Monday, June 27, 2016

THE END SESSION ( 27 / 06 / 2016 )

Benchmark indices eke out minuscule gains


Amid a divergent trend among various index constituents, the two key benchmark indices settled near the flat line. The barometer index, the S&P BSE Sensex, rose 5.25 points or 0.02% to settle at 26,402.96. The Nifty 50 rose 6.10 points or 0.08% to settle at 8,094.70. Volatility was high throughout the session. IT stocks extended losses registered during the previous trading session triggered by the UK voting to leave in the European Union in a historic referendum on 23 June 2016.

Engineering & construction major L&T moved higher after the company's announcement that its construction division has secured orders worth Rs 2416 crore across various business segments in this month so far. Tata Steel extended losses registered during the previous trading session triggered by the UK voting to leave the European Union (EU) in a referendum on 23 June 2016. Stocks of public sector oil marketing companies (PSU OMCs) edged higher on fall in global crude oil prices.
The broad market depicted strength. More than two stocks rose for each stock that fell on BSE. 1,820 shares rose and 788 shares declined. A total of 179 shares were unchanged. A number of stocks forming part of the broad based BSE Small-Cap index registered gains exceeding 3% for the trading session. Nearly 80% of the stocks forming part of the BSE Small-Cap index ended higher. The BSE Small-Cap index rose 1.52%. The BSE Mid-Cap index rose 0.80%. Both these indices outperformed the Sensex.

Meanwhile, global credit rating agency Moody's Investors Service reportedly said in a note that the Indian government's recent decision to relax foreign direct (FDI) investment rules in sectors including defence, aviation, and retail is credit positive for its Baa3 sovereign rating on India because the move demonstrates a continuation of reform momentum and paves the way for private investment and a boost in productivity. The rating agency simultaneously warned that reforms have stalled in passing a revamped goods and services tax and land acquisition rules, according to media reports. Moody's reportedly expects that political division in India will keep the reform process uneven and slow-moving. Moody's currently rates India at Baa3, the lowest investment-grade rating, with a "positive" outlook.

In overseas stock markets, key equity benchmark indices in UK, Germany and France extended steep losses registered during the previous trading session on Friday, 24 June 2016, triggered by the UK voting to leave the European Union (EU) in a referendum on 23 June 2016 dubbed "Brexit". In UK, the FTSE 100 index was currently down 1.20%. Investors fear that Britain's exit from the EU could trigger slowdown in UK and European economies, stoke the anti-establishment mood in Europe and destabilize the trade bloc.

The unexpected referendum result sent shock waves through the UK parliament, leaving the two biggest political parties in turmoil. Soon after the Brexit referendum outcome, British Prime Minister David Cameron said on 24 June 2016 that he will resign as the country's prime minister. Meanwhile, over the weekend the leader of the opposition Labour Party Jeremy Corbyn sacked a key member of his cabinet seen as plotting a coup against him. That dismissal was followed by the resignations of 11 other key party members in a protest against Corbyn's leadership. More resignations followed today, 27 June 2016.

UK's finance minister, George Osborne, said in a statement today, 27 June 2016, that Britain has discussed co-ordinated response with the finance ministers and central bank governors of the G7 after the outcome of the referendum. He further said that he has been in contact with his fellow European finance ministers, central bank governors, the managing director of the IMF, the US Treasury Secretary and the Speaker of Congress, and the CEOs of some of Britain's major financial institutions so as to collectively keep a close eye on the developments. He said that only the UK can trigger Article 50, and that in his judgement the country should only do that when there is a clear view about what new arrangement the UK is seeking with its European neighbours. Osborne said that it is inevitable that Britain's economy will have to adjust to the outcome of the Brexit referendum. It is already evident that as a result of the decision, some firms are continuing to pause their decisions to invest, or to hire people.

The Governor of UK's central bank Bank of England Mark Carney said in a statement on 24 June 2016 that there will be a period of uncertainty and adjustment after people of the UK voted for the UK to leave the European Union. It will take some time for the UK to establish new relationships with Europe and the rest of the world. Some market and economic volatility can be expected as this process unfolds. Carney said that the Bank of England stands ready to provide more than £250b billion of additional funds through its normal facilities to support the functioning of markets. The Bank of England also stands ready to provide substantial liquidity in foreign currency, if required. A few months ago, the Bank of England judged that the risks around the referendum were the most significant, near-term domestic risks to financial stability. To mitigate them, the Bank of England has put in place extensive contingency plans, Carney said.

Meanwhile, Euroskeptic parties on the rise in other member states — such as Denmark, Sweden, Holland and Italy — are now calling for their own referendum, which could see the European Union face more uncertainty in coming years. A statement from the European Commission after a meeting at Brussels, Belgium between Martin Schulz, President of the European Parliament, Donald Tusk, President of the European Council and Mark Rutte, Holder of the Presidency of the Council of the European Union (EU) on 24 June 2016 stated that the union of the remaining 27 member states of the EU will continue after British people voted in favour of United Kingdom leaving the EU. The EU stands ready to launch negotiations swiftly with the UK regarding the terms and conditions of UK's withdrawal from the EU. The statement further mentioned that the EU now expects the UK government to give effect to this decision of the British people as soon as possible. Any delay would unnecessarily prolong uncertainty. The EU hopes that the UK becomes a close partner of the EU in the future.

