Sensex, Nifty attain highest closing level in nearly two weeks
The government's announcement of a further liberalization of foreign direct investment (FDI) rules in some sectors and gains in global stocks aided the upmove on the domestic bourses at the onset of the week. The barometer index, the S&P BSE Sensex, rose 241.01 points or 0.91% to settle at 26,866.92. The gains for the Nifty 50 index were lower in percentage terms than those for the Sensex. The Nifty rose 68.30 points or 0.84% to settle at 8,238.50. The Sensex and the Nifty, both, attained their highest closing level in almost two weeks. European stocks led gains in world stocks after polls over the weekend showed resurgence in support for the UK staying in the European Union (EU) ahead of the 23 June Brexit referendum. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it. Eighteen out of the nineteen sectoral indices on BSE registered gains.
The Indian government today, 20 June 2016, announced liberalization of foreign direct investment (FDI) rules in aviation, pharmaceutical, defence, trading in food products and single brand retail trading. The government said in a statement that with the latest liberalization of the FDI regime in the country, most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI, it said.
IT shares edged higher as the rupee edged lower against the dollar. Aviation stocks were in demand after the government liberalized the foreign direct investment norms in the civil aviation sector. Shares of defence equipment companies rose after the government raised the ceiling on foreign direct investment (FDI) in defence sector to 100% from 49%. Metal and mining stocks rose as copper prices edged higher in the global commodities markets. Gammon India rose by its maximum permissible daily limit of 20% to Rs 14.89 after the company reported turnaround Q4 March 2016 results.
The Sensex rose 241.01 points or 0.91% to settle at 26,866.92, its highest closing level since 8 June 2016. The Sensex rose 259.58 points, or 0.97% at the day's high of 26,885.49. The index fell 178.03 points, or 0.67% at the day's low of 26,447.88.
The Nifty rose 68.30 points or 0.84% to settle at 8,238.50, its highest closing level since 8 June 2016. The Nifty rose 73.95 points, or 0.91% at the day's high of 8,244.15. The index fell 62.85 points, or 0.77% at the day's low of 8,107.35.
In overseas stock markets, European stocks rose after polls over the weekend showed resurgence in support for the UK staying in the European Union (EU) ahead of the 23 June Brexit referendum. Earlier during the global day, Japanese stocks led gains in Asian stocks as the yen weakened against the dollar amid rising expectations of Britain voting to remain in the European Union (EU) lifted risk sentiment. The Nikkei 225 Average ended with gains of 2.34% for the trading session. A weaker Japanese yen helps the competitiveness of Japanese exporters. Three British opinion polls ahead of the EU membership referendum on 23 June 2016 showed the 'remain' camp recovering some momentum, although the overall picture remained one of an evenly split electorate.
Trading in US index futures indicated a firm opening of US stocks today, 20 June 2016. Trading in US index futures indicated that the Dow Jones Industrial Average could jump 211 points at the opening bell. US stocks fell during the previous trading session on Friday, 17 June 2016, as investors continued to fret over the possibility that the UK may leave the EU.
The UK government holds a referendum on Thursday, 23 June 2016, on whether the country should remain a member of the European Union (EU). The Organization for Economic Cooperation and Development (OECD) has warned that Britain's leaving the EU -- the so-called Brexit -- could send shocks through global financial markets. The OECD said on 1 June 2016 that a United Kingdom vote to leave the EU would trigger negative economic effects on the UK, other European countries and the rest of the world. Brexit would lead to economic uncertainty and hinder trade growth, with global effects being even stronger if the British withdrawal from the EU triggers volatility in financial markets, the OECD said. By 2030, post-Brexit UK GDP could be over 5% lower than if the country remained in the European Union, the OECD said.
Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,386 shares rose and 1,192 shares fell. A total of 205 shares were unchanged. The BSE Mid-Cap index rose 0.4%. The BSE Small-Cap index rose 0.37%. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 2686 crore, lower than turnover of Rs 2830.49 crore registered during the previous trading session.
