Key benchmark indices extended intraday losses in early afternoon trade as Asian stocks fell on concerns about the region`s slowing growth after the Bank of Korea delivered a surprise 0.25-percentage point cut to its benchmark rate and after official data from Australia showed the country`s seasonally-adjusted unemployment rate increased 0.1 percentage points to 5.2% in June. The market breadth was weak. The barometer index, BSE Sensex, was down 219.97 points or 1.26%, up about 25 points from the day`s low and off close to 60 points from the day`s high.
IT major Infosys tumbled after the company revised downwards both earnings and revenue growth guidance for the year ending March 2013 (FY 2013) in dollar terms after reporting disappointing Q1 June 2012 results before trading hours. Infosys` guidance weighed on shares of two other IT majors -- Wipro and TCS. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight and cigarette major ITC also declined.
Airline stocks rose on reports government is working on a comprehensive package for the airline industry after the presidential polls. Construction shares declined after Union Minister for Road Transport & Highways Dr. C.P. Joshi on Wednesday, 11 July 2012, said the performance of road sector in Q1 June 2012 was disappointing. Telecom stocks fell for the second straight day ahead of a meeting of the empowered group of ministers on spectrum pricing which is scheduled today, 12 July 2012, under its new head -- Home Minister P Chidambaram.
Weak Q1 June 2012 results and downward revision in both earnings and revenue growth guidance for the year ending March 2013 (FY 2013) in dollar terms from IT major Infosys dragged key benchmark indices to their lowest level in nearly two weeks at the onset of the trading session. A bout of volatility was witnessed as key benchmark indices cut losses after hitting fresh intraday lows in morning trade. Volatility continued as the market weakened once again after staging intraday recovery in mid-morning trade. The market extended losses in early afternoon trade.
Asian stocks fell on Thursday as a surprise rate cut in South Korea, lack of central bank policy action from Japan, and weak jobs data from Australia kept investors on edge a day before the release of a likely downbeat report on Chinese growth.
At 12:20 IST, the BSE Sensex was down 219.97 points or 1.26% to 17,269.23. The index declined 245.05 points at the day`s low of 17,244.09 in early trade, its lowest level since 29 June 2012. The index fell 159.68 points at the day`s high of 17,329.46 in early trade.
The S&P CNX Nifty was down 65.40 points or 1.23% to 5,240.90. The index hit a low of 5,234.30 in intraday trade, its lowest level since 29 June 2012. The index hit a high of 5,261.75 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,483 shares fell and 868 shares rose. A total of 108 shares were unchanged.
From the 30-share Sensex pack, 22 stocks fell and the rest of them rose. M&M, NTPC and Sterlite Industries shed by between 1.22% to 1.56%. Hindustan Unilever, ONGC and Hero MotoCorp rose by between 0.59% to 1.2%.
India`s second largest software services exporter by revenues, Infosys, tumbled 9.24% to Rs 2239.40 after company announced before market hours today that its consolidated net profit as per International Financial Reporting Standards (IFRS) declined 1.2% to Rs 2289 crore on 8.6% growth in revenue to Rs 9616 crore in Q1 June 2012 over Q4 March 2012.
In dollar terms, the consolidated net profit declined 10.2% to $416 million on 1.1% decline in revenue to $1.752 billion in Q1 June 2012 over Q4 March 2012. The revenue in dollar terms fell short of Infosys` own guidance of revenue of between $1.758 billion to $1.776 billion for the quarter. Non-annualised earnings per American depository receipt (EPADS) matched the company`s own projection of $0.73.
In dollar terms, the company has revised downwards both earnings and revenue growth guidance for the year ending March 2013 (FY 2013). Infosys has forecast 5% growth in revenue to at least $7.343 billion for FY 2013, lower than its April guidance of 8% to 10% growth. The company has projected 1% growth in EPADS to at least $3.03 for FY 2013, lower than its April guidance of 4% to 5.7% growth.
Thanks to deprecation of the rupee against the dollar, Infosys has revised upwards both earnings and revenue growth guidance in Indian currency for the year ending March 2013 (FY 2013). Infosys has forecast 19.7% growth in revenue to at least Rs 40364 crore for FY 2013, higher than its April guidance of 13.9% to 16% growth. The company has projected 14.4% growth in EPS to at least Rs 166.46 for FY 2013, higher that its April guidance of 9.1% to 10.9% growth.
Infosys appears to have suspended quarterly guidance -- the company has not issued guidance for Q2 September 2012.
Infosys CEO and Managing Director S. D. Shibulal said, "Our focus on Infosys 3.0 and building tomorrow`s enterprise coupled with disciplined execution will help us deliver high-quality growth, despite challenges seen in the global economic situation resulting in slower IT spends by large corporations."
Member of Infosys board and Chief Financial Officer V. Balakrishnan said, "Global currency volatility continues to be a big challenge for the industry. We are making the right investments, balancing the short-term needs with long-term opportunities."
