Thursday, June 09, 2016

THE END SESSION ( 09 / 06 )

Market slides as crude boils


Negative cues from global markets and concerns arising from higher global crude oil prices pulled Indian stocks lower. The barometer index, the S&P BSE Sensex, fell 257.20 points or 0.95% to settle at 26,763.46. The losses for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty fell 69.45 points or 0.84% to settle at 8,203.60. The Sensex fell below the psychologically important 27,000 mark. The barometer index hit its lowest closing levels in more than a week.

The recent run up in crude oil prices has sparked concerns of its adverse impact on India's macroeconomic fundamentals. Until recently, lower global commodity prices led to optimism regarding India reining in its fiscal and current account deficit. With India importing about 80% of its crude requirements, there are now concerns that higher crude oil prices will result in widening of India's current account and fiscal deficit and increase fuel price inflation.

Brent for August 2016 settlement was current off 55 cents to $51.96 a barrel. The contract had risen by $1.07 a barrel or 2.08% to settle at $52.51 a barrel yesterday, 8 June 2016. Prices rose overnight amid ongoing supply outages in Nigeria and a weaker dollar.

Index heavyweight and IT major Infosys dropped after the company's chief operating officer UB Pravin Rao was quoted as saying yesterday, 8 June 2016, that the company would face volatility in revenue over the next few quarters. Stocks of public sector banks extended their recent gains triggered by media reports that the Reserve Bank of India may ease bad-loan recognition norms for lenders. Dr Reddy's Laboratories edged lower on reports that the US Consumer Product Safety Commission has sought civil penalty against the drug maker for alleged violation of provisions related to child resistant packaging.

Shares of oil exploration and production (E&P) gained as crude oil prices rose. BPCL edged higher after the Reserve Bank of India (RBI) raised the ceiling on investment in the company's shares by foreign institutional investors (FIIs) to 49% of the company's equity from earlier 24%.

In overseas stock markets, European shares dropped for a second straight day after European Central Bank's president Mario Draghi warned that Europe is at risk of suffering lasting economic damage from weak productivity and low growth. Asian stocks declined amid continuing uncertainty over the pace of the US economic recovery and ahead of looming major political events, such as a British referendum over whether or not to remain in the European Union later this month and Japan's upper house election in July. In China, the latest data showed that consumer inflation rose less than forecast in May as pressure from high food prices eased. The consumer price index (CPI) rose 2% in May, compared with a 2.3% increase in April. The producer price index (PPI) fell 2.8% in May, easing from a 3.4% drop in April, and rose 0.5% month-on-month. US stocks rose yesterday, 8 June 2016, with Dow Jones Industrial Average rising above 18,000 for the first time since April as a weaker dollar lifted some commodity-related shares.

Closer home, the Sensex fell 257.20 points or 0.95% to settle at 26,763.46, its lowest closing level since 1 June 2016. The index dropped 328.31 points or 1.21% at the day's low of 26,692.35. The index fell 25.75 points or 0.09% at the day's high of 26,994.91.

The Nifty fell 69.45 points or 0.84% to settle at 8,203.60, its lowest closing level since 6 June 2016. The index fell 88.45 points or 1.06% at the day's low of 8,184.60. The index rose 0.3 points at the day's high of 8,273.35.

The market breadth indicating the overall health of the market was negative. On BSE, 1,339 shares fell and 1,229 shares rose. A total of 188 shares were unchanged. The BSE Mid-Cap index fell 0.47%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index rose 0.04%, outperforming the Sensex

Among the sectoral indices on BSE, the S&P BSE Metal index (up 1.59%), the S&P BSE Energy index (up 1.58%), the S&P BSE Oil & Gas index (up 1.19%), the S&P BSE Utilities index (up 0.45%), the S&P BSE Consumer Durables index (up 0.35%), the S&P BSE Power index (up 0.34%), the S&P BSE Realty index (up 0.07%), the S&P BSE Basic Materials index (down 0.12%), the S&P BSE Bankex (down 0.28%), the S&P BSE Telecom index (down 0.3%), the S&P BSE Industrials index (down 0.35%), the S&P BSE Healthcare index (down 0.4%), the S&P BSE Finance index (down 0.54%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.56%), the S&P BSE Auto index (down 0.62%) and the S&P BSE Capital Goods index (down 0.81%), outperformed the Sensex. The S&P BSE FMCG index (down 1.6%), the S&P BSE Teck index (down 1.81%) and the S&P BSE IT index (down 2.17%), underperformed the Sensex.

The total turnover on BSE amounted to Rs 2547 crore, higher than turnover of Rs 2535.88 crore registered during the previous trading session.

Stocks of public sector banks extended their recent gains triggered by media reports that the Reserve Bank of India may ease bad-loan recognition norms for lenders. UCO Bank (up 3.66%), Vijaya Bank (up 2.73%), Bank of Maharashtra (up 2.44%), Indian Bank (up 2.22%), Andhra Bank (up 2.09%), Central Bank of India (up 2.03%), Punjab and Sind Bank (up 2.03%), Punjab National Bank (up 1.67%), Canara Bank (up 1.52%), Bank of India (up 1.41%), Allahabad Bank (up 1.40%), Dena Bank (up 1.35%), Syndicate Bank (up 1.05%), Corporation Bank (up 0.98%), United Bank of India (up 0.83%), Bank of Baroda (up 0.74%), Union Bank of India (up 0.50%) and IDBI Bank (up 0.22%), edged higher. State Bank of India fell 0.19%.

