Market gains on passage of Bankruptcy bill in Parliament
Indian equity markets registered modest gains in the week ended Friday, 13 May 2016 buoyed by the passage of key legislation viz. the Insolvency and Bankruptcy Code, 2016 by the government in the Parliament which is expected to help creditors recover bad debt faster. The barometer index, the S&P BSE Sensex gained in three out of five trading sessions.
The Sensex rose 261.07 points or 1.03% to settle at 25,489.57. The Nifty 50 index rose 81.45 points or 1.05% to settle at 7,814.90. The BSE Mid-Cap index rose 1.73%. The BSE Small-Cap index rose 1.96%. Both these indices outperformed the Sensex.
Foreign portfolio investors (FPI) bought stocks worth a net Rs 417.12 crore from the secondary equity markets in four trading sessions from 9 May 2016 to 12 May 2016.
Optimism over the progress of key legislation in parliament and gains in European stocks triggered rally on the domestic bourses on the first trading session of the week on Monday, 9 May 2016. The Sensex rose 460.36 points or 1.82% to settle at 25,688.86, its highest closing level since 27 April 2016.
Gains in global stocks aided small upmove for key benchmark indices on Tuesday, 10 May 2016. The Sensex rose 83.67 points or 0.33% to settle at 25,772.53, its highest closing level since 27 April 2016.
Concerns that future equity inflows into India would be hit in the aftermath of amendments to the bilateral India-Mauritius tax treaty weighed on the domestic bourses on Wednesday, 11 May 2016. The Sensex lost 175.51 points or 0.68% to settle at 25,597.02, its lowest closing level since 6 May 2016.
The passage of the Insolvency and Bankruptcy Code, 2016 in Rajya Sabha and gains in European stocks triggered upmove on the domestic bourses on Thursday, 12 May 2016. The Sensex rose 193.20 points or 0.75% to settle at 25,790.22, its highest closing level since 27 April 2016.
Acceleration in consumer price inflation in April 2016 triggered losses for Indian stocks on the last trading session of the week on Friday, 13 May 2016, as the data triggered speculation that the Reserve Bank of India (RBI) would hold off on cutting rates at its policy review next month. The Sensex lost 300.65 points or 1.17% to settle at 25,489.57, its lowest closing level since 6 May 2016.
Among the 30-share Sensex pack, 16 shares rose and 14 stocks declined during the week ended Friday, 13 May 2016. Adani Ports and Special Economic Zone (down 3.35%), Bharti Airtel (down 0.82%), Bharat Heavy Electricals (down 3.19%), Coal India (down 0.15%), GAIL (India) (down 1.22%) and HDFC (down 0.13%) edged lower from the Sensex pack. L&T (up 2.15%), NTPC (up 0.71%) and Reliance Industries (up 0.91%) edged higher from the Sensex pack.
Bank stocks rose with the S&P BSE Bankex index gaining 2.69%. State Bank of India (up 0.32%), HDFC Bank (up 1.86%), ICICI Bank (up 3.85%) and Axis Bank (up 6.34%) edged higher.
IT stocks gained. TCS (up 2.21%), Infosys (up 2.13%) and Wipro (up 1.31%) edged higher.
The S&P BSE IT index rose 1.57%.
Pharma stocks declined. Cipla (down 1.02%), Sun Pharmaceutical Industries (down 1.13%) and Lupin (down 0.15%) edged lower.
The S&P BSE Healthcare index was up 0.44%.
Pharma major Dr Reddy's Laboratories (DRL) rose 1.53% at Rs 2,912.10. The company's consolidated net profit dropped 85.62% to Rs 74.60 crore on 2.47% decline in total income to Rs 3786.90 crore in Q4 March 2016 over Q4 March 2015. The results are as per International Financial Reporting Standards (IFRS). The company's Co-Chairman and CEO G V Prasad said that the sharp fall in profitability in Q4 March 2016 was due to provision made as a matter of abundant precaution to write down outstanding receivables from the company's subsidiary in Venezuela. DRL made provision of Rs 430.90 crore in Q4 March 2016 on its outstanding receivables from Venezuela. Similar charge on account of translation of net monetary assets was Rs 84.30 crore in Q4 March 2015. The result was announced during market hours on Thursday, 12 May 2016.