Earlier during the global day, Asian stocks ended on a mixed note. Japanese stocks edged higher after warnings from Japanese officials that they may intervene in currency markets to stabilize the yen. The Nikkei 225 Average ended 2.39% higher. The safe-haven yen surged against the dollar on 24 June 2016 after the UK voted to leave the European Union in a referendum on 23 June 2016. A stronger yen hurts the competitiveness of Japanese exporters.

US stocks plunged during the previous trading session on Friday, 24 June 2016, after UK citizens voted to end the country's membership in the European Union—a historic rejection of Europe's political order. The US Federal Reserve said in a statement on 24 June 2016 that it is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the UK referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the US economy.

The Sensex rose 5.25 points or 0.02% to settle at 26,402.96, its highest closing level since 23 June 2016. The index rose 95.80 points or 0.36% at the day's high of 26,493.51. The index lost 134.99 points or 0.51% at the day's low of 26,262.72.
The Nifty 50 index rose 6.10 points or 0.08% to settle at 8,094.70, its highest closing level since 23 June 2016. The index rose 32.05 points or 0.4% at the day's high of 8,120.65. The index lost 49.25 points or 0.6% at the day's low of 8,039.35.

The total turnover on BSE amounted to Rs 3246 crore, lower than turnover of Rs 3968.19 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Healthcare index (up 2.01%), the S&P BSE Basic Materials index (up 1.91%), the S&P BSE Capital Goods index (up 1.62%), the S&P BSE Realty index (up 1.29%), the S&P BSE FMCG index (up 1.25%), the S&P BSE Industrials index (up 1.07%), the S&P BSE Oil & Gas index (up 1.07%), the S&P BSE Consumer Durables index (up 1.03%), the S&P BSE Energy index (up 0.65%), the S&P BSE Bankex (up 0.59%), the S&P BSE Finance index (up 0.53%), the S&P BSE Metal index (up 0.29%), the S&P BSE Utilities index (up 0.29%), the S&P BSE Power index (up 0.09%) and the S&P BSE Consumer Discretionary Goods & Services index (up 0.08%), outperformed the Sensex. The S&P BSE Telecom index (down 0.13%), the S&P BSE Auto index (down 0.25%), the S&P BSE Teck index (down 1.66%) and the S&P BSE IT index (down 1.86%), underperformed the Sensex.

Stocks of public sector banks edged higher. Vijaya Bank (up 6.45%), Indian Bank (up 4.90%), Dena Bank (up 4.78%), United Bank of India (up 4.44%), Bank of India (up 4.16%), Bank of Baroda (up 3.33%), UCO Bank (up 3.27%), Andhra Bank (up 3.20%), Allahabad Bank (up 3.15%), Syndicate Bank (up 2.92%), Bank of Maharashtra (up 2.83%), Punjab & Sind Bank (up 2.83%), State Bank of India (up 2.77%), Union Bank of India (up 2.66%), Canara Bank (up 2.41%), IDBI Bank (up 2.34%), Punjab National Bank (up 2.01%), Central Bank of India (up 0.95%) and Corporation Bank (up 0.86%), edged higher.

Stock of private sector banks were mixed. City Union Bank (up 3.37%), Federal Bank (up 1.45%), Kotak Mahindra Bank (up 0.92%) and ICICI Bank (up 0.78%), edged higher. Yes Bank (down 0.34%) and IndusInd Bank (down 1.75%), edged lower.

Index heavyweight HDFC Bank fell 0.32% at Rs 1,158.05. The stock hit a high of Rs 1,169.90 and a low of Rs 1,152.95 in intraday trade.

Axis Bank rose 0.76% at Rs 514.25 after a large bulk deal of 35.55 lakh shares was executed on the scrip at Rs 509.10 per share in opening trade on the BSE today, 27 June 2016.

Cement stocks edged higher on renewed buying. UltraTech Cement (up 3.07%), ACC (up 2.48%) and Ambuja Cements (up 2.30%) gained.

Grasim Industries rose 2.48%. Grasim has exposure to cement sector through its holding in UltraTech Cement.

Index heavyweight and cigarette major ITC rose 1.60% at Rs 359.05. The stock hit a high of Rs 361.05 and a low of Rs 354.60 in intraday trade.

Most capital goods shares edged higher. Jindal Saw (up 4.48%), Lakshmi Machine Works (up 3.69%), ALSTOM India (up 2.10%), Praj Industries (up 1.53%), Suzlon Energy (up 1.49%), Reliance Defence and Engineering (up 1.21%), SKF India (up 1.21%), Punj Lloyd (up 1.13%), BEML (up 0.94%), Crompton Greaves (up 0.70%), Bharat Heavy Electricals (up 0.68%), Havells India (up 0.39%), AIA Engineering (up 0.24%), Bharat Electronics (up 0.17%) and ABB India (up 0.08%), edged higher. Siemens (down 0.12%), Alstom T&D India (down 1.33%) and Thermax (down 1.33%), edgd lower.

