Key benchmark indices snapped two-day winning streak as the latest data showed inflation accelerating in May 2012 and after the government revised upwards inflation for March 2012 to 7.69% from a provisional reading of 6.89%. Weakness in global stocks caused by euro-zone debt worries also weighed on sentiment. The market breadth was weak. The barometer index, BSE Sensex, was down 202.63 points or 1.2%, up about 20 points from the day`s low and off about 240 points from the day`s high.
From a recent low of 16,668.01 on 11 June 2012, the Sensex had risen 212.50 points or 1.27% in two trading sessions to 16,880.51 on Wednesday, 13 June 2012. The Sensex has risen 459.35 points or 2.83% so far in this month (till 14 June 2012). The barometer index has gained 1,222.96 points or 7.91% in calendar 2012 so far (till 14 June 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,542.02 points or 10.18%. From a 52-week high of 19,131.70 on 8 July 2011, the Sensex has lost 2,453.82 points or 12.82%.
Coming back to today`s trade, banking and realty stocks edged lower as investors reduced bets on possible interest rate cuts by the central bank after the latest data showed inflation accelerating in May 2012. Capital goods shares also declined. Shares of diesel vehicles makers declined for the second straight day on reports the government is planning to compensate the subsidy on diesel by taxing cars running on diesel. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade.
The market moved alternately between positive and negative terrain near the flat line in early trade. A bout of volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday lows in morning trade. Volatility continued as the market once again trimmed losses after hitting fresh intraday low in mid-morning trade.
Volatility ruled the roost as key benchmark indices reversed gains after hitting fresh intraday highs after the latest data showed inflation accelerating in May 2012. Weakness continued in afternoon trade. The market extended losses in mid-afternoon trade. The market hit fresh intraday low in late trade.
Inflation based on the wholesale price index (WPI) accelerated to 7.55% in May 2012 from a year earlier as prices of manufactured products and fuel increased, adding to concerns of a rise in price pressures. Inflation was at 7.23% in April 2012. The government also raised WPI inflation reading for March 2012 to 7.69% from 6.89% reported earlier.
Core inflation, or non-food manufacturing inflation, was below 5% in May 2012, far lower than the headline reading. Inflation in India has moderated from 10% in September 2011, but still remains above the central bank`s comfort level. The central bank undertakes a mid-quarter monetary policy review on 18 June 2012. The RBI aims to contain inflation expectations below 4.5%.
The government today, 14 June 2012, raised the minimum support prices of various kharif (June-October) crops 2012 in the range of 15.3% to 53.1%, which is expected to further fuel persistently high food inflation in the coming months. Food inflation has been in double digits for around a year and has been contributing significantly to overall inflation.
Easing of core inflation, falling crude oil prices, weak industrial production data for April 2012 and a sharp deceleration in GDP growth in Q4 March 2012 have raised expectations that the central bank will cut interest rates to revive economic growth.
The BSE Sensex was down 202.63 points or 1.2% to 16,677.88, its lowest closing level since 11 June 2012. The index fell 221.53 points at the day`s low of 16,658.98 in late trade. The index rose 40.98 points at the day`s high of 16,921.49 in early afternoon trade.
The S&P CNX Nifty was down 66.70 points or 1.3% to 5,054.75, its lowest level since 11 June 2012. The index hit a low of 5,047.60 and a high of 5,130 in intraday trade.
The BSE Mid-Cap index fell 1.27% and underperformed the Sensex. The BSE Small-Cap index declined 0.67% and outperformed the Sensex.
BSE clocked turnover of Rs 1766 crore, lower than Rs 2117.80 crore on Wednesday, 13 June 2012.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,701 shares fell and 1,011 shares rose. A total of 119 shares were unchanged.
From 30-share Sensex pack, 25 stocks fell and rest of them rose.
Index heavyweight Reliance Industries (RIL) fell 0.13% to Rs 715.55, off the day`s high of Rs 720.95. RIL chairman Mukesh Ambani said at the company`s Annual General Meeting in Mumbai last week that the company has cumulatively bought back a total of 2.7 crore shares under the share buyback programme, which is 22.5% of share buyback target. Ambani said the company`s buyback programme represents highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future.
Ambani said RIL will invest about Rs 1 lakh crore over the five years in expanding its business in India. Ambani said RIL is targeting to double its operating profit in about five years.