Auto stocks witnessed a mixed trend. Bajaj Auto (up 3.43%), Hero MotoCorp (up 1.06%) and Maruti Suzuki India (up 0.65%) gained. Mahindra & Mahindra (down 1.22%) declined.
The S&P BSE Auto index fell 0.27%.
Tata Motors fell 2.18% at Rs 390. The company's British luxury car making unit Jaguar Land Rover reported 11% growth in retail sales to 41,341 vehicles in April 2016 over April 2015. Sales of the Land Rover brand rose 4% to 33,348 units in April 2016 over April 2015. Sales of the Jaguar brand jumped 49% to 7,993 units in April 2016 over April 2015.
The company after market hours on Tuesday, 10 May 2016, announced that its global wholesales including Jaguar Land Rover rose 5% to 81,333 units in April 2016 over April 2015. Global wholesales of all Tata Motors' commercial vehicles and Tata Daewoo range rose 11% to 29,584 units in April 2016 over April 2015. Global wholesales of all passenger vehicles rose 1% to 51,749 units in April 2016 over April 2015.
Cigarette maker ITC rose 0.66% at Rs 319.30. The company on 8 May 2016, announced that the manufacturing of cigarettes at its factories will commence progressively. The company had 4 May 2016 announced temporary closure of its cigarette factories until it is in a position to comply with the rules on pictorial warnings on cigarette packs. While passing an order on 4 May 2016 transferring all writ petitions pending in various courts challenging the rules prescribing 85% pictorial warnings on cigarette packs to the Karnataka High Court, the Supreme Court said at that time all parties should endeavour to follow the existing rules on pictorial warnings on cigarette packs. The government had notified that cigarette companies have to carry warning over 85% of the pack from 1 April 2016, sharply higher than earlier 40% of the pack.
FMCG major Hindustan Unilever (HUL) declined 2.56% at Rs 831.10. The company's net profit rose 7.02% to Rs 1089.59 crore on 3.26% rise in total income to Rs 8027.91 crore in Q4 March 2016 over Q4 March 2015. The rate of growth in net profit in Q4 March 2016 was adversely impacted by base effect. HUL said it had booked higher exceptional income in Q4 March 2015 from the sale of subsidiary. Net profit before exceptional items rose 13% to Rs 1031 crore in Q4 March 2016 over Q4 March 2015. The result was announced during market hours on Monday, 9 May 2016.
Tata Steel fell 1.95% at Rs 323. Tata Steel before market hours on Tuesday, 10 May 2016, announced that seven expressions of interest submitted for Tata Steel's UK business have been immediately taken forward to the next stage of the sale process. Only those bidders who have put in initial bid for Tata Steel UK's entire business have been considered for the next stage of the sale process, Tata Steel said. Expressions of interest for parts of the UK business are not being taken forward at this point. In the next phase of the sales process the progressing interested parties will be given access to further business information and management team presentations in order for them to rapidly progress their interest to a binding stage. Tata Steel Europe has put Tata Steel UK on the block due to the deteriorating financial performance of the UK subsidiary.
Asian Paints surged 6.08% at Rs 942.50. The company's consolidated net profit rose 19.9% to Rs 408.80 crore on 12.3% rise in income from operations to Rs 3971.30 crore in Q4 March 2016 over Q4 March 2015. The result was announced at the fag end of the session on Wednesday, 11 May 2016.
Among major developments, as per the amendments to the bilateral India-Mauritius tax announced by India's finance ministry after trading hours on Tuesday, 10 May 2016, with effect from 1 April 2017 capital gains tax will be levied on sale of shares in India from a resident of Mauritius.
There will be a benefit of 50% reduction in the capital gains tax rate during the transition period from 1 April 2017 to 31 March 2019 subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell/conduit company) will not be entitled to the benefit of 50% reduction in tax rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh (Mauritian Rupees 1,500,000) in the immediately preceding 12 months. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards. Mauritius is the top source of foreign funds into India.