Eighteen out of the nineteen sectoral indices on BSE registered gains. The S&P BSE IT index (up 2%), the S&P BSE Telecom index (up 1.98%), the S&P BSE Teck index (up 1.97%), the S&P BSE Industrials index (up 1.5%), the S&P BSE Auto index (down 1.49%), the S&P BSE Metal index (up 1.4%), the S&P BSE Basic Materials index (up 1.34%), the S&P BSE Capital Goods index (up 1.23%), the S&P BSE Realty index (up 1.05%), the S&P BSE Energy index (up 0.96%) outperformed the Sensex. The S&P BSE Oil & Gas index (up 0.59%), the S&P BSE Consumer Durables index (up 0.52%), the S&P BSE Consumer Discretionary Goods & Services index (up 0.39%), the S&P BSE Power index (up 0.31%), the S&P BSE Healthcare index (up 0.28%), the S&P BSE Utilities index (up 0.27%), the S&P BSE Finance index (up 0.26%), the S&P BSE Bankex (up 0.2%), the S&P BSE FMCG index (down 0.06%) underperformed the Sensex.
Index heavyweight and engineering & construction major L&T rose 1.86% to Rs 1,505.65. The stock hit a high of Rs 1,509 and a low of Rs 1,460.60 in intraday trade.
IT shares edged higher as the rupee edged lower against the dollar. HCL Technologies (up 2.19%), MindTree (up 1.52%), Tech Mahindra (up 1.71%), Hexaware Technologies (up 0.31%), Wipro (up 0.86%), Oracle Financial Services Software (up 0.49%) and Persistent Systems (up 0.85%) edged higher. MphasiS fell 0.9%.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. In the foreign exchange market, the partially convertible rupee was hovering at 67.44, compared with its close of 67.08 during the previous trading session. The rupee edged lower against the dollar after Rajan's surprise announcement over the weekend he would step down as RBI Governor when his term ends on 4 September 2016. Rajan's leaving is negative for the currency because he has been credited with stabilizing it against the dollar.
TCS gained 2% after the company announced a partnership to deliver next generation cloud-based derivative post trade processing service on the Calypso platform to Sernova Financial, an innovative provider of turn-key post-trade services. The partnership combines Sernova Financial's capital markets expertise, Calypso platform's capability and TCS' bouquet of capital markets solutions along with IT-Operations synergies as well as Business Process as a Service (BPaaS) models. The announcement was made during market hours today, 20 June 2016
Index heavyweight and software major Infosys advanced 2.57% to Rs 1,208.60. The stock hit high of Rs 1,211.90 and low of Rs 1,177.90 in intraday trade.
Stocks of public sector banks edged higher. Indian Bank (up 13.67%), United Bank of India (up 3.67%), Central Bank of India (up 1.57%), Bank of Maharashtra (up 0.9%), Punjab National Bank (up 1.9%), Union Bank of India (up 1.22%), Bank of India (up 2.98%), Corporation Bank (up 0.25%), UCO Bank (up 1.02%), Canara Bank (up 2.91%), Syndicate Bank (up 1.05%), Allahabad Bank (up 2.84%), Andhra Bank (up 1.37%), State Bank of India (up 1.12%) and Bank of Baroda (up 0.8%), edged higher. Dena Bank (down 0.14%), IDBI Bank (down 0.07%) and Vijaya Bank (down 1.34%) edged lower.
Stocks of private sector banks witnessed a mixed trend. HDFC Bank (up 0.28%), Yes Bank (up 0.42%), Kotak Mahindra Bank (up 0.08%), IndusInd Bank (up 0.33%) and City Union Bank (up 0.96%) edged higher. Federal Bank (down 1.13%) and ICICI Bank (down 0.04%) edged lower.
Axis Bank fell 0.39%. The bank said that it has kept its lending rates based on marginal cost of funds unchanged effective from 18 June 2016. The bank made the announcement after market hours on Friday, 17 June 2016. All rupee loans sanctioned and credit limits renewed with effect from 1 April 2016 are priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which is the internal benchmark of the concerned bank. Actual lending rates are determined by adding the components of spread to the MCLR.
Metal and mining stocks rose as copper prices edged higher in the global commodities markets. Tata Steel (up 3.27%), Vedanta (up 4.66%), Hindustan Zinc (up 2.38%), Jindal Steel & Power (up 1.89%), Hindalco Industries (up 2.19%), Steel Authority of India (up 0.89%), National Aluminium Company (up 0.73%) and JSW Steel (up 0.92%) edged higher. Hindustan Copper (down 0.28%), NMDC (down 0.48%) and Bhushan Steel (down 0.75%) edged lower.
