A bout of volatility was witnessed as key benchmark indices weakened once again in early afternoon trade after staging a strong intraday recovery in mid-morning trade. The market breadth turned negative from positive in early afternoon trade. The barometer index, BSE Sensex, was down 139.71 points or 0.82%, off 91.25 points from the day`s high and up 37 points from the day`s low. Weakness in Asian stocks dampened sentiment. Index heavyweight Reliance Industries (RIL) extended Thursday`s losses triggered by Canada`s Niko Resources sharply cutting the reserves estimate at the KG D6 gas blocks, off India`s east coast, where the two companies -- RIL and Niko are partners.
Index heavyweight and cigarette major ITC reversed direction after striking record high at the onset of the trading session. Auto stocks were mixed. Telecom stocks fell across the board as the much-awaited meeting of the high-power ministerial panel on auction of telecom spectrum on Thursday was deferred.
A weak opening took the barometer index, BSE Sensex, below the psychological 17,000 mark. Weakness on the bourses continued in morning trade. The market trimmed losses in mid-morning trade. A bout of volatility was witnessed as key benchmark indices weakened once again in early afternoon trade after staging a strong intraday recovery in mid-morning trade.
Asian markets declined on Friday, 22 June 2012, as signs of a deepening global economic slowdown and Moody`s downgrade 15 of the world`s biggest banks, wiped away investor appetite for risk.
At 12:15 IST, the BSE Sensex was down 139.71 points or 0.82% to 16,892.85. The index fell 176.71 points at the day`s low of 16,855.85 at the onset of the trading session. The index lost 48.46 points at the day`s high of 16,984.10 in mid-morning trade.
The S&P CNX Nifty was down 50.10 points or 0.97% to 5,114.90. The index hit a low of 5,097.30 and a high of 5,148.15 in intraday trade.
The market breadth, indicating the overall health of the market, turned negative from positive in early afternoon trade. On BSE, 1,323 shares declined and 1,114 shares advanced. A total of 114 shares were unchanged.
The total turnover on BSE amounted to Rs 967 crore by 12:25 IST compared with Rs 696 crore by 11:25 IST
Among the 30-share Sensex pack, 23 declined while the rest gained. Cipla (up 1.13%), TCS (up 0.47%) and ONGC (up 0.24%) edged higher from the Sensex pack. L&T (down 1.58%), ICICI Bank (down 1.24%) and Coal India (down 1.18%) edged lower from the Sensex pack.
Index heavyweight Reliance Industries (RIL) fell 1.50% to Rs 707.80. The stock extended Thursday`s 2.58% slide triggered by Canada`s Niko Resources sharply cutting the reserves estimate at the KG D6 gas blocks, off India`s east coast, where the two companies -- RIL and Niko are partners. The Canadian oil and gas producer late Wednesday estimated that total proved plus probable reserves at the KG D6 block, as of March 31, had decreased to 1.93 trillion cubic feet. The block had been estimated to hold more than 9 trillion cubic feet (tcf) of gas. Niko holds a 10% stake in the D6 block. RIL holds 60%, while BP Plc has a 30% stake.
RIL chairman Mukesh Ambani said at the company`s Annual General Meeting in Mumbai early this month 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.
Auto stocks were mixed. India`s largest utility vehicles maker Mahindra & Mahindra (M&M) rose 0.15%. The company early this month 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 8 June 2012.
Small-car major Maruti Suzuki India gained 1.04% to Rs 1101.80 and was the top gainer from the Sensex pack. The company early this month 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.
India`s largest truck maker by sales Tata Motors shed 1.11%. After market hours on Thursday, 21 June 2012, the company said that P.M. Telang, Managing Director of Tata Motors` India Operations retired from the company on Thursday 21 June 2012 on attaining the age of superannuation and stepped down from the board of the company. Tata Motors said it has appointed two new Executive Directors. Ravindra Pisharody, President - Commercial Vehicles Business Unit, has been appointed Executive Director (Commercial Vehicles). Satish Borwankar, Senior Vice-President (Manufacturing Operations - Commercial Vehicles Business Unit), has been appointed Executive Director - Quality, Vendor Development & Strategic Sourcing for Tata Motors.
Tata Motors has decided to close its truck plant in Pune for three days from June 22 to June 24 to ensure alignment of production with demand.
