Saturday, October 01, 2016

THE WEEK THAT WAS

Market drops on weak global cues, geopolitical concerns


Key benchmark indices dropped in the week ended Friday, 30 September 2016 weighed by weak global cues and geopolitical concerns. The barometer index, the S&P BSE Sensex, dropped below the psychologically important 28,000 level during the week. Key indices edged lower in three out of five trading sessions during the week ended 30 September 2016.

The Indian Army conducted surgical strikes on terror launch pads on 28 September 2016 night across the Line of Control (LoC) in Pakistan, killing several terrorists and causing significant casualties to their hideouts. The press conference was jointly conducted by the Ministry of External Affairs and the Ministry of Defence. The operations were focused to ensure that these terrorists do not succeed in endangering lives of citizens in India.

In the week ended Friday, 30 September 2016, the Sensex fell 802.26 points or 2.79% to settle at 27,865.96. The Nifty 50 index fell 220.40 points or 2.49% to settle at 8,611.15. The BSE Mid-Cap index lost 165.29 points or 1.23% to settle at 13,166.68. The BSE Small-Cap index fell 178.10 points or 1.37% to settle at 12,780.80. The fall in both these indices was lower than the Sensex's decline in percentage terms.

Trading for the week began on a weak note on Monday, 26 September 2016 as the key benchmark indices dropped on weak global stocks. The Sensex dropped 373.94 points or 1.3% to settle at 28,294.28, its lowest closing level since 29 August 2016.
Key benchmark indices ended lower in a volatile session of trade on Tuesday, 27 September 2016. The Sensex fell 70.58 points or 0.25% to settle at 28,223.70, its lowest closing level since 29 August 2016

Key benchmark indices snapped three-day losing streak on Wednesday, 28 September 2016 to settle with small gains as firmness in European stocks boosted sentiment. The Sensex rose 69.11 points or 0.24% to settle at 28,292.81, its highest closing level since 26 September 2016.

Key benchmark indices suffered steep losses on Thursday, 29 September 2016 on geopolitical concerns after Indian Army revealed that India conducted surgical strikes against terror launchpads inside Pakistan occupied Kashmir on Wednesday, 28 September 2016. The Sensex slumped 465.28 points or 1.64% to settle at 27,827.53, its lowest closing level since 26 August 2016.

Key benchmark indices settled with small gains on Friday, 30 September 2016 on bargain hunting after a rangebound trade and amid volatility. The Sensex rose 38.43 points or 0.14% to settle at 27,865.96, its highest closing level since 28 September 2016.

Among the 30-share Sensex pack, 27 stocks fell and only three of them rose in the week ended Friday, 30 September 2016.

Adani Ports and Special Economic Zone (down 6.72%), NTPC (down 5.32%) and Hindustan Unilever (down 4.66%) edged lower from the Sensex pack.

Index heavyweight and housing finance major HDFC lost 2.21% to Rs 1,393.05.

Index heavyweight and cigarette maker ITC declined 4.84% to Rs 241.55.

Index heavyweight Reliance Industries lost 1.89% to Rs 1,082.10.

Bank stocks dropped. Axis Bank (down 2.78%), ICICI Bank (down 7.17%) and HDFC Bank (down 3.15%) declined.

State Bank of India (SBI) fell 1.45%. The bank said that on 27 September 2016 it issued and allotted 25,000 AT1 Basel III compliant non-convertible, perpetual, subordinated, unsecured debt instrument in the nature of debenture, of face value Rs 10 lakh each at par through private placement bearing coupon of 8.75% per annum payable annually with call option after 5 years or any coupon payment date thereafter aggregating to Rs 2500 crore in second tranche. The announcement was made after market hours on 27 September 2016.

Auto stocks declined. Maruti Suzuki India (down 2.19%), Bajaj Auto (down 3.22%) and Tata Motors (down 3.36%) fell.

Hero MotoCorp declined 3.32%. The company said that it has augmented premium portfolio with the next-gen 'Achiever - 150' aiming to expand its presence in the premium segment. The motorcycle is competitively priced at Rs 62,800 ex-showroom Delhi for the disc variant and Rs 61,800 for the drum variant. The company has launched limited edition Achiever 150 to commemorate the 7 crore milestone of cumulative production. The announcement was made after market hours on 26 September 2016.

Mahindra & Mahindra (M&M) slipped 0.25%. M&M said that the company has agreed to acquire 1.49 crore shares or 100% of the share capital of Mahindra Two Wheelers Europe Holdings S.ar.l. from Mahindra Two Wheelers, a subsidiary of the company for Euro 26.3 million. The announcement was made after market hours on 27 September 2016. The indicative time period for completion of the acquisition is 30 days. MTWL-Europe is a special purpose vehicle to hold the investment in Peugeot Motorcycles S.A.S.

Separately, M&M said that Merakisan (MKPL), a wholly owned subsidiary of Mahindra Univeg (MUPL), a subsidiary of Mahindra Agri Solutions (MASL), which in turn is a wholly owned subsidiary of M&M, allotted equity shares on preferential basis to Prashanth Patil. As a result of this allotment, the holding of MUPL in MKPL has reduced from 100% to 33.17%. Hence, MKPL has ceased to be a subsidiary of MUPL and as such of MASL and in turn of M&M. MUPL, a 60:40 joint venture between MAPL and Univeg announced a minority shareholding in MKPL. Prasanth Patil from the founding family of Merakisan is now the majority stakeholder of Merakisan and will be the CEO of the company. Merakisan shall operate in sourcing fruits, vegetables and other agricultural products directly from farmers ad sell to customers. The announcement was made during market hours on 28 September 2016.

