The barometer index, the S&P BSE Sensex, rose 130.01 points or 0.51% to settle at 25,399.65. The gains for the Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty rose 45.75 points or 0.59% to settle at 7,758.80.
Banking, telecom, auto stocks and index heavyweights Infosys and ITC led losses for key benchmark indices, with the barometer index, the S&P BSE Sensex, falling below the psychologically important 25,000 level on Tuesday, 5 April 2016. The Sensex fell 516.06 points or 2.03% to settle at 24,883.59. The Nifty fell 155.60 points or 2.01% to settle at 7,603.20. The weakness on the domestic bourses was a part of weakness in global stocks triggered by uncertainty regarding the quantum and timing of interest rate hikes in the United States.
Meanwhile, on that day the Reserve Bank of India's (RBI) announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) after a monetary policy review came in line with market expectations. The central bank also announced the fine-tuning of its liquidity management framework. While retaining the accommodative stance of the monetary policy, RBI Governor Raghuram Rajan indicated in his monetary policy statement that the RBI may cut the repo rate further in the coming months if macroeconomic and financial developments provide room for further rate cut.
Gains for metal, auto and telecom stocks offset losses for stocks of public sector banks and index heavyweight Infosys, with the two key benchmark indices registering small gains on Wednesday, 6 April 2016. The barometer index, the S&P BSE Sensex, rose 17.04 points or 0.07% to settle at 24,900.63. The Nifty 50 index rose 11.15 points or 0.15% to settle at 7,614.35.
IT, telecom stocks and index heavyweights HDFC and ITC led losses for the two key benchmark indices on Thursday, 7 April 2016. The barometer index, the S&P BSE Sensex, fell 215.21 points or 0.86% to settle at 24,685.42. The Nifty fell 67.90 points or 0.89% to settle at 7,546.45. The Sensex failed to retain the psychologically important 25,000 level which it had crossed at the onset of the trading session. After languishing in negative zone almost throughout the trading session, the two key indices extended losses in late trade as European stocks reversed gains. The Sensex and the Nifty, both, hit 3-week closing low.
After seeing a rangebound movement in intraday trade, the two key benchmark indices settled near the flat line on Friday, 8 April 2016. The barometer index, the S&P Sensex, lost 11.58 points or 0.05% to settle at 24,673.84. The Nifty 50 index rose 8.75 points or 0.12% to settle at 7,555.20. The Sensex hit its lowest closing level in more than three weeks.
In the 30-share Sensex pack, 23 stocks declined and the remaining shares rose.
Adani Ports and Special Economic Zone (APSEZ), India's biggest port developer and operator, was the biggest loser in the Sensex pack last week. The stock fell 9.80% to Rs 218.95.
Car major Maruti Suzuki India lost 7.91% to Rs 3,428.85 on reports that a foreign brokerage has cut target price on the stock while retaining its hold rating stating that valuations are still undemanding for the stock. The foreign brokerage has reportedly said that yen benefit has started to reverse and is a significant headwind in the near term for Maruti Suzuki India. According to reports, every 1% appreciation in yen affects 15-20 basis points (bps) margin for the company. Yen hit 17-month high against dollar on Thursday, 7 April 2016.
Maruti Suzuki India after market hours on Wednesday, 6 April 2016, announced that it has introduced the automatic transmission option for the Zeta petrol variant of its premium hatchback Baleno. The Baleno Zeta (automatic CVT) petrol variant is priced at Rs 7.47 lakh ex-showroom Delhi. With this automatic transmission options are available on Delta and Zeta trim of Baleno. Maruti said it has sold over 44,000 Baleno cars through its premium retail channel NEXA across India. The model has pending orders for 55,000 units. Baleno is also the first model by Maruti Suzuki to be exported to Japan. Going forward Maruti Suzuki plans to export the model to more than 100 countries from India.
Tata Motors fell 1.94% to Rs 372.20. The company announced that its total commercial and passenger vehicles sales rose 1% to 53,057 units in March 2016 over March 2015. The company announced the monthly sales volume data after market hours on Friday, 1 April 2016. Domestic sales of Tata commercial and passenger vehicles declined 1% to 46,701 units in March 2016 over March 2015. Exports rose 17% to 6,356 units in March 2016 over March 2015. Tata Motors passenger vehicles fell 44% to 8,454 units in March 2016 over March 2015. The company's sales of commercial vehicles in the domestic market rose 20% to 38,247 units in March 2016 over March 2015.
Two-wheeler major Hero MotoCorp fell 1.04% to Rs 2,920.30. The company's total sales rose 14% to 6.06 lakh units in March 2016 over March 2015. The announcement was made after market hours on Friday, 1 April 2016.