Tata Motors on Friday, 15 June 2012, intimated to the Bombay Stock Exchange (BSE) that Chairman Ratan N Tata purchased additional 4.25 lakh equity shares of Tata Motors from open market purchases on Thursday, 14 June 2012, for about Rs 9.94 crore. After the latest acquisition, Ratan N Tata now holds a total of 13.61 lakh ordinary equity shares of Tata Motors and 1.09 lakh `A` Ordinary shares of Tata Motors, aggregating to 0.05% of voting rights of Tata Motors.
Tata Motors on Friday, 15 June 2012, said sales of its luxury vehicles -- Jaguar Land Rover -- jumped 35% to 30,094 in May 2012 over May 2011. Tata Motors derives almost two-third of its revenue from its British unit Jaguar Land Rover. Tata Motors` global vehicle sales rose 12% to 96,089 units in May 2012 over May 2011. The company`s overall global passenger vehicles sales rose 21% to 51,064 units in May 2012 over May 2011. Commercial vehicle sales rose 3% to 45,025 in May 2012 over May 2011
Shares of two-wheeler makers advanced on hopes good monsoon rains this year will boost rural demand. The India Meteorological Department (IMD) today, 22 June 2012, maintained its earlier forecast of normal monsoon this year. IMD said monsoon rains in 2012 would be 96% of the long-term average overall, down from its April forecast of 99%. A normal or average monsoon means rainfall between 96-104 percent of a 50-year average of 89 centimetres in total during the four-month season from June, according to IMD`s classification.
The weather office forecast normal rains in July and August, key months for planting and maturing of crops. July rains this year are likely to be 98 percent of the long period average, while the rainfall in August is forecast to be 96 percent of the average.
India`s second largest motorcycle maker by sales Bajaj Auto rose 0.60%. 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) rose 0.88%. 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).
Telecom stocks fell across the board as the much-awaited meeting of the high-power ministerial panel on auction of telecom spectrum on Thursday was reportedly deferred indefinitely. Bharti Airtel (down 1.36%), Reliance Communications (down 2.96%), Idea Cellular (down 2.06%), Tata Teleservices (Maharashtra) (down 1.04%) and MTNL (down 1.53%) declined.
Index heavyweight and cigarette major ITC shed 0.80% to Rs 249.35. The stock revered direction after hitting a record high of Rs 252.90 in intraday trade today, 22 June 2012.
India`s largest commercial bank in terms of branch network State Bank of India (SBI) declined 0.78%. As per recent reports, the bank has slashed interest rates on term loans, agriculture loans and loans to small and medium enterprises (SMEs) by 50-350 basis points (bps), or 0.5%-3.5% with effect from 1 June 2012. SBI has kept the base rate unchanged at 10%. Meanwhile, the bank holds its 57th annual general meeting (AGM) today, 22 June 2012.
Oriental Bank of Commerce fell 0.29%. During market hours today, 22 June 2012, the bank said it has reduced interest rate on Rupee Export Credit by 25 basis points effective from 1 July 2012.
The next major trigger for the market is Q1 June 2012 corporate earnings, which will start trickling from the second week of July 2012. HDFC announces Q1 results on 11 July 2012. Bajaj Auto reports Q1 results on 18 July 2012.
The Reserve Bank of India governor D Subbarao on Tuesday warned that inflation is above acceptable levels and he called on the government to do more to support the flagging economy after a controversial decision early this week to leave rates unchanged in the face of pressure for a cut. In his first comments since the rate meeting, Subbarao said it was critical that the RBI contained demand pressures while the government works on easing supply bottlenecks in the economy, particularly in food distribution.
Subbarao said there is "no new normal for inflation" in India, referring to unyielding price pressures that have plagued the economy for several months. The Reserve Bank of India`s "medium-term inflation goal is still 4%-5%," Subbarao said in a presentation on the central bank`s web site.
Prime Minister Manmohan Singh at the G20 Plenary Session on Monday, 18 June 2012, said that the Indian government is determined to create an environment that will boost investor sentiment and promote an atmosphere conducive to enterprise and creativity. He said that the government`s policies will be transparent, stable and designed to provide a level playing field to both domestic and foreign investors.
Singh said that the government is focusing heavily on infrastructure investment and it has set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks. Like other countries, we too allowed the fiscal deficit to expand after 2008 to impart a stimulus. We are now focussing on reversing the expansion. Singh said that the government is determined to take tough decisions, including on controlling subsidies
The prospect of change of guard at the finance ministry has raised expectations of possible kick-starting of economic reforms in the country. Market men expect that either C Rangarajan, chairman of the Prime Minister`s Economic Advisory Council, or P Chidambaram, Union home minister, will become the country`s next finance minister if Pranab Mukherjee moves on to become the nation`s next president after the upcoming presidential poll to be held next month. Election for the 13th President to succeed Pratibha Patil will be held on 19 July 2012. The counting of votes will be taken up on 22 July 2012, with the result to be out on the same day. Expectations are that if either Rangarajan or Chidambaram becomes the new finance minister, he would push through some economic reforms.