High Grade Copper for July 2016 delivery was currently up 1.78% at $2.0875 per pound on the COMEX.
Aviation stocks were in demand after the government liberalized the foreign direct investment norms in the civil aviation sector. SpiceJet (up 6.74%), Jet Airways (India) (up 6.46%) and InterGlobe Aviation (up 6.13%) edged higher. The government has raised the ceiling on foreign direct investment (FDI) in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service to 100% from 49%. At present, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service. It has now been decided to raise this limit to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through government approval. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing FDI policy. For NRIs, 100% FDI will continue to be allowed under automatic route.
Meanwhile, with a view to aid in modernization of the existing airports and help ease the pressure on the existing airports, the government has decided to permit 100% foreign direct investment (FDI) under automatic route in brownfield airport projects.
Shares of defence equipment companies rose after the government raised the ceiling on foreign direct investment (FDI) in defence sector to 100% from 49%. Reliance Defence Engineering (up 7.39%), Walchandnagar Industries (up 5.66%), BEML (up 4%), Astra Microwave Products (up 3.49%), Bharat Forge (up 3.45%), Taneja Aerospace & Aviation (up 3.26%), Dynamatic Technologies (up 3.24%), Punj Lloyd (up 3.22%), Bharat Electronics (up 2.07%), L&T (up 2.05%) and Tata Power Company (up 2.04%), edged higher. The present FDI regime in the defence sector permits 49% FDI participation in the equity of a company under automatic route. FDI beyond 49% has now been permitted in the defence sector through government approval route in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to 'state-of-art' technology in the country has been done away with.
Pharma stocks witnessed a mixed trend. Alkem Laboratories (up 0.1%), Dr Reddy's Laboratories (up 1.72%), Wockhardt (up 1.62%), Aurobindo Pharma (up 1.46%), Divi's Laboratories (up 1.12%), Biocon (up 0.98%), Glenmark Pharmaceuticals (up 0.41%) and Cipla (up 0.09%), edged higher. Strides Shasun (down 0.16%), Lupin (down 0.44%), Sun Pharmaceutical Industries (down 0.64%), GlaxoSmithKline Pharmaceuticals (down 0.94%), Piramal Enterprises (down 1.65%) and IPCA Laboratories (down 2.23%) edged lower.
With regard to the pharmaceutical sector, the government has decided to permit up to 74% FDI under automatic route in brownfield projects. FDI beyond 74% will continue to be through government approval route. As per the present norms, 100% FDI in brownfield pharma projects is allowed under government approval route.
Cadila Healthcare rose 0.7% after the company said it has strengthened its US portfolio with the acquisition of two abbreviated new drug applications (ANDAs) from Teva that are being divested by Teva as a pre-condition to its acquisition of Allergan's generic business. The acquisition of these ANDAs is contingent on the closing of the Teva-Allergan Generics transaction and approval by the US Federal Trade Commission, Cadila said. The company did not disclose the financial details of the transaction.
Cadila said that the ANDAs have been acquired by its 100% subsidiary, Zydus Worldwide DMCC and the transaction will be financed through the group's internal accruals. The acquired portfolio comprises an ANDA which is already commercialised and one pipeline ANDA which is a transdermal patch. The estimated market size of the two ANDAs put together is nearly $200 million, Cadila said in a statement. The announcement was made during market hours today, 20 June 2016.
Gammon India rose by its maximum permissible daily limit of 20% to Rs 14.89 after the company reported net profit of Rs 53.38 crore in the quarter ended 31 March 2016 compared with net loss of Rs 73.53 crore in the quarter ended 31 March 2015. Net sales rose 9.4% to Rs 1115.08 crore in the quarter ended 31 March 2016 over the quarter ended 31 March 2015. The result was announced on Saturday, 18 June 2016.