Bharti Airtel declined 4.09%. The company announced the launch of its new International Roaming (IR) packs that redefine the value proposition for customers traveling abroad. With the new IR packs, customers will have the convenience of carrying their India mobile number wherever they go and stay connected 24x7 without having to worry about high call and data charges. The packs will be available to both postpaid and prepaid customers. The announcement was made during market hours on 28 September 2016. The IR packs, which are available for all popular global destinations, come with validity of one day and 30 days, giving customers greater flexibility to plan their communication budgets when traveling overseas.
Airtel's new IR packs offer free incoming calls, free texts to India and ample data benefits along with free India calling minutes across all popular destinations. Charges for calls to India and local in-country calls have been reduced to as low as Rs 3 per minute across popular destinations. Airtel also announced that post the exhaustion of pack data benefits, international roaming data will now be charged at just Rs 3 per megabyte (MB), a reduction of 99% from Rs 650 per MB, so that customers can enjoy uninterrupted data usage without having to worry about bill charges.

Pharma shares declined. Cipla (down 5.05%), Dr Reddy's Laboratories (down 2.27%), Sun Pharmaceutical Industries (down 4.79%) fell.

Lupin shed 0.22%. The company announced that it has received final approval for its Memantine Hydrochloride Extended-Release Capsules, 7 mg, 14 mg, 21 mg, and 28 mg from the United States Food and Drug Administration (USFDA) to market a generic version of Allergan's Namenda XR Capsules, 7 mg, 14 mg, 21 mg, and 28 mg. Lupin's Memantine Hydrochloride Extended-Release Capsules, 7 mg, 14 mg, 21 mg, and 28 mg are the AB rated generic equivalent of Allergan's Namenda XR Capsules, 7 mg, 14 mg, 21 mg, and 28 mg. Memantine Hydrochloride Extended-Release Capsules, 7 mg, 14 mg, 21 mg, and 28 mg are indicated for treatment of moderate to severe dementia of the Alzheimer's type. Namenda XR Capsules had annual sales of $1.22 billion in US as per IMS MAT June 2016.The announcement was made during market hours on 29 September 2016.

L&T fell 4.35%. The company said its construction arm won orders worth Rs 2046 crore across various business segments. The announcement was made during trading hours on 29 September 2016.

Meanwhile, the Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016, to provide for a statutory and institutionalized framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth and notified on 29 September 2016. The Monetary Policy Committee would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. A Committee-based approach for determining the Monetary Policy will add lot of value and transparency to monetary policy decisions. The meetings of the Monetary Policy Committee shall be held at least 4 times a year and it shall publish its decisions after each such meeting. The factors constituting failure to meet inflation target under the Monetary Policy Committee Framework have also been notified. The Government, in consultation with RBI, has notified the inflation target in the Gazette of India Extraordinary dated 5 August 2016 for the period beginning from the date of publication of this notification and ending on the 31 March 2021, with inflation target of 4% with upper and lower tolerance level of 2%.

As per the provisions of the RBI Act, out of the six members of Monetary Policy Committee, three members will be from the RBI and the other three members of MPC will be appointed by the Central Government. The members of the Monetary Policy Committee appointed by the Central Government shall hold office for a period of four years, with immediate effect or until further orders, whichever is earlier.

Meanwhile, the Asian Development Bank kept its growth estimates for developing Asia for this year and next at 5.7%, saying sustained expansion in China and India can steady the region but warned of risks from a looming US interest rate hike. The Manila-based lender increased its growth forecast this year for China to 6.6% from 6.5% and for 2017 to 6.4% from 6.3%, citing fiscal and monetary stimulus measures in the world's second-largest economy. The projections for India were kept at 7.4% for this year and 7.8% for 2017, driven by strong consumption and an investment revival, the ADB said.

The Organization of the Petroleum Exporting Countries (OPEC) took an important step toward a cap on crude-oil output, which helped in lifting oil prices. OPEC said on 28 September 2016 that it would reduce output to a range of 32.5-33.0 million barrels per day (bpd), a reduction of 0.7-2.2% from OPEC estimates of its current output at 33.24 million bpd.

Revised data suggest that the US economy's performance in the spring was slightly better than expected, as business investment wasn't nearly as weak as previously reported. The gross domestic product grew a 1.4% pace in the second quarter. 

Philadelphia Federal Reserve President Patrick Harker said he backs a December rate increase if the economy continues to grow as expected, while Atlanta Fed President Dennis Lockhart said he expects the Fed to be in a position to raise rates soon. Fed Gov. Jerome Powell on the other hand said the Fed can afford to be patient in gradually raising rates as the economy slowly improves.

Additionally, US consumer confidence rose to 104.1 in September, the highest level since August 2007. The Case-Shiller home price index rose 5% for the year in July, while house prices rose 0.6%. The Markit flash services purchasing managers index for September rose to 51.9 in September from 51 in August.

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