Engineering & construction major L&T rose 2.36% at Rs 1,467.50 after the company said its construction division has secured orders worth Rs 2416 crore across various business segments in this month so far. L&T said that the building and factories division won orders worth Rs 1165 crore, power transmission and distribution business bagged orders worth Rs 1120 crore in the domestic and international markets and its smart world and communication business won orders worth Rs 131 crore. The announcement was made during market hours today, 27 June 2016.

Metal and mining stocks edged higher as copper prices rose in global commodities markets. Vedanta (up 3.65%), Jindal Steel & Power (up 2%), Hindalco Industries (up 1.83%), Bhushan Steel (up 1.34%), Steel Authority of India (up 0.71%), JSW Steel (up 0.41%), National Aluminium Company (up 0.24%) and Hindustan Copper (up 0.10%), edged higher. Hindustan Zinc fell 0.91%.

High Grade Copper for September 2016 delivery was currently up 0.4% at $2.1245 per pound on the COMEX.

Tata Steel extended losses registered during the previous trading session triggered by the UK voting to leave the European Union (EU) in a referendum on 23 June 2016. The stock fell 0.69% at Rs 310.35. The stock tumbled 6.37% to settle at Rs 312.50 on Friday, 24 June 2016. Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe. Tata Steel Europe has initiated the process to sell its UK business viz. Tata Steel UK. Tata Steel Europe has invited seven short listed potential investors to submit binding bids for Tata Steel UK.

IT stocks extended losses registered during the previous trading session triggered by the UK voting to leave in the European Union in a historic referendum on 23 June 2016. TCS (down 2.93%), Infosys (down 2.37%), MindTree (down 0.97%), HCL Technologies (down 0.96%), Persistent Systems (down 0.64%) and Tech Mahindra (down 0.49%), edged lower. Oracle Financial Services Software (up 0.04%), Hexaware Technologies (up 0.56%) and MphasiS (up 8.74%), edged higher.

According to a research note from a domestic brokerage on the impact of Brexit on Indian IT firms, Indian IT companies' revenue in dollar terms will be adversely impacted by the sharp depreciation of the British pound and the euro against the dollar. Indian IT companies derive about 25% of their revenue from Europe. 

According to the calculation by the domestic brokerage, 10% depreciation each of the pound and the euro against the dollar could shave about 1.5-2.5% off IT companies' revenue in dollar terms and adversely impact EBIT margins by 75-100 basis points. The pound has slumped against the dollar and the euro, too, has depreciated against the dollar after Britain voted to leave EU in a referendum on 23 June 2016.

Wipro fell 1.23% at Rs 549.10 after a large bulk deal of 34.01 lakh shares was executed on the scrip at Rs 554.20 per share in opening trade on the BSE today, 27 June 2016.

Most pharmaceutical shares edged higher. Biocon (up 6.61%), Aurobindo Pharma (up 3.23%), Dr Reddy's Laboratories (up 3.04%), Sun Pharmaceutical Industries (up 2.67%), Cipla (up 2.62%), Cadila Healthcare (up 2.48%), IPCA Laboratories (up 2.19%), Glenmark Pharmaceuticals (up 2.07%), Wockhardt (up 1.11%), Lupin (up 1.06%), Strides Shasun (up 0.67%), GlaxoSmithKline Pharmaceuticals (up 0.29%) and Divi's Laboratories (up 0.13%), edgd higher. Alkem Laboratories (down 0.42%) and Piramal Enterprises (down 1.81%), edged lower.

Stocks of public sector oil marketing companies (PSU OMCs) edged higher on fall in global crude oil prices. HPCL (up 4.07%), BPCL (up 2.57%) and Indian Oil Corporation (up 0.63%) gained. Decline in crude oil prices could reduce under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at government controlled prices. The government has already decontrolled pricing of petrol and diesel.

Stocks of oil exploration and production (E&P) companies also moved higher. ONGC (up 0.21%) and Cairn India (up 0.83%) edged higher. Oil India fell 0.68%.

Index heavyweight Reliance Industries was up 0.48% at Rs 956.10. The stock hit a high of Rs 958.80 and a low of Rs 944 in intraday trade.

In the global commodities markets, Brent for August 2016 settlement was currently down 26 cents at $48.15 a barrel. The contract had declined $2.50 a barrel or 4.91% to settle at $48.41 a barrel during the previous trading session after the UK's vote to leave the European Union in a nationwide referendum triggered a selloff across markets.

The Sensex has fallen 265 points or 0.99% in this month so far (till 27 June 2016). The Sensex has risen 285.42 points or 1.09% in calendar year 2016 so far (till 27 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 3,908.35 points or 17.37%. The Sensex is off 2,175.37 points or 7.61% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,621.78 points 12.06% from a record high of 30,024.74 hit on 4 March 2015.

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