Eros International Media rose 2.43% after the company announced a strategic alliance with veteran producer Vashu Bhagnani by signing a term sheet to acquire a 50% stake in his film company, Puja Entertainment & Films, one of the most reputed production houses in India that owns a valuable library of films with great franchise value. Under this joint venture, blockbuster hits of 90s known as the "No1” series including Hero No 1, Coolie No 1 and Biwi No 1 will be among the first of Vashu Bhagnani films to be remade. The deal will also allow Eros access to Puja Entertainment's vast library of all-time hits like Bade Miya Chote Miya, Rehna Hai Tere Dil Main and FALTU. In addition to the remakes of some of these all time hits, several new projects are in the pipeline as well. The announcement was made during market hours today, 20 June 2016.
Separately, Eros International Media after market hours on Friday, 17 June 2016, announced a television syndication deal for its new and catalogue films with Zee Network, one of India's leading television media and entertainment companies. The films comprise a number of catalogue films from Eros' vast library and also pre-sales for a few forthcoming films.
Key indices edged higher for second day in a row today, 20 June 2016. The Sensex has gained 341.46 points or 1.28% in two trading days from its close of 26,866.92 on 16 June 2016. The Sensex has risen 198.96 points or 0.74% in this month so far (till 20 June 2016). The Sensex has risen 749.38 points or 2.86% in calendar year 2016 so far (till 20 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,372.31 points or 19.43%. The Sensex is off 1,711.41 points or 5.98% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,157.82 points 10.51% from a record high of 30,024.74 hit on 4 March 2015.
Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan surprised financial markets by announcing over the weekend that he will not seek a second term as the RBI chief and will be returning to academia when his term as RBI Governor ends on 4 September 2016. While announcing his decision in a letter to the RBI staff on Saturday, 18 June 2016, not to seek a second term as RBI Governor, Rajan said he has accomplished all of what was laid out on the first day of his term as agenda for action. He, however, added that two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term. Rajan, however, added in his statement that India's financial markets are prepared to ride out imminent sources of market volatility like the threat of Brexit. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it.
Rajan also said that India has made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Rajan has been credited with stabilizing the rupee against the dollar, bringing down inflation and cleaning the bad-loan mess in the Indian banking system.
Global credit rating agency Fitch Ratings has reportedly said in a report that India's sovereign ratings will not be affected solely by Rajan's unexpected departure at the end of his term as the RBI Governor in September and that the country's policies would be the main driver of the ratings. Fitch also said the new RBI Governor would inherit a good opportunity to continue pursuing a policy of relatively low consumer price inflation and of strengthening banks' balance sheets. The problems associated with both high inflation and weak bank balance sheets have been recognized and policy makers are doing something about it, Fitch said. Such institutionalization implies support for these policies beyond the RBI Governor, also among government officials and broader within the RBI, the rating agency has said according to reports.
The Indian government today, 20 June 2016, announced liberalization of foreign direct investment (FDI) rules in aviation, pharmaceutical, defence, trading in food products and single brand retail trading. The government said in a statement that with the latest liberalization of the FDI regime in the country, most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI, it said.
IT shares edged higher as the rupee edged lower against the dollar. Aviation stocks were in demand after the government liberalized the foreign direct investment norms in the civil aviation sector. Shares of defence equipment companies rose after the government raised the ceiling on foreign direct investment (FDI) in defence sector to 100% from 49%. Metal and mining stocks rose as copper prices edged higher in the global commodities markets. Gammon India rose by its maximum permissible daily limit of 20% to Rs 14.89 after the company reported turnaround Q4 March 2016 results.
The Sensex rose 241.01 points or 0.91% to settle at 26,866.92, its highest closing level since 8 June 2016. The Sensex rose 259.58 points, or 0.97% at the day's high of 26,885.49. The index fell 178.03 points, or 0.67% at the day's low of 26,447.88.
The Nifty rose 68.30 points or 0.84% to settle at 8,238.50, its highest closing level since 8 June 2016. The Nifty rose 73.95 points, or 0.91% at the day's high of 8,244.15. The index fell 62.85 points, or 0.77% at the day's low of 8,107.35.
In overseas stock markets, European stocks rose after polls over the weekend showed resurgence in support for the UK staying in the European Union (EU) ahead of the 23 June Brexit referendum. Earlier during the global day, Japanese stocks led gains in Asian stocks as the yen weakened against the dollar amid rising expectations of Britain voting to remain in the European Union (EU) lifted risk sentiment. The Nikkei 225 Average ended with gains of 2.34% for the trading session. A weaker Japanese yen helps the competitiveness of Japanese exporters. Three British opinion polls ahead of the EU membership referendum on 23 June 2016 showed the 'remain' camp recovering some momentum, although the overall picture remained one of an evenly split electorate.