PSU bank stocks have made a strong rebound during the past 3-4 trading sessions after media reports suggested that Reserve Bank of India (RBI) is considering a proposal to allow banks to reclassify some borderline cases as standard loans, where repayments were missed due to reasons outside the control of borrowers such as governmental department delays. Any relaxation of the bad-loan recognition rules could possibly lower provisioning requirements and boost earnings at banks. Banks have reported poor earnings in the past two quarters following the RBI diktat to provision adequately for bad loans aimed at cleaning bank balance sheets.

Stocks of private sector banks were mixed. Yes Bank (down 1.22%), ICICI Bank (down 1.18%), Kotak Mahindra Bank (down 0.8%) and HDFC Bank (down 0.21%), edged lower. Axis Bank (up 0.57%), IndusInd Bank (up 0.70%), Federal Bank (up 0.78%) and City Union Bank (up 1.35%), edged higher.

Index heavyweight and cigarette maker ITC shed 2.29% to Rs 354. The stock hit high of Rs 362.75 and low of Rs 353.50 in intraday trade.

Index heavyweight and housing finance major HDFC dropped 1.74% to Rs 1,238.40. The stock hit high of Rs 1,257.80 and low of Rs 1,233.95 in intraday trade.

Index heavyweight and IT major Infosys lost 4.27% to Rs 1,185.45 after the company's chief operating officer UB Pravin Rao was quoted as saying yesterday, 8 June 2016, that the company would face volatility in revenue over the next few quarters. Rao was quoted as saying at an investor conference in Mumbai that the overall demand remains volatile and Infosys does not expect a recovery in spending from the energy sector before 2017. He said that the company is little bit watchful with regard to the outlook for the retail sector too. Rao also reportedly said that the company is facing a slowdown in its enterprise resource planning (ERP) and business process outsourcing (BPO) businesses, adding that the company is working to turn around those businesses. Rao, however, said that the company remains on track to meet its full-year constant currency revenue growth guidance of 11.5%-13.5% for the year ending 31 March 2017 (FY 2017).

Meanwhile, shares of Infosys turned ex-dividend today, 9 June 2016, for final dividend of Rs 14.25 per share for the year ended 31 March 2016 (FY 2016). Before turning ex-dividend, the stock offered a dividend yield of 1.15% based on the closing price of Rs 1,238.30 on BSE yesterday, 8 June 2016.

Shares of oil exploration and production (E&P) gained as crude oil prices rose. Cairn India (up 1.88%), Oil India (up 2.21%), Reliance Industries (RIL) (up 1.81%) and ONGC (up 1.99%) rose. Higher crude oil prices will result in higher realization from crude sales for oil exploration firms.

Shares of public sector oil marketing companies (PSU OMCs) were mixed. Indian Oil Corporation (IOCL) was flat at Rs 415.25. HPCL fell 0.30%.

BPCL rose 1.9% to Rs 998.70 after the Reserve Bank of India (RBI) raised the ceiling on investment in the company's shares by foreign institutional investors (FIIs) to 49% of the company's equity from earlier 24%. It may be recalled that BPCL last week got shareholders' nod for raising the ceiling on investment by FIIs in the company's equity.

Metal & mining stocks edged higher on renewed buying. Hindustan Copper (up 12.53%), Steel Authority of India (up 6.79%), Hindustan Zinc (up 3.91%), Hindalco Industries (up 1.56%), JSW Steel (up 1.50%), Vedanta (up 1.07%), NMDC (up 0.72%), National Aluminium Company (up 0.36%) and Tata Steel (up 0.16%) edged higher. Jindal Steel & Power (down 0.08%) and Bhushan Steel (down 1.21%) edged lower.
Meanwhile, copper prices edged lower in global commodities markets. High Grade Copper for July 2016 delivery was currently down 0.24% at $2.0565 per pound on the COMEX.

Dr Reddy's Laboratories (DRL) fell 1.95% to Rs 3,071.45 on reports that the US Consumer Product Safety Commission (US CPSC), a federal regulatory body, has pleaded to the US Department of Justice, seeking civil penalty against DRL, charging that the drug maker had violated provisions related to child resistant packaging in at least five prescription drugs. The US CPSC, which is tasked with protecting children and families from risks of injuries or death associated with consumer products, had taken issue with DRL's compliance norms that required special packaging for child resistant blister packs for products sold in the US over several years. As part of its review on 6 June 2016, US CPSC voted 4-1 against DRL for not reporting the risks as per provisions of Consumer Product Safety Act and the Poison Prevention Packaging Act (PPPA), reports added. DRL has reportedly disagreed with the US CPSC's allegations.

Of the global sales of $2.33 billion for financial year ended 31 March 2016, DRL drew $1.16 billion from its North American operations, of which the US accounted for the lion's share, according to reports.

The Sensex has risen 95.50 points or 0.36% in this month so far (till 9 June 2016). The Sensex has risen 645.92 points or 2.47% in calendar year 2016 so far (till 9 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,268.85 points or 18.98%. The Sensex is off 1,814.87 points or 6.35% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,261.28 points 10.86% from a record high of 30,024.74 hit on 4 March 2015.

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