Shares of diesel vehicles makers declined for the second straight day on reports the government is planning to compensate the subsidy on diesel by taxing cars running on diesel. As per reports, Oil Minister S Jaipal Reddy has recommended a steep Rs 2.55 lakh additional tax on large and medium diesel cars and Rs 1.70 lakh on small diesel cars. Reddy on Friday, 8 June 2012, said his ministry has recommended that the tax on diesel vehicles should be raised.
India`s largest utility vehicles maker Mahindra & Mahindra (M&M) declined 0.44%. The company early this week said it has received an overwhelming 7,200 plus bookings for its cheetah-inspired XUV500 from customers within just 2 days of opening all India bookings for the vehicle. All India bookings for the XUV500 were opened from 8th June 2012. The XUV500 is now available at more than 100 dealerships across India, including those cities where it had been launched earlier.
Small-car major Maruti Suzuki India shed 2.58%, with the stock extending Wednesday`s 3.38% slide. The company early this week said that the board of directors of the company has approved a proposal to merge Suzuki Powertrain India (SPIL) with the company. SPIL, which supplies diesel engines as well as transmissions for vehicles to Maruti Suzuki, is a subsidiary of Suzuki Motor Corporation (SMC), Japan. SMC holds 70% share in SPIL and remaining 30% is held by Maruti Suzuki.
As per the terms of the proposed merger, SMC will receive one share of MSIL of Rs 5 each for every 70 shares of Rs 10 each it holds in SPIL. There will be no cash outflow from MSIL due to the merger. MSIL proposes to make a fresh issue of about 1.31 crore equity shares to SMC in lieu of SMC`s 70% holding in SPIL. Consequent to the merger, SMC`s holding in MSIL will go up from 54.2% to 56.2%.
With the merger, MSIL will be able to bring its entire diesel engine capacity under a single management control. All key initiatives to strengthen the business, including sourcing, localization, production planning, manufacturing flexibility and cost reduction can be controlled, monitored and improved by the MSIL management, MSIL said in a statement. The proposed merger also promises benefits for the combined entity through synergies in areas like finance, capital structuring, and administration and consequent reduction of transaction costs, MSIL said.
Maruti early this month said total sales declined 5% to 98,884 units in May 2012 over May 2011.
India`s largest commercial vehicle maker by sales Tata Motors declined 4.56%. Tata Motors` total sales (including exports) of Tata commercial and passenger vehicles rose 4% to 64,347 vehicles in May 2012 over May 2011. The company`s domestic sales of Tata commercial and passenger vehicles for May 2012 rose 6% to 60,128 units in May 2012 over May 2011. The company announced the monthly sales data early this month.
Shares of two-wheeler makers also edged lower. India`s second largest motorcycle maker by sales Bajaj Auto declined 0.76%. The company early this month said its total sales fell 2% to 3,52,219 units in May 2012 over May 2011, as exports to Sri Lanka were nil in May 2012 against a typical monthly average of 10,000 motorcycles and 3-wheelers each per month. The company expects recovery in Sri Lankan exports from July 2012 onwards. The company`s exports rose 3% to 1,30,573 units in May 2012 over May 2011.
Hero MotoCorp (HMCL) dropped 0.24%. The board of directors of the company recently approved a proposal to merge Hero Investments (HIPL), the investment arm of the Hero Group, into HMCL. The shareholders of HIPL include the partnership firm Brijmohan Lall Om Prakash (BMOP) which holds 71.63%, and private equity (PE) investors BC India Private Investors (19.81%) and Lathe Investment (8.56%). BC India Private Investors is an affiliate of Bain Capital LLC, while Lathe Investment is a wholly-owned subsidiary of Government of Singapore Investment Corporation (GIC).
Hero MotoCorp reported its best-ever monthly sales in May 2012, thus underlining the robust momentum the company has sustained since embarking on its solo journey. Marking its 10th consecutive month of over five lakh sales, Hero MotoCorp total sales rose 11.3% to 5,56,644 two-wheelers in May 2012 over May 2011. The company`s sales in May this year surpassed its previous highest of 5,51,557, recorded only last month (April 2012).
NTPC was down 3.76%. The company announced during trading hours today, 14 June 2012, that the Unit-11 of 500 megawatts (MW) of Vindhyachal Super Thermal Power Station has been commissioned on 14 June 2012 at 07:35 IST. With this, the total capacity of NTPC group has become 39,174 MW.
Bank stocks edged lower as investors reduced bets on possible interest rate cuts by the central bank after the latest data showed inflation accelerating in May 2012. India`s largest commercial bank in terms of branch network State Bank of India fell 3.03%. The state-run bank has cut its retail term deposit interest rates by 0.25% in tenors up to 240 days with effect from 8 June 2012.