Infosys` guidance weighed on shares of other IT stocks. India`s largest software services exporter by revenues, Tata Consultancy Services (TCS), declined 2.29%. The company announces Q1 results today, 12 July 2012. India`s third largest software services exporter by revenue, Wipro, dropped 4.2%. The company announces Q1 results on 24 July 2012.
Index heavyweight Reliance Industries (RIL) fell 0.23% to Rs 724.05. The stock was volatile. The scrip hit a high of Rs 729.50 and a low of Rs 722 so far during the day. The company last week said it has selected Technip as a technology supplier and engineering contractor to implement its Refinery Off-Gas Cracker (ROGC) project. This is part of the expansion project being executed at RIL`s Jamnagar refinery and petrochemical complex in Gujarat. The ROGC plant will be amongst the largest ethylene crackers in the world and will be using refinery off-gas as feedstock, RIL said. The products from the plant will be utilised for the new downstream petrochemical plants being built at Jamnagar, RIL said.
RIL has bought back 3 crore shares for Rs 2144.73 crore till 22 June 2012 under its ongoing share buyback program. RIL has set a maximum buyback price of Rs 870 for share buyback. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. Last month, RIL chairman Mukesh Ambani said at the company`s Annual General Meeting in Mumbai that the company`s buyback program represents a 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.
Index heavyweight and cigarette major ITC fell 0.24%.
Castrol India rose 1.72%, with the stock extending Wednesday`s 1.52% gains. The company said during market hours on Wednesday its board of directors will consider proposal for bonus share issue on 16 July 2012.
Airline stocks rose on reports government is working on a comprehensive package for the airline industry after the presidential polls. This will also include relaxation of norms for Foreign Direct Investment (FDI) in domestic airlines. Jet Airways, Kingfisher Airlines and SpiceJet rose by between 0.51% to 2.64%. The Presidential election will be over with the counting of votes, scheduled for July 21. Currently, foreign airlines are not allowed to pick up equity in aviation companies while foreign investors and financial institutions can hold up to a 49% stake.
Construction shares declined after Union Minister for Road Transport & Highways Dr. C.P. Joshi on Wednesday, 11 July 2012, said the performance of road sector in Q1 June 2012 was disappointing. IVRCL, NCC, Valecha Engineering, Patel Engineering, Gammon India, IRB Infrastructure Developers, and L&T fell by between 0.68% to 6.67%.
Dr. Joshi said road projects bid out in the first quarter have not received the kind of response the ministry got last year, with some project getting no bidders at all. One of the reasons for this may be the tightening of the purse-strings from the lenders for funding of road projects. Dr. Joshi said the government is keen to ensure that road sector achieves success and that his ministry can not afford to take any chances. Buoyed by the success achieved in 2011-12, the Ministry of Road Transport & Highway has pegged the targets for the road sector to achieve 9,500 Kms of award and 3,500 Kms of completion 20012-13. A record length of 7957 Kms of roads was awarded for strengthening/up gradation and improvement and over 2,200 Kms were completed during the year 2011-12.
Telecom stocks fell for the second straight day ahead of a meeting of the empowered group of ministers on spectrum pricing which is scheduled today, 12 July 2012, under its new head -- Home Minister P Chidambaram. MTNL, Tata Teleservices (Maharashtra), Reliance Communications, Idea Celluar and Bharti Airtel dropped by between 1.26% to 2.62%.
On April 23, the Telecom Regulatory Authority of India (Trai) had recommended a base price of Rs 3622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the Telecom Minister. According to Trai recommendations, a minimum of 5 Mhz should be allotted which would mean that a pan-India spectrum in 1800 MHz band will cost Rs 18000 crore. The reserve price is five times the base price of Rs 3500 crore for 3G auction. However, telecom operators have been opposing the Trai recommendations, saying that it will hurt investment in the sector further and expansion of the industry in rural areas.
Monsoon rains have covered the entire country but the amount is unlikely to improve until next week, with overall rainfall 23% less than a long-term average, L.S. Rathore, director-general of the state-run India Meteorological Department (IMD) said on Wednesday. There is a strong chance of an El Nino weather event this season and it will likely emerge in August 2012, he told reporters. El Ninos are usually associated with lower rainfall. Lower rainfall this year is intensifying concerns that output of summer-sown crops such as oilseeds, sugar and pulses will fall compared with record-high levels in the last couple of years, hitting farm income. Monsoon rainfall has been deficient in 62% of the country`s crop area so far.
Annual monsoon rainfall has improved in the past 10 days, speeding up sowing of key summer-sown crops like rice and cotton, Agriculture Minister Sharad Pawar said on Wednesday, 11 July 2012. Poor rainfall in cane and pulses growing Maharashtra and Karnataka is cause for concern, he said. Maharashtra is the top sugar producer and second-biggest producer of soybeans, while Karnataka is the No. 1 coffee producer. Sowing of crops other than coarse grains has been progressing well, Mr. Pawar said. With monsoon rains advancing to all regions, sowing of rice--the main summer staple--is expected to pick up in the next few weeks, the minister said.