Trading in US index futures indicated a firm opening of US stocks today, 20 June 2016. Trading in US index futures indicated that the Dow Jones Industrial Average could jump 211 points at the opening bell. US stocks fell during the previous trading session on Friday, 17 June 2016, as investors continued to fret over the possibility that the UK may leave the EU.
The UK government holds a referendum on Thursday, 23 June 2016, on whether the country should remain a member of the European Union (EU). The Organization for Economic Cooperation and Development (OECD) has warned that Britain's leaving the EU -- the so-called Brexit -- could send shocks through global financial markets. The OECD said on 1 June 2016 that a United Kingdom vote to leave the EU would trigger negative economic effects on the UK, other European countries and the rest of the world. Brexit would lead to economic uncertainty and hinder trade growth, with global effects being even stronger if the British withdrawal from the EU triggers volatility in financial markets, the OECD said. By 2030, post-Brexit UK GDP could be over 5% lower than if the country remained in the European Union, the OECD said.
Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,386 shares rose and 1,192 shares fell. A total of 205 shares were unchanged. The BSE Mid-Cap index rose 0.4%. The BSE Small-Cap index rose 0.37%. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 2686 crore, lower than turnover of Rs 2830.49 crore registered during the previous trading session.
Eighteen out of the nineteen sectoral indices on BSE registered gains. The S&P BSE IT index (up 2%), the S&P BSE Telecom index (up 1.98%), the S&P BSE Teck index (up 1.97%), the S&P BSE Industrials index (up 1.5%), the S&P BSE Auto index (down 1.49%), the S&P BSE Metal index (up 1.4%), the S&P BSE Basic Materials index (up 1.34%), the S&P BSE Capital Goods index (up 1.23%), the S&P BSE Realty index (up 1.05%), the S&P BSE Energy index (up 0.96%) outperformed the Sensex. The S&P BSE Oil & Gas index (up 0.59%), the S&P BSE Consumer Durables index (up 0.52%), the S&P BSE Consumer Discretionary Goods & Services index (up 0.39%), the S&P BSE Power index (up 0.31%), the S&P BSE Healthcare index (up 0.28%), the S&P BSE Utilities index (up 0.27%), the S&P BSE Finance index (up 0.26%), the S&P BSE Bankex (up 0.2%), the S&P BSE FMCG index (down 0.06%) underperformed the Sensex.
Index heavyweight and engineering & construction major L&T rose 1.86% to Rs 1,505.65. The stock hit a high of Rs 1,509 and a low of Rs 1,460.60 in intraday trade.
IT shares edged higher as the rupee edged lower against the dollar. HCL Technologies (up 2.19%), MindTree (up 1.52%), Tech Mahindra (up 1.71%), Hexaware Technologies (up 0.31%), Wipro (up 0.86%), Oracle Financial Services Software (up 0.49%) and Persistent Systems (up 0.85%) edged higher. MphasiS fell 0.9%.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. In the foreign exchange market, the partially convertible rupee was hovering at 67.44, compared with its close of 67.08 during the previous trading session. The rupee edged lower against the dollar after Rajan's surprise announcement over the weekend he would step down as RBI Governor when his term ends on 4 September 2016. Rajan's leaving is negative for the currency because he has been credited with stabilizing it against the dollar.
TCS gained 2% after the company announced a partnership to deliver next generation cloud-based derivative post trade processing service on the Calypso platform to Sernova Financial, an innovative provider of turn-key post-trade services. The partnership combines Sernova Financial's capital markets expertise, Calypso platform's capability and TCS' bouquet of capital markets solutions along with IT-Operations synergies as well as Business Process as a Service (BPaaS) models. The announcement was made during market hours today, 20 June 2016
Index heavyweight and software major Infosys advanced 2.57% to Rs 1,208.60. The stock hit high of Rs 1,211.90 and low of Rs 1,177.90 in intraday trade.