India`s largest private sector bank by net profit ICICI Bank declined 3.5%. India`s second largest private sector bank by net profit HDFC Bank shed 1.53%.
Punjab National Bank fell 5.49% as the stock turned ex-dividend for a dividend of Rs 22 per share for the year ended March 2012.
Bank of Baroda declined 3.32% as the stock turned ex-dividend for a dividend of Rs 17 per share for the year ended March 2012.
Axis Bank dropped 3.27% as the stock turned ex-dividend for a dividend of Rs 16 per share for the year ended March 2012.
Canara Bank fell 4.4% as the stock turned ex-dividend for a dividend of Rs 11 per share for the financial year ended March 2012.
ING Vysya Bank fell 2.15% as the stock turned ex-dividend for a dividend of Rs 4 per share for the financial year ended March 2012.
Engineering and construction major L&T declined 3.92% on profit taking after recent strong gains. The stock was the top loser from the Sensex pack. Last week, L&T Shipbuilding -- a subsidiary of L&T -- bagged orders valued at Rs 483 crore for four specialized commercial vessels in Q1 June 2012. L&T also announced last week that its construction division bagged new orders worth Rs 2410 crore across various businesses in Q1 June 2012.
Among other capital goods stocks, Siemens, Punj Lloyd, BEML, Bhel, and Crompton Greaves shed by between 0.19% to 4.48%.
Realty stocks reversed initial gains as investors reduced bets on possible interest rate cuts by the central bank after the latest data showed inflation accelerating in May 2012. Purchases of both residential and commercial property are largely driven by finance. D B Realty, Unitech and HDIL fell by between 2.35% to 5.7%.
Real estate major DLF declined 2.2%, with the stock extending Wednesday`s 0.89% losses. The company on Tuesday said its wholly-owned subsidiary, DLF Hotel Holdings, has divested its entire shareholding in Adone Hotels and Hospitality (Adone) for Rs 567 crore. DLF said that the transaction is in line with its stated objective of divesting its non-strategic assets.
Some FMCG stocks rose as the government raised the minimum support prices of various kharif (June-October) crops 2012 in the range of 15.3% to 53.1%. FMCG firms derive substantial sales from rural India. ITC, Marico, and Nestle India rose by between 0.29% to 1.56%.
FMCG major Hindustan Unilever was down 1.15% to Rs 440.75. The stock reversed direction after hitting a record high of Rs 449.30 today.
Fertilizer stocks gave up initial gains after the Cabinet Committee on Economic Affairs (CCEA) reported deferred a decision on hike in urea prices. Chambal Fertilisers & Chemicals, Rashtriya Chemicals & Fertilisers, Tata Chemicals and GSFC shed by between 0.14% to 2.75%. Subsidised urea is currently sold at Rs 5,310 a tonne for agricultural use. The Department of Fertilisers has reportedly proposed a 10% rise in urea prices.
IT stocks were mixed. India`s second-largest software exporter by revenue Infosys gained 1.09%. Infosys today, 14 June 2012, said it has signed an initial agreement with the Israeli government to work on industrial research and development. The pact will create a framework for industrial cooperation between Infosys and Israeli companies in the technology areas of cloud, information security, sensors, analytics and sustainability, Infosys said.
Dansk Supermarked A/S, a leading retailer in the Nordics, has engaged Infosys as its strategic partner to transform its cross-channel commerce program, Infosys said in a release early this week. Through this engagement, Dansk Supermarked A/S which has over 1,300 stores across Denmark, Sweden, Germany and Poland will provide its consumers a seamless and convenient cross-channel shopping experience, Infosys said.
Infosys was selected by Dansk Supermarked A/S for its capabilities in delivering end-to-end digital commerce programs for global retailers, Infosys said. This transformation program will start with Bilka.dk, one of Dansk Supermarked`s store chains and is expected to help increase Bilka.dk`s sales to 2.4 Billion Danish kroner by 2016, Infosys said.
India`s largest IT company by revenue Tata Consultancy Services (TCS) declined 0.09%.
India`s third largest software services exporter by revenue, Wipro, declined 0.4%. The company said before market hours today Wipro Technologies, the global information technology, consulting and outsourcing business of Wipro, has been chosen by Australia based MMG, a mid-tier global resources company as its strategic partner to define and deliver MMG`s integrated business management program over a period of three years.