Following the amendments to the bilateral India-Mauritius tax treaty, India and Singapore will need to renegotiate their own double tax-exemption treaty, as rules say that any changes to the capital gains exemption clause in the treaty with Mauritius would also lead to changes in the agreement with Singapore. Singapore is another major source of foreign funds into India.
The Insolvency and Bankruptcy Code, 2016 was passed in both the houses of the Parliament during this week. Once the bill becomes a law when it receives President of India's assent, it will help creditors recover bad debt faster. The law aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, presently contained in a number of legislations, into a single legislation which in turn will provide for a greater clarity in law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt. The essential idea of the new law is that when a firm defaults on its debt and control shifts from the shareholders/promoters to a Committee of Creditors, the creditors will get a time span of 180 days to evaluate proposals from various players about resuscitating the company or taking it into liquidation.
When decisions are taken in a time-bound manner, there is a greater chance that the firm can be saved as a going concern and the productive resources of the economy (the labour and the capital) can be put to the best use. This is in complete departure with the experience under the Sick Industrial Companies (Special Provisions) Act, 1985 regime where there were delays leading to destruction of the value of the firm.
On the macro front, the data released by the government after market hours on Thursday, 12 May 2016 showed acceleration in consumer price inflation in April 2016. Inflation based on consumer price index (CPI) surged to 5.39% in April 2016 from six months low of 4.8% recorded in March 2016. The core CPI inflation rose to 4.76% in April 2016 from 4.54% in March 2016.
Data released by the government after market hours on Thursday, 12 May 2016 showed that the industrial production growth moderated to 0.1% in March 2016 over March 2015 compared with 2% growth recorded in February 2016.
On the global front, China's exports and imports fell more than expected in April, underlining weak demand at home and abroad. China's exports declined 1.8% in April in dollar terms, reversing an increase of 11.5% the previous month, the General Administration of Customs said on 8 May 2016. Imports in April fell by a sharper-than-expected 10.9% from a year earlier, compared with a 7.6% drop in March.
US non-farm payrolls increased by 160,000 in April, the smallest gain since September, and below market expectations, data released on Friday, 6 May 2016 showed.
The Sensex rose 261.07 points or 1.03% to settle at 25,489.57. The Nifty 50 index rose 81.45 points or 1.05% to settle at 7,814.90. The BSE Mid-Cap index rose 1.73%. The BSE Small-Cap index rose 1.96%. Both these indices outperformed the Sensex.
Foreign portfolio investors (FPI) bought stocks worth a net Rs 417.12 crore from the secondary equity markets in four trading sessions from 9 May 2016 to 12 May 2016.
Optimism over the progress of key legislation in parliament and gains in European stocks triggered rally on the domestic bourses on the first trading session of the week on Monday, 9 May 2016. The Sensex rose 460.36 points or 1.82% to settle at 25,688.86, its highest closing level since 27 April 2016.
Gains in global stocks aided small upmove for key benchmark indices on Tuesday, 10 May 2016. The Sensex rose 83.67 points or 0.33% to settle at 25,772.53, its highest closing level since 27 April 2016.
Concerns that future equity inflows into India would be hit in the aftermath of amendments to the bilateral India-Mauritius tax treaty weighed on the domestic bourses on Wednesday, 11 May 2016. The Sensex lost 175.51 points or 0.68% to settle at 25,597.02, its lowest closing level since 6 May 2016.
The passage of the Insolvency and Bankruptcy Code, 2016 in Rajya Sabha and gains in European stocks triggered upmove on the domestic bourses on Thursday, 12 May 2016. The Sensex rose 193.20 points or 0.75% to settle at 25,790.22, its highest closing level since 27 April 2016.
Acceleration in consumer price inflation in April 2016 triggered losses for Indian stocks on the last trading session of the week on Friday, 13 May 2016, as the data triggered speculation that the Reserve Bank of India (RBI) would hold off on cutting rates at its policy review next month. The Sensex lost 300.65 points or 1.17% to settle at 25,489.57, its lowest closing level since 6 May 2016.