The monsoon rains--which make up around 70% of India`s annual rainfall--are crucial to the nation`s agriculture sector and broader economy. More than 60% of the country`s farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops.
Corporate affairs minister Veerappa Moily said in a newspaper interview published on Wednesday, 11 July 2012, that the government is hopeful of the passage of the pension bill in the monsoon session of parliament. The monsoon session of parliament begins on 7 August 2012.
Prime Minister Dr. Manmohan Singh on Wednesday, 11 July 2012, said he had very fruitful discussions with the Prime Minister of Singapore Lee Hsien Loong who is on a visit to India. Singapore is not only India`s foremost trading partner in ASEAN, but also a major source of FDI inflows into India, Dr. Singh said. Dr. Singh and Lee have agreed to expedite the conclusion of the ongoing second Review of the Comprehensive Economic Cooperation Agreement that would further facilitate trade in goods and services and investment between the two countries.
Dr. Singh said in a statement that he has assured Lee of India`s commitment to reinforce its status as an investment-friendly country and expressed hope that Singapore companies would look at India as a valued investment destination in the current scenario.
An India-Mauritius joint panel will in August discuss a series of proposals to review the double taxation avoidance treaty between the two nations, Mauritius Foreign Minister Arvin Boolell said on Thursday, 5 July 2012. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation.
Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. India and Mauritius will discuss the renegotiation of the tax pact between 22-24 August in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India`s tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty.
Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year`s national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured.
Draft guidelines issued by Indian government recently for implementing the controversial anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities.
Prime Minister Dr Manmohan Singh said in a newspaper interview last week that he has identified controlling the fiscal deficit, achieving clarity on tax matters, reviving the mutual funds and insurance industries, clearing a backlog of foreign investment proposals and boosting infrastructure as his focus areas in the short term. Singh said there will be no arbitrariness in tax matters. The statement assumes significance in the context of a raging controversy over the Income Tax amendment to re-open tax demands with retrospective effect from companies like Vodafone over acquisition of companies having operations in India but registered abroad to avoid taxes.
Singh last month said he is chalking out plan for the country`s economic revival. Singh last month took additional charge at the finance ministry after Pranab Mukherjee resigned as finance minister on 26 June 2012 to contest the presidential polls scheduled on 19 July 2012. Mr. Mukherjee is the leading contender in the July 19 presidential election, having been nominated by the Congress party-led United Progressive Alliance government for the largely ceremonial post.
The next major trigger for the stock market is Q1 June 2012 corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the result which could cause revision in their future earnings forecast of the company for the current year or the next year. A deceleration in top line growth of India Inc amid economic slowdown and slowdown in investment cycle will weigh on bottom line growth in Q1 June 2012 as the core operating profit margin could be negatively impacted by deceleration in top line growth.
HDFC Bank declares its Q1 results tomorrow, 13 July 2012. Axis Bank announces Q1 results on 17 July 2012. Bajaj Auto reports Q1 results on 18 July 2012. Kotak Mahindra Bank, Hero MotoCorp and Dr Reddy`s Laboratories unveil Q1 results on 19 July 2012. Asian Paints announces Q1 results on 20 July 2012.
Hindustan Unilever, L&T and Cairn India unveil Q1 results on 23 July 2012. Wipro announces Q1 results on 24 July 2012. Bhel announces Q1 results on 26 July 2012. Ambuja Cements announces Q2 June 2012 results on the same day. ICICI Bank announces Q1 results on 27 July 2012. Maruti Suzuki India announces Q1 results on 28 July 2012. Mahindra & Mahindra announces Q1 results on 8 August 2012. Ranbaxy Laboratories announces Q2 June 2012 results on 9 August 2012. BPCL announces Q1 results on 10 August 2012. Hindalco Industries announces Q1 results on 14 August 2012.
Industrial production grew at a higher-than-expected pace of 2.4% in May 2012 driven by manufacturing output, government data showed on Thursday, 12 July 2012. Industrial production declined 0.9% in April 2012, with the government revising the figure downward from a provisional rise of 0.12% for the month. The government slightly revised upwards industrial production growth for February 2012 to 4.29% from 4.11% earlier.
Inflation based on the wholesale price index (WPI) is seen rising further to 7.62% in June 2012 from 7.55% in May 2012, as per the median estimate of a poll of economists carried out by Capital Market. The CSO will announce data on WPI inflation for June 2012 at 11:30 IST on 16 July 2012.
The Reserve Bank of India (RBI) announces first quarter review of the Monetary Policy 2012-13 on 31 July 2012. The RBI unexpectedly left its key lending rate unchanged at its last meeting in June 2012, citing inflationary concerns.
Asian stocks fell on Thursday as a surprise rate cut in South Korea, lack of central bank policy action from Japan, and weak jobs data from Australia kept investors on edge a day before the release of a likely downbeat report on Chinese growth. Key benchmark indices in Hong Kong, Indonesia, Japan, Taiwan, South Korea and Singapore fell by between 0.27% to 2.24%. China`s Shanghai