Market slips as crude boils
Market declined last week as negative cues from global markets and concerns arising from higher global crude oil prices spooked investors. The rebound 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.
The barometer index, the S&P BSE Sensex, fell 207.28 points or 0.77% to settle at 26,635.75. The Nifty 50 index fell 50.75 points or 0.62% to settle at 8,170.05.
The BSE Mid-Cap index fell 0.16%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index rose 1.92%, outperforming the Sensex.
Trading for the week started on a subdued note as key benchmark indices edged lower on Monday, 6 June 2016. The barometer index, the S&P BSE Sensex, fell 65.58 points or 0.24% to settle at 26,777.45. The Nifty 50 index fell 19.75 points or 0.24% to settle at 8,201.05.
The Reserve Bank of India's (RBI) indication after a policy review that interest rate cut may be announced if macroeconomic and financial developments favour rate cut and firmness in European stocks aided the upmove on the domestic bourses on Tuesday, 7 June 2016. The barometer index, the S&P BSE Sensex, rose 232.22 points or 0.87% to settle at 27,009.67. The gains for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty rose 65.40 points or 0.8% to settle at 8,266.45.
In what was a lackluster trading session, the two key benchmark indices registered minuscule gains on Wednesday, 8 June 2016. The barometer index, the S&P BSE Sensex, rose 10.99 points or 0.04% to settle at 27,020.66. The Nifty 50 index rose 6.60 points or 0.08% to settle at 8,273.05.
Negative cues from global markets and concerns arising from higher global crude oil prices pulled Indian stocks lower on Thursday, 9 June 2016. 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.
Trading for the week ended on a subdued note as weakness in global stocks dragged key benchmark indices lower for the second day in a row on Friday, 10 June 2016. The barometer index, the S&P BSE Sensex shed 127.71 points or 0.48% to settle at 26,635.75. The Nifty 50 index dropped 33.55 points or 0.41% to settle at 8,170.05.
IT major Infosys was the biggest Sensex loser last week. The stock fell 6.76% to Rs 1,180.80 after the company's chief operating officer UB Pravin Rao was quoted as saying on Wednesday, 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).
Among other IT majors. TCS fell 2.66% to Rs 2560.95.
Wipro rose 0.72% to Rs 544.95. Wipro announced on Monday, 6 June 2016, that it would commence buyback of shares on 17 June 2016. The buyback closes on 30 June 2016. Wipro's board of directors had in April 2016 approved a proposal to buyback up to 4 crore equity shares of the company for an aggregate amount of up to Rs 2500 crore, being 1.62% of the total paid up equity share capital. The buyback will be through the tender offer route at Rs 625 per share. The promoters of the company have indicated their intention to participate in the proposed buyback. The buyback price of Rs 625 per share represents a 16.02% premium over the stock's ruling market price.
Dr Reddy's Laboratories (DRL) fell 3% to Rs 3,064.60 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.
Drug major Sun Pharmaceutical Industries rose 0.45% to Rs 741.60.
Drug major Lupin lost 0.82% to Rs 1,437.10 on reports the company is recalling 54,472 vials of anti-bacterial injection Ceftriaxone in the United States and Puerto Rico due to violation of current manufacturing norms. According to reports, the recall of the drug is a voluntary recall. The recall is being initiated by the company's US arm Lupin Pharmaceuticals Inc. Ceftriaxone for injection USP is used to treat or prevent infections that are proven or strongly suspected to be caused by bacteria. The US Food and Drug Administration has reportedly categorized the recall as a class III recall. According to reports, a class III recall is initiated in a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.
Auto stocks were mixed. Maruti Suzuki India (down 2.43%), Hero MotoCorp (down 2.31%) and Bajaj Auto (down 1.90%) edged lower. Tata Motors (up 0.73%) and Mahindra and Mahindra (up 1.56%), edged higher. The BSE Auto index fell 110.05 points, or 0.57% to 19,308.28 last week.
State Bank of India was the top Sensex gainer last week. It rose 4.94% to Rs 206.20 on reports the bank is considering a proposal to hive off its stressed-loan portfolio into a separate company. If non-performing assets (NPAs) are transferred to a separate company, it will help State Bank of India (SBI) concentrate on core banking services. Meanwhile, media reports also suggested that some sovereign wealth funds and private equity players have shown interest in acquiring stake in the so-called bad bank proposed by SBI.