Metal stocks reversed initial gains. Sail, Jindal Steel & Power Tata Steel, JSW Steel, Bhushan Steel and Hindustan Zinc fell by between 0.68% to 4%. But, Sterlite Industries rose 0.15%.
Hindalco Industries fell 1.8%. The company will announce its audited consolidated results for the year ended 31 March 2012 on 27 June 2012.
Cement stocks were mixed after recent gains triggered by Prime Minister`s thrust on infrastructure sector. ACC and UltraTech Cements gained by between 0.67% to 0.78%. Ambuja Cements, Jaiprakash Associates and India Cements fell by between 0.09% to 4.07%.
Prime Minister Manmohan Singh last week laid out ambitious infrastructure development plans for the current fiscal year, in an effort to counter criticism over a perceived policy paralysis that has led India into its worst slowdown in nearly a decade.
Reliance Communications (RCom) fell 1.53% after Wednesday`s 2.62% gains. The company said during market hours on Wednesday that the Singapore Exchange Securities Trading has granted an eligibility to list to a Singapore business trust of the firm subject to the requisite conditions being satisfied. RCom had earlier announced that it was evaluating a potential initial public offering and listing in Singapore of its subsea telecommunications infrastructure network business, through a Singapore business trust.
Lanco Infratech clocked highest volume of 55.59 lakh shares on BSE. Kingfisher Airlines (47.30 lakh shares), Sybly Industries (44.54 lakh shares), HDIL (38.36 lakh shares) and SpiceJet (35.72 lakh shares) were the other volume toppers in that order.
SBI clocked highest turnover of Rs 161.11 crore on BSE. L&T (Rs 72.56 crore), Tata Motors (Rs 48.53 crore), Infosys (Rs 44.39 crore) and ICICI Bank (Rs 34.85 crore) were the other turnover toppers in that order.
The country`s crucial monsoon rains were 50% below average in the week to June 13, the weather office said on Thursday, a second week of scant rain and confirmation the four-month season has got off to a slow start. The India Meteorological Department (IMD) has forecast average rainfall for the whole June to September season -- the third year in a row to avoid a drought. The monsoon rains are important for farm output and economic growth as about 55% of the south Asian nation`s arable land is rain-fed, and the farm sector accounts for about 15% of a nearly $2-trillion economy.
India`s exports fell 4.16% to $25.7 billion in May 2012 over May 2011, Anup Pujari, director general of foreign trade told reporters on Thursday, citing provisional data that showed the trade deficit widening over the previous month. Imports declined an annual 7.36% to $41.9 billion, leaving a trade deficit of $16.3 billion for the month.
The Congress party on Thursday said Manmohan Singh will continue as the country`s Prime Minister until 2014 when next general elections are due. The party said it cannot spare Singh for the President`s post. Samjwadi Party and Trinamool Congress had on Wednesday suggested three names for President`s post -- former President APJ Abdul Kalam, Prime Minister Manmohan Singh and former Lok Sabha speaker Somnath Chatterjee.
Data on first installment of the advance tax payment due tomorrow, 15 June 2012 could provide cues on Q1 June 2012 corporate earnings.
Housing finance major HDFC announces Q1 June 2012 results on 11 July 2012.
Finance Minister Pranab Mukherjee on Monday, 11 June 2012, said the government hopes to introduce a bill for a direct tax code (DTC) during the monsoon session of parliament. The monsoon session usually runs from July to August. The code, which will replace the existing Indian Income Tax Act 1961, intends to cut tax rates to bring more people and companies under the tax net, phase out profit-linked exemptions for companies and replace them with investment-linked incentives.
Global rating agency Standard & Poor`s on Monday warned that India could become the first BRIC nation to lose its investment-grade rating if the South Asian country doesn`t revive its growth and push the pedal on reforms. Setbacks or reversals in India`s path toward a more liberal economy could hurt its long-term growth prospects and therefore its credit quality, Joydeep Mukherji, S&P`s credit analyst, stated in a report titled `Will India Be the first BRIC Fallen Angel?`. S&P currently rates India BBB-minus, just one notch above junk. The other three BRIC group of emerging nations--Brazil, Russia and China--are also rated investment-grade.
S&P had in April this year cut the outlook on India`s long-term credit rating to negative from stable and warned that the country could lose its investment-grade status if the government fails to bring its fiscal house in order. Data released on 31 May 2012 showed India`s economic growth slowed to its weakest pace in nine years in the January-March quarter, when it expanded 5.3% from a year earlier. For the fiscal year ended March 31, the economy grew 6.5%, below the 6.9% expansion the government had projected.