Stocks of public sector banks edged higher. Indian Bank (up 13.67%), United Bank of India (up 3.67%), Central Bank of India (up 1.57%), Bank of Maharashtra (up 0.9%), Punjab National Bank (up 1.9%), Union Bank of India (up 1.22%), Bank of India (up 2.98%), Corporation Bank (up 0.25%), UCO Bank (up 1.02%), Canara Bank (up 2.91%), Syndicate Bank (up 1.05%), Allahabad Bank (up 2.84%), Andhra Bank (up 1.37%), State Bank of India (up 1.12%) and Bank of Baroda (up 0.8%), edged higher. Dena Bank (down 0.14%), IDBI Bank (down 0.07%) and Vijaya Bank (down 1.34%) edged lower.
Stocks of private sector banks witnessed a mixed trend. HDFC Bank (up 0.28%), Yes Bank (up 0.42%), Kotak Mahindra Bank (up 0.08%), IndusInd Bank (up 0.33%) and City Union Bank (up 0.96%) edged higher. Federal Bank (down 1.13%) and ICICI Bank (down 0.04%) edged lower.
Axis Bank fell 0.39%. The bank said that it has kept its lending rates based on marginal cost of funds unchanged effective from 18 June 2016. The bank made the announcement after market hours on Friday, 17 June 2016. All rupee loans sanctioned and credit limits renewed with effect from 1 April 2016 are priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which is the internal benchmark of the concerned bank. Actual lending rates are determined by adding the components of spread to the MCLR.
Metal and mining stocks rose as copper prices edged higher in the global commodities markets. Tata Steel (up 3.27%), Vedanta (up 4.66%), Hindustan Zinc (up 2.38%), Jindal Steel & Power (up 1.89%), Hindalco Industries (up 2.19%), Steel Authority of India (up 0.89%), National Aluminium Company (up 0.73%) and JSW Steel (up 0.92%) edged higher. Hindustan Copper (down 0.28%), NMDC (down 0.48%) and Bhushan Steel (down 0.75%) edged lower.
High Grade Copper for July 2016 delivery was currently up 1.78% at $2.0875 per pound on the COMEX.
Aviation stocks were in demand after the government liberalized the foreign direct investment norms in the civil aviation sector. SpiceJet (up 6.74%), Jet Airways (India) (up 6.46%) and InterGlobe Aviation (up 6.13%) edged higher. The government has raised the ceiling on foreign direct investment (FDI) in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service to 100% from 49%. At present, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service. It has now been decided to raise this limit to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through government approval. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing FDI policy. For NRIs, 100% FDI will continue to be allowed under automatic route.
Meanwhile, with a view to aid in modernization of the existing airports and help ease the pressure on the existing airports, the government has decided to permit 100% foreign direct investment (FDI) under automatic route in brownfield airport projects.
Shares of defence equipment companies rose after the government raised the ceiling on foreign direct investment (FDI) in defence sector to 100% from 49%. Reliance Defence Engineering (up 7.39%), Walchandnagar Industries (up 5.66%), BEML (up 4%), Astra Microwave Products (up 3.49%), Bharat Forge (up 3.45%), Taneja Aerospace & Aviation (up 3.26%), Dynamatic Technologies (up 3.24%), Punj Lloyd (up 3.22%), Bharat Electronics (up 2.07%), L&T (up 2.05%) and Tata Power Company (up 2.04%), edged higher. The present FDI regime in the defence sector permits 49% FDI participation in the equity of a company under automatic route. FDI beyond 49% has now been permitted in the defence sector through government approval route in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to 'state-of-art' technology in the country has been done away with.
Pharma stocks witnessed a mixed trend. Alkem Laboratories (up 0.1%), Dr Reddy's Laboratories (up 1.72%), Wockhardt (up 1.62%), Aurobindo Pharma (up 1.46%), Divi's Laboratories (up 1.12%), Biocon (up 0.98%), Glenmark Pharmaceuticals (up 0.41%) and Cipla (up 0.09%), edged higher. Strides Shasun (down 0.16%), Lupin (down 0.44%), Sun Pharmaceutical Industries (down 0.64%), GlaxoSmithKline Pharmaceuticals (down 0.94%), Piramal Enterprises (down 1.65%) and IPCA Laboratories (down 2.23%) edged lower.