Among the 30-share Sensex pack, 16 shares rose and 14 stocks declined during the week ended Friday, 13 May 2016. Adani Ports and Special Economic Zone (down 3.35%), Bharti Airtel (down 0.82%), Bharat Heavy Electricals (down 3.19%), Coal India (down 0.15%), GAIL (India) (down 1.22%) and HDFC (down 0.13%) edged lower from the Sensex pack. L&T (up 2.15%), NTPC (up 0.71%) and Reliance Industries (up 0.91%) edged higher from the Sensex pack.
Bank stocks rose with the S&P BSE Bankex index gaining 2.69%. State Bank of India (up 0.32%), HDFC Bank (up 1.86%), ICICI Bank (up 3.85%) and Axis Bank (up 6.34%) edged higher.
IT stocks gained. TCS (up 2.21%), Infosys (up 2.13%) and Wipro (up 1.31%) edged higher.
The S&P BSE IT index rose 1.57%.
Pharma stocks declined. Cipla (down 1.02%), Sun Pharmaceutical Industries (down 1.13%) and Lupin (down 0.15%) edged lower.
The S&P BSE Healthcare index was up 0.44%.
Pharma major Dr Reddy's Laboratories (DRL) rose 1.53% at Rs 2,912.10. The company's consolidated net profit dropped 85.62% to Rs 74.60 crore on 2.47% decline in total income to Rs 3786.90 crore in Q4 March 2016 over Q4 March 2015. The results are as per International Financial Reporting Standards (IFRS). The company's Co-Chairman and CEO G V Prasad said that the sharp fall in profitability in Q4 March 2016 was due to provision made as a matter of abundant precaution to write down outstanding receivables from the company's subsidiary in Venezuela. DRL made provision of Rs 430.90 crore in Q4 March 2016 on its outstanding receivables from Venezuela. Similar charge on account of translation of net monetary assets was Rs 84.30 crore in Q4 March 2015. The result was announced during market hours on Thursday, 12 May 2016.
Auto stocks witnessed a mixed trend. Bajaj Auto (up 3.43%), Hero MotoCorp (up 1.06%) and Maruti Suzuki India (up 0.65%) gained. Mahindra & Mahindra (down 1.22%) declined.
The S&P BSE Auto index fell 0.27%.
Tata Motors fell 2.18% at Rs 390. The company's British luxury car making unit Jaguar Land Rover reported 11% growth in retail sales to 41,341 vehicles in April 2016 over April 2015. Sales of the Land Rover brand rose 4% to 33,348 units in April 2016 over April 2015. Sales of the Jaguar brand jumped 49% to 7,993 units in April 2016 over April 2015.
The company after market hours on Tuesday, 10 May 2016, announced that its global wholesales including Jaguar Land Rover rose 5% to 81,333 units in April 2016 over April 2015. Global wholesales of all Tata Motors' commercial vehicles and Tata Daewoo range rose 11% to 29,584 units in April 2016 over April 2015. Global wholesales of all passenger vehicles rose 1% to 51,749 units in April 2016 over April 2015.
Cigarette maker ITC rose 0.66% at Rs 319.30. The company on 8 May 2016, announced that the manufacturing of cigarettes at its factories will commence progressively. The company had 4 May 2016 announced temporary closure of its cigarette factories until it is in a position to comply with the rules on pictorial warnings on cigarette packs. While passing an order on 4 May 2016 transferring all writ petitions pending in various courts challenging the rules prescribing 85% pictorial warnings on cigarette packs to the Karnataka High Court, the Supreme Court said at that time all parties should endeavour to follow the existing rules on pictorial warnings on cigarette packs. The government had notified that cigarette companies have to carry warning over 85% of the pack from 1 April 2016, sharply higher than earlier 40% of the pack.