US Treasury Secretary Timothy Geithner will meet India`s finance minister in Delhi in June to strengthen economic and financial ties between the two countries, the US Treasury Department said early this week.
European shares edged lower on Thursday after Spain`s 10-year bond yields hit a euro-era record of 7%. Key benchmark indices in UK, France and Germany were down by 0.42% to 0.5%.
Italian borrowing costs rose in keenly-watched auctions on Thursday, with yields on 3-year bonds surging to the highest level in six months. Yields for the 3-year bond rose to 5.30% from 3.91% at a previous auction, while yields on bonds maturing in 2019 rose to 6.10% from 5.21% previously. In total the government succeeded in selling its maximum targeted 4.5 billion euros ($5.7 billion). In the secondary market, yields on 10-year Italian government bonds rose to 6.30% from 6.22% at Wednesday`s close.
Independent auditors examining Spanish lenders have estimated that the sector`s capital needs are about euro 60 billion ($75 billion), according to a Spanish daily ABC. Bankia SA, Novalgalicia Banco and CatalunyaCaixa will absorb about 66% of that total, the newspaper said. The rest of the total will be divided among five lenders. Banco Santander SA, BBVA SA, La Caixa, Bankinter SA and Kutxabank are the only lenders that will not need any aid, the newspaper said.
Moody`s Investors Service on Wednesday downgraded Spain`s sovereign-debt rating to Baa3 from A3, while placing the country on review for a possible further downgrade. Moody`s said it made the move following last weekend`s announcement that Spain will borrow up to 100 billion euros ($126 billion) to support its banking sector, coupled with the country`s limited financial-market access and increasingly vulnerable economy. The downgrade by Moody`s followed a similar move from Egan-Jones, which lowered its rating on Spain to CCC+ from B on that day. On Wednesday, yields on Spain`s 10-year note pushed past 6.75%.
Spain on Saturday, 9 June 2012, agreed to receive euro 100 billion ($125 billion) in financial aid for its struggling banking sector from the European Union. The request made Spain the fourth euro-zone country to require international assistance.
Moody`s Investors Service cut its credit ratings on Cyprus` sovereign debt by two notches on Wednesday, citing rising risks of a Greek exit from the euro currency and an already strained fiscal position. The speculative grade credit for the European Union member, which is third-smallest economy in the euro zone, is also on review for further downgrade, Moody`s said. Cyprus and its banks have a high exposure to Greece.
Greek voters return to the polls on 17 June 2012 after the splintered results of a May 6 parliamentary election left no party able to put together a government. The poll could potentially decide whether the nation will remain in the euro zone.
A key summit of the European Union is scheduled on 28 and 29 June 2012 to discuss the ongoing European debt crisis.
Most Asian shares staged a retreat on Thursday, with Spain under the threat of more downgrades, and weekend elections in Greece looming closer. Key benchmark indices in China, Hong Kong, Japan, Taiwan, Singapore and Indonesia fell by between 0.19% to 1.78%. South Korea`s Kospi rose 0.65%.
Trading in US index futures indicated that the Dow could gain 18 points at the opening bell on Thursday, 14 June 2012. US markets fell Wednesday, with investors parsing weaker retail-sales data and increasingly nervous ahead of elections in Greece on Sunday that may lead to the country exiting the European currency union.
The Federal Open Market Committee holds its next policy meeting on June 19-20. It remains to be seen if the Fed extends Operation Twist -- a plan expiring this month that lengthens the average duration of bonds in the Fed`s portfolio. The Fed launched Operation Twist in September 2011 to lower long-term borrowing costs.
The Organization of Petroleum Exporting Countries (OPEC), which supplies about 40% of the world`s crude, may maintain its official daily production ceiling at 30 million barrels a day when the group meets in Vienna today, 14 June 2012. On Tuesday, Saudi Arabia`s Oil Minister Ali Naimi said his country wouldn`t ask for OPEC to increase its production levels at this week`s meeting
Nigeria`s oil minister said Wednesday she expects currently volatile prices to settle in the next six months. Diezani Alison-Madueke said volatility in various markets had affected oil prices.
The International Energy Agency on Wednesday said global oil supply rose slightly in May 2012.
The 7th Group of 20 industrial and developing nations summit is scheduled to be held in Los Cabos, Mexico on 18 and 19 June 2012 to discuss current affairs such as poverty, youth unemployment and environmental issues. The leaders are also likely to discuss the ongoing European debt crisis.
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