Media reports suggest that Prime Minister Manmohan Singh is likely to handle the finance portfolio until a cabinet reshuffle next month.
Recent media reports suggested that the government will raise prices of diesel and cooking gas shortly as part of broader policy measures that the government is planning to unveil to attract capital inflows and boost investor confidence. These measures are reportedly aimed at averting a possible sovereign downgrade to junk status by rating agencies and reviving faltering growth.
The BJP has decided to support P A Sangma for President of India against Pranab Mukherjee. The Congress-led United Progressive Alliance (UPA) coalition last week named Finance Minister Pranab Mukherjee as its nominee for the post of president in the upcoming presidential poll. Mukherjee is expected to step down as the country`s finance minister later this month.
Asian markets declined on Friday, 22 June 2012, as signs of a deepening global economic slowdown and Moody`s downgrade 15 of the world`s biggest banks, wiped away investor appetite for risk. Key benchmark indices in Singapore, Taiwan, South Korea, Hong Kong, Japan and Indonesia were down by 0.29% to 2.21%. The stock market in China was closed for a holiday.
Weak manufacturing reports from around the world and disappointing housing and labour market data in the United States overnight, have heightened fears of slowdown in the global economy
Adding to investor concerns, independent stress tests of Spanish banks revealed capital needs for financial institutions in an adverse scenario could be as high as 62 billion euro (78.8 billion).
Moody`s Investor Service on Thursday downgraded 15 global banks citing volatility and risks in capital markets.
China and Brazil have agreed a currency swap arrangement that enables each country to access up to $30 billion as part of efforts to build a financial buffer to help guard against a freeze up in global markets, according to reports on Thursday. Each country will be able to tap the other`s central bank for funds to help bolster reserves in the event of a crisis, according to newswire reports which cited Brazilian Finance Minister Guido Mantega as saying Thursday. The agreement was part of a 10-year accord also designed to promote two way investment and trade, reports said.
An initial reading of HSBC`s China manufacturing Purchasing Managers` Index on Thursday showed activity slowing in June from the previous month. HSBC China chief economist Hongbin Qu said the sharp fall in prices and moderation of new orders pointed to weak domestic demand. With external headwinds remaining strong, exports are likely to decelerate in the coming months, he said in a statement.
Trading in US index futures indicated that the Dow could gain 32 points at opening bell on Friday, 22 June 2012. US stocks tumbled on Thursday on mounting evidence that slowing manufacturing growth worldwide threatened corporate profits.
European Central Bank (ECB) Executive Board member Benoit Coeure said in newspaper interview published on Wednesday that ECB is likely to discuss lowering its main interest rate at its July 5 council meeting. Coeure`s comments are the clearest indication as yet that the ECB is willing to cut interest rates further in an attempt to stop the latest wave of volatility on the euro zone`s debt markets in the wake of Spain`s bank funding problems.
A key summit of the European Union is scheduled on 28 and 29 June 2012 to discuss the ongoing European debt crisis. At the upcoming EU summit, European officials will reportedly launch the long process of deeper integration within Europe, starting with a push for a banking union, with the aim of finalizing a broad plan by December 2012. European nations will take all necessary measures to safeguard the integrity and stability of the euro zone, improve the functioning of financial markets and break the feedback loop between sovereign debts and banks, according to the statement released at the end of the G20 summit in the Mexican resort of Los Cabos on 19 June 2012.
Italian prime minister Mario Monti has warned about the likely consequences of failure to reach a breakthrough on Europe`s debt problems at next week`s European Union leaders summit, according to a latest newspaper report. There would be greater "speculative attacks on individual countries, with harassment of the weaker countries," Monti said, according to the report. A plan to stem debt contagion though the region was an "absolutely necessary" outcome of the meeting, he said, the report stated.
Italian Prime Minister Mario Monti said Italy won`t ask for a bailout from the European Union, according to an interview published Friday in the German daily Sueddeutsche Zeitung. He noted that EU forecasters have pencilled in a budget deficit of 2% of gross domestic product for Italy this year, while Holland and France have projected rates above 4%. Mr. Monti said Italy would have a structural surplus next year of 0.6%. But he said "something isn`t right" when a euro zone country makes an enormous effort yet still has to pay high interest rates on its debt.
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