ICICI Bank gained 3.69% to Rs 252.65 on reports that a foreign brokerage has issued a tactical short term buy call on the stock, citing attractive price to book value on a 1 year forward basis of ICICI Bank vis-à-vis Axis Bank. Meanwhile, ICICI Bank is seeking approval from its shareholders for an enabling resolution to raise up to Rs 25000 crore by way of issue of non-convertible securities within the overall borrowing limits of Rs 2.5 lakh crore. The approval will be valid for a period of one year from the date of passing of the resolution by the shareholders. The Annual General Meeting (AGM) of shareholders is scheduled on 11 July 2016.
Axis Bank fell 0.28% to Rs 541.30. HDFC Bank fell 0.93% to Rs 1,161.20.
L&T rose 1.79% to Rs 1,487.10. Housing Development Finance Corporation (HDFC) fell 1.97% to Rs 1,230.80. The board of directors of HDFC ERGO General Insurance Company (HDFC ERGO), a non listed subsidiary of HDFC, approved the acquisition of a 100% stake in L&T General Insurance Company (LTGI) for an aggregate consideration of Rs 551 crore. The board of HDFC ERGO also approved the plan to merge the two companies subject to all regulatory approvals. The acquisition would help HDFC ERGO improve its market position. HDFC ERGO expects significant cost synergies arising out of business, technology optimization and rationalization of offices.
HDFC ERGO, a 51:49 joint venture between housing major HDFC and ERGO International, Germany (part of Munich Re Group), is the 4th largest private sector general insurer in India and offers all lines of general insurance products including motor, health, personal accident, home, fire, marine, aviation, liability, crop insurance etc.
The transaction is subject to various approvals, including approval of Insurance Regulatory and Development Authority of India and the Bombay High Court.
Upon closing, the L&T Group would exit from the general insurance and health insurance business.
LTGI gross earned premium income during the year 2015-2016 was Rs 483 crore, constituting around 0.5% of the company's consolidated revenue for the year 2015-2016 and reported a net worth of Rs 142 crore as on 31 March 2016. The share sale is part of L&T's strategy of exiting from its non-core activity.
Index heavyweight Reliance Industries rose 1.85% to Rs 975.65. The company announced after market hours on Friday, 3 June 2016, that it has restarted its purified terephthalic acid plants, and is ramping up production to full capacity at Dahej. The purified terephthalic acid (PTA) plants had been shut for a brief period owing to increased water salinity. Reliance Industries (RIL) said it ensured PTA supplies to downstream customers from its Hazira and Patalganga plants during the brief shutdown at Dahej. Now, the customers will be getting PTA from all three locations, RIL said.
Bhel (up 4.83%), ONGC (up 2.90%), Cipla (up 2.40%) and NTPC (up 2.27%), edged higher from the Sensex pack.
The Reserve Bank of India (RBI) kept its benchmark interest rate viz. the repo rate unchanged at 6.5% after the conclusion of a monetary policy review on Tuesday, 7 June 2016. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it continues to provide liquidity as required and will progressively lower the liquidity deficit in the banking system from 1% of NDTL to a position closer to neutrality.
RBI Governor Raghuram Rajan said in his monetary policy statement that the central bank will monitor macroeconomic and financial developments for scope for reduction in the repo rate. RBI has retained its March 2017 inflation projection of 7%. Rajan said that incoming data in the next few months will provide more clarity regarding RBI's March 2017 inflation target of 7%. The expectations of a normal monsoon and a reasonable spatial and temporal distribution of rainfall, along with various supply management measures and the introduction of the electronic national agriculture market (e-NAM) trading portal, should moderate unanticipated flares of food inflation. In addition, capacity utilisation indicators suggest that the available headroom in industry could keep output prices subdued even as demand picks up.
The central bank has simultaneously pointed out some upside risks to inflation such as firming international commodity prices, the implementation of the 7th Central Pay Commission awards, the upturn in inflation expectations of households and of corporates and the stickiness in inflation excluding food and fuel. Rajan said that the stance of monetary policy remains accommodative. The RBI has retained its gross value added growth projection for 2016-17 at 7.6%. It said that the risk to this number is evenly balanced.
RBI Governor Raghuram Rajan was quoted as saying that the RBI will have room to cut interest rates if the central bank gains confidence in reaching its 5% target for consumer inflation by March 2017.
Meanwhile, the India Meteorological Department (IMD) on Wednesday, 8 June 2016, announced the arrival of the monsoon rains in Kerala. That marks the beginning of the 4-month June-September southwest monsoon season in the country. IMD has forecast above normal rains for the 2016 southwest monsoon season. Quantitatively, monsoon season rainfall for the country as a whole is likely to be 106% of the long period average (LPA) with a model error of plus/minus 4%. The quantum of the rainfall and its spatial and temporal distribution are critical for the country's agriculture.