Bajaj Auto fell 0.51% to Rs 2,404.75. The company's total sales rose 22% to 3.05 lakh units in March 2016 over March 2015. The company announced the sales volume data during market hours on Monday, 4 April 2016. Motorcycles sales rose 26% to 2.64 lakh units in March 2016 over March 2015. Sales of commercial vehicles rose 2% to 41,551 units in March 2016 over March 2015. Exports rose 3% to 1.01 lakh units in March 2016 over March 2015.
Bank shares witnessed selling pressure. ICICI Bank (down 7.21%), State Bank of India (down 6.44%), Axis Bank (down 6.24%) and HDFC Bank (down 0.58%), edged lower. The S&P BSE Bankex fell 4.07% last week. The decline in this index was higher than the Sensex's decline in percentage terms.
India's largest cigarette maker by sales ITC dropped 4.36% to Rs 321.35 after the company said that it has been compelled to shut its cigarette factories with effect from 1 April 2016 until clarity emerges in the current uncertain state of the rules on health warning. The announcement was made on Saturday, 2 April 2016. ITC said that the implementation of any change in the health warnings on the cigarette packages is an elaborate process for the manufacturers, entailing months of preparation involving substantial cost and effort. Since the matter of new health warning was under the Parliamentary Committee's consideration, and the Government had itself held out that it would await the Committee's report, the industry was led to believe that the Government would re-notify new health warnings after considering the Committee's recommendations, the company said.
Further, the question of the legality of the new warnings has been and continues to be pending before the Court, it added. In this situation, the company, as any prudent person would, did not commit to wasting substantial resources in creating the large number of cylinders and other tools necessary for a change-over of the warnings. As a result, the company is at present not in readiness to print the health warnings as now once again notified, ITC said. In 2009, the Central Government introduced pictorial health warning on cigarette packages.
Housing finance major HDFC dropped 2.92% to Rs 1,079.05 after the company proposed to make an additional one-time special provision of Rs 450 crore in Q4 March 2016. The announcement was made after market hours on Wednesday, 6 April 2016. HDFC said that the special provision is being done voluntarily and not on account of any regulatory requirement. The provision is on standard assets and it added that the company holds adequate security in respect of all loans. The company added that regulatory provision on standard assets and provision for non-performing loans will continue to be made as per current practices in the quarterly accounts. The company will announce its Q4 results on 2 May 2016.
The company believed that with the objective of further strengthening balance sheet it will be prudent to utilise a part of the exceptional gains to build an additional buffer against any unexpected risk in the future. The company made profit on sale of investments of Rs 1520 crore (net of tax of Rs 1220 crore) in Q4 March 2016 compared with Rs 225 crore in Q4 March 2015. The current quarter's profit includes the profit on sale of shares in HDFC Standard Life Insurance Company to Standard Life (Mauritius Holdings) 2006 Limited. The capital gains tax on the sale of shares is Rs 300 crore.
Income from dividend for Q4 March 2016 was Rs 192 crore compared to Rs 179 crore in the corresponding quarter of the previous year. Meanwhile, under the loan assignment route, HDFC sold loans amounting to Rs 4799 crore in Q4 March 2016 to HDFC Bank compared to Rs 5000 crore during corresponding quarter of the previous year. Loans sold in the preceding twelve months amounted to Rs 12773 crore.
On the economic front, the outcome of a monthly survey showed that growth in India's services sector accelerated last month on the back of a marked and accelerated increase in new business. On the flip slide, the latest data indicated that businesses still operated below capacity, as backlogs declined at the quickest rate in seven years. The seasonally adjusted Nikkei India Services purchasing managers' index (PMI) edged higher to 54.3 in March from 51.4 in February. Sub-sector data indicated that the services sector activity rose in five out six categories, with the sole exception being Transport & Storage. Services input costs and output charges rose at relatively weak rates. Indian services companies remained optimistic that activity will increase further over the coming 12 months. The level of confidence was at a nine-month high, with positivity linked to favourable government policies and forecasts of a pick-up in demand.
The outcome of a monthly survey showed that the growth in India's manufacturing accelerated last month. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) hit eight-month high of 52.4 in March 2016, data showed on Monday, 4 April 2016. The index rose from 51.1 in February 2016. Despite gathering momentum, growth of production and new orders still remained below trend rates. The latest monthly survey showed that inflationary pressures in India's manufacturing are on the upside, with cost burdens rising at the quickest pace in three months in March and output charge inflation reaching a 16-month high in the month just gone by. The build-up in inflationary pressures may lead the Reserve Bank of India to hold off from cutting rates, especially as solid growth was seen in March, said Pollyanna De Lima, Economist at Markit.
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