FMCG major Hindustan Unilever (HUL) declined 2.56% at Rs 831.10. The company's net profit rose 7.02% to Rs 1089.59 crore on 3.26% rise in total income to Rs 8027.91 crore in Q4 March 2016 over Q4 March 2015. The rate of growth in net profit in Q4 March 2016 was adversely impacted by base effect. HUL said it had booked higher exceptional income in Q4 March 2015 from the sale of subsidiary. Net profit before exceptional items rose 13% to Rs 1031 crore in Q4 March 2016 over Q4 March 2015. The result was announced during market hours on Monday, 9 May 2016.
Tata Steel fell 1.95% at Rs 323. Tata Steel before market hours on Tuesday, 10 May 2016, announced that seven expressions of interest submitted for Tata Steel's UK business have been immediately taken forward to the next stage of the sale process. Only those bidders who have put in initial bid for Tata Steel UK's entire business have been considered for the next stage of the sale process, Tata Steel said. Expressions of interest for parts of the UK business are not being taken forward at this point. In the next phase of the sales process the progressing interested parties will be given access to further business information and management team presentations in order for them to rapidly progress their interest to a binding stage. Tata Steel Europe has put Tata Steel UK on the block due to the deteriorating financial performance of the UK subsidiary.
Asian Paints surged 6.08% at Rs 942.50. The company's consolidated net profit rose 19.9% to Rs 408.80 crore on 12.3% rise in income from operations to Rs 3971.30 crore in Q4 March 2016 over Q4 March 2015. The result was announced at the fag end of the session on Wednesday, 11 May 2016.
Among major developments, as per the amendments to the bilateral India-Mauritius tax announced by India's finance ministry after trading hours on Tuesday, 10 May 2016, with effect from 1 April 2017 capital gains tax will be levied on sale of shares in India from a resident of Mauritius.
There will be a benefit of 50% reduction in the capital gains tax rate during the transition period from 1 April 2017 to 31 March 2019 subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell/conduit company) will not be entitled to the benefit of 50% reduction in tax rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh (Mauritian Rupees 1,500,000) in the immediately preceding 12 months. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards. Mauritius is the top source of foreign funds into India.
Following the amendments to the bilateral India-Mauritius tax treaty, India and Singapore will need to renegotiate their own double tax-exemption treaty, as rules say that any changes to the capital gains exemption clause in the treaty with Mauritius would also lead to changes in the agreement with Singapore. Singapore is another major source of foreign funds into India.
The Insolvency and Bankruptcy Code, 2016 was passed in both the houses of the Parliament during this week. Once the bill becomes a law when it receives President of India's assent, it will help creditors recover bad debt faster. The law aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, presently contained in a number of legislations, into a single legislation which in turn will provide for a greater clarity in law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt. The essential idea of the new law is that when a firm defaults on its debt and control shifts from the shareholders/promoters to a Committee of Creditors, the creditors will get a time span of 180 days to evaluate proposals from various players about resuscitating the company or taking it into liquidation.
When decisions are taken in a time-bound manner, there is a greater chance that the firm can be saved as a going concern and the productive resources of the economy (the labour and the capital) can be put to the best use. This is in complete departure with the experience under the Sick Industrial Companies (Special Provisions) Act, 1985 regime where there were delays leading to destruction of the value of the firm.
On the macro front, the data released by the government after market hours on Thursday, 12 May 2016 showed acceleration in consumer price inflation in April 2016. Inflation based on consumer price index (CPI) surged to 5.39% in April 2016 from six months low of 4.8% recorded in March 2016. The core CPI inflation rose to 4.76% in April 2016 from 4.54% in March 2016.
Data released by the government after market hours on Thursday, 12 May 2016 showed that the industrial production growth moderated to 0.1% in March 2016 over March 2015 compared with 2% growth recorded in February 2016.
On the global front, China's exports and imports fell more than expected in April, underlining weak demand at home and abroad. China's exports declined 1.8% in April in dollar terms, reversing an increase of 11.5% the previous month, the General Administration of Customs said on 8 May 2016. Imports in April fell by a sharper-than-expected 10.9% from a year earlier, compared with a 7.6% drop in March.
US non-farm payrolls increased by 160,000 in April, the smallest gain since September, and below market expectations, data released on Friday, 6 May 2016 showed.
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