The barometer index, the S&P BSE Sensex, fell 207.28 points or 0.77% to settle at 26,635.75. The Nifty 50 index fell 50.75 points or 0.62% to settle at 8,170.05.
The BSE Mid-Cap index fell 0.16%. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index rose 1.92%, outperforming the Sensex.
Trading for the week started on a subdued note as key benchmark indices edged lower on Monday, 6 June 2016. The barometer index, the S&P BSE Sensex, fell 65.58 points or 0.24% to settle at 26,777.45. The Nifty 50 index fell 19.75 points or 0.24% to settle at 8,201.05.
The Reserve Bank of India's (RBI) indication after a policy review that interest rate cut may be announced if macroeconomic and financial developments favour rate cut and firmness in European stocks aided the upmove on the domestic bourses on Tuesday, 7 June 2016. The barometer index, the S&P BSE Sensex, rose 232.22 points or 0.87% to settle at 27,009.67. The gains for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty rose 65.40 points or 0.8% to settle at 8,266.45.
In what was a lackluster trading session, the two key benchmark indices registered minuscule gains on Wednesday, 8 June 2016. The barometer index, the S&P BSE Sensex, rose 10.99 points or 0.04% to settle at 27,020.66. The Nifty 50 index rose 6.60 points or 0.08% to settle at 8,273.05.
Negative cues from global markets and concerns arising from higher global crude oil prices pulled Indian stocks lower on Thursday, 9 June 2016. 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.
Trading for the week ended on a subdued note as weakness in global stocks dragged key benchmark indices lower for the second day in a row on Friday, 10 June 2016. The barometer index, the S&P BSE Sensex shed 127.71 points or 0.48% to settle at 26,635.75. The Nifty 50 index dropped 33.55 points or 0.41% to settle at 8,170.05.
IT major Infosys was the biggest Sensex loser last week. The stock fell 6.76% to Rs 1,180.80 after the company's chief operating officer UB Pravin Rao was quoted as saying on Wednesday, 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).
Among other IT majors. TCS fell 2.66% to Rs 2560.95.
Wipro rose 0.72% to Rs 544.95. Wipro announced on Monday, 6 June 2016, that it would commence buyback of shares on 17 June 2016. The buyback closes on 30 June 2016. Wipro's board of directors had in April 2016 approved a proposal to buyback up to 4 crore equity shares of the company for an aggregate amount of up to Rs 2500 crore, being 1.62% of the total paid up equity share capital. The buyback will be through the tender offer route at Rs 625 per share. The promoters of the company have indicated their intention to participate in the proposed buyback. The buyback price of Rs 625 per share represents a 16.02% premium over the stock's ruling market price.
Dr Reddy's Laboratories (DRL) fell 3% to Rs 3,064.60 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.
Drug major Sun Pharmaceutical Industries rose 0.45% to Rs 741.60.
Drug major Lupin lost 0.82% to Rs 1,437.10 on reports the company is recalling 54,472 vials of anti-bacterial injection Ceftriaxone in the United States and Puerto Rico due to violation of current manufacturing norms. According to reports, the recall of the drug is a voluntary recall. The recall is being initiated by the company's US arm Lupin Pharmaceuticals Inc. Ceftriaxone for injection USP is used to treat or prevent infections that are proven or strongly suspected to be caused by bacteria. The US Food and Drug Administration has reportedly categorized the recall as a class III recall. According to reports, a class III recall is initiated in a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.
Auto stocks were mixed. Maruti Suzuki India (down 2.43%), Hero MotoCorp (down 2.31%) and Bajaj Auto (down 1.90%) edged lower. Tata Motors (up 0.73%) and Mahindra and Mahindra (up 1.56%), edged higher. The BSE Auto index fell 110.05 points, or 0.57% to 19,308.28 last week.
State Bank of India was the top Sensex gainer last week. It rose 4.94% to Rs 206.20 on reports the bank is considering a proposal to hive off its stressed-loan portfolio into a separate company. If non-performing assets (NPAs) are transferred to a separate company, it will help State Bank of India (SBI) concentrate on core banking services. Meanwhile, media reports also suggested that some sovereign wealth funds and private equity players have shown interest in acquiring stake in the so-called bad bank proposed by SBI.