With regard to the pharmaceutical sector, the government has decided to permit up to 74% FDI under automatic route in brownfield projects. FDI beyond 74% will continue to be through government approval route. As per the present norms, 100% FDI in brownfield pharma projects is allowed under government approval route.
Cadila Healthcare rose 0.7% after the company said it has strengthened its US portfolio with the acquisition of two abbreviated new drug applications (ANDAs) from Teva that are being divested by Teva as a pre-condition to its acquisition of Allergan's generic business. The acquisition of these ANDAs is contingent on the closing of the Teva-Allergan Generics transaction and approval by the US Federal Trade Commission, Cadila said. The company did not disclose the financial details of the transaction.
Cadila said that the ANDAs have been acquired by its 100% subsidiary, Zydus Worldwide DMCC and the transaction will be financed through the group's internal accruals. The acquired portfolio comprises an ANDA which is already commercialised and one pipeline ANDA which is a transdermal patch. The estimated market size of the two ANDAs put together is nearly $200 million, Cadila said in a statement. The announcement was made during market hours today, 20 June 2016.
Gammon India rose by its maximum permissible daily limit of 20% to Rs 14.89 after the company reported net profit of Rs 53.38 crore in the quarter ended 31 March 2016 compared with net loss of Rs 73.53 crore in the quarter ended 31 March 2015. Net sales rose 9.4% to Rs 1115.08 crore in the quarter ended 31 March 2016 over the quarter ended 31 March 2015. The result was announced on Saturday, 18 June 2016.
Eros International Media rose 2.43% after the company announced a strategic alliance with veteran producer Vashu Bhagnani by signing a term sheet to acquire a 50% stake in his film company, Puja Entertainment & Films, one of the most reputed production houses in India that owns a valuable library of films with great franchise value. Under this joint venture, blockbuster hits of 90s known as the "No1” series including Hero No 1, Coolie No 1 and Biwi No 1 will be among the first of Vashu Bhagnani films to be remade. The deal will also allow Eros access to Puja Entertainment's vast library of all-time hits like Bade Miya Chote Miya, Rehna Hai Tere Dil Main and FALTU. In addition to the remakes of some of these all time hits, several new projects are in the pipeline as well. The announcement was made during market hours today, 20 June 2016.
Separately, Eros International Media after market hours on Friday, 17 June 2016, announced a television syndication deal for its new and catalogue films with Zee Network, one of India's leading television media and entertainment companies. The films comprise a number of catalogue films from Eros' vast library and also pre-sales for a few forthcoming films.
Key indices edged higher for second day in a row today, 20 June 2016. The Sensex has gained 341.46 points or 1.28% in two trading days from its close of 26,866.92 on 16 June 2016. The Sensex has risen 198.96 points or 0.74% in this month so far (till 20 June 2016). The Sensex has risen 749.38 points or 2.86% in calendar year 2016 so far (till 20 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,372.31 points or 19.43%. The Sensex is off 1,711.41 points or 5.98% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,157.82 points 10.51% from a record high of 30,024.74 hit on 4 March 2015.
Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan surprised financial markets by announcing over the weekend that he will not seek a second term as the RBI chief and will be returning to academia when his term as RBI Governor ends on 4 September 2016. While announcing his decision in a letter to the RBI staff on Saturday, 18 June 2016, not to seek a second term as RBI Governor, Rajan said he has accomplished all of what was laid out on the first day of his term as agenda for action. He, however, added that two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term. Rajan, however, added in his statement that India's financial markets are prepared to ride out imminent sources of market volatility like the threat of Brexit. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it.
Rajan also said that India has made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Rajan has been credited with stabilizing the rupee against the dollar, bringing down inflation and cleaning the bad-loan mess in the Indian banking system.
Global credit rating agency Fitch Ratings has reportedly said in a report that India's sovereign ratings will not be affected solely by Rajan's unexpected departure at the end of his term as the RBI Governor in September and that the country's policies would be the main driver of the ratings. Fitch also said the new RBI Governor would inherit a good opportunity to continue pursuing a policy of relatively low consumer price inflation and of strengthening banks' balance sheets. The problems associated with both high inflation and weak bank balance sheets have been recognized and policy makers are doing something about it, Fitch said. Such institutionalization implies support for these policies beyond the RBI Governor, also among government officials and broader within the RBI, the rating agency has said according to reports.
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