ICICI Bank gained 3.69% to Rs 252.65 on reports that a foreign brokerage has issued a tactical short term buy call on the stock, citing attractive price to book value on a 1 year forward basis of ICICI Bank vis-à-vis Axis Bank. Meanwhile, ICICI Bank is seeking approval from its shareholders for an enabling resolution to raise up to Rs 25000 crore by way of issue of non-convertible securities within the overall borrowing limits of Rs 2.5 lakh crore. The approval will be valid for a period of one year from the date of passing of the resolution by the shareholders. The Annual General Meeting (AGM) of shareholders is scheduled on 11 July 2016.
Axis Bank fell 0.28% to Rs 541.30. HDFC Bank fell 0.93% to Rs 1,161.20.
L&T rose 1.79% to Rs 1,487.10. Housing Development Finance Corporation (HDFC) fell 1.97% to Rs 1,230.80. The board of directors of HDFC ERGO General Insurance Company (HDFC ERGO), a non listed subsidiary of HDFC, approved the acquisition of a 100% stake in L&T General Insurance Company (LTGI) for an aggregate consideration of Rs 551 crore. The board of HDFC ERGO also approved the plan to merge the two companies subject to all regulatory approvals. The acquisition would help HDFC ERGO improve its market position. HDFC ERGO expects significant cost synergies arising out of business, technology optimization and rationalization of offices.
HDFC ERGO, a 51:49 joint venture between housing major HDFC and ERGO International, Germany (part of Munich Re Group), is the 4th largest private sector general insurer in India and offers all lines of general insurance products including motor, health, personal accident, home, fire, marine, aviation, liability, crop insurance etc.
The transaction is subject to various approvals, including approval of Insurance Regulatory and Development Authority of India and the Bombay High Court.
Upon closing, the L&T Group would exit from the general insurance and health insurance business.
LTGI gross earned premium income during the year 2015-2016 was Rs 483 crore, constituting around 0.5% of the company's consolidated revenue for the year 2015-2016 and reported a net worth of Rs 142 crore as on 31 March 2016. The share sale is part of L&T's strategy of exiting from its non-core activity.
Index heavyweight Reliance Industries rose 1.85% to Rs 975.65. The company announced after market hours on Friday, 3 June 2016, that it has restarted its purified terephthalic acid plants, and is ramping up production to full capacity at Dahej. The purified terephthalic acid (PTA) plants had been shut for a brief period owing to increased water salinity. Reliance Industries (RIL) said it ensured PTA supplies to downstream customers from its Hazira and Patalganga plants during the brief shutdown at Dahej. Now, the customers will be getting PTA from all three locations, RIL said.
Bhel (up 4.83%), ONGC (up 2.90%), Cipla (up 2.40%) and NTPC (up 2.27%), edged higher from the Sensex pack.
The Reserve Bank of India (RBI) kept its benchmark interest rate viz. the repo rate unchanged at 6.5% after the conclusion of a monetary policy review on Tuesday, 7 June 2016. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it continues to provide liquidity as required and will progressively lower the liquidity deficit in the banking system from 1% of NDTL to a position closer to neutrality.
RBI Governor Raghuram Rajan said in his monetary policy statement that the central bank will monitor macroeconomic and financial developments for scope for reduction in the repo rate. RBI has retained its March 2017 inflation projection of 7%. Rajan said that incoming data in the next few months will provide more clarity regarding RBI's March 2017 inflation target of 7%. The expectations of a normal monsoon and a reasonable spatial and temporal distribution of rainfall, along with various supply management measures and the introduction of the electronic national agriculture market (e-NAM) trading portal, should moderate unanticipated flares of food inflation. In addition, capacity utilisation indicators suggest that the available headroom in industry could keep output prices subdued even as demand picks up.
The central bank has simultaneously pointed out some upside risks to inflation such as firming international commodity prices, the implementation of the 7th Central Pay Commission awards, the upturn in inflation expectations of households and of corporates and the stickiness in inflation excluding food and fuel. Rajan said that the stance of monetary policy remains accommodative. The RBI has retained its gross value added growth projection for 2016-17 at 7.6%. It said that the risk to this number is evenly balanced.
RBI Governor Raghuram Rajan was quoted as saying that the RBI will have room to cut interest rates if the central bank gains confidence in reaching its 5% target for consumer inflation by March 2017.
Meanwhile, the India Meteorological Department (IMD) on Wednesday, 8 June 2016, announced the arrival of the monsoon rains in Kerala. That marks the beginning of the 4-month June-September southwest monsoon season in the country. IMD has forecast above normal rains for the 2016 southwest monsoon season. Quantitatively, monsoon season rainfall for the country as a whole is likely to be 106% of the long period average (LPA) with a model error of plus/minus 4%. The quantum of the rainfall and its spatial and temporal distribution are critical for the country's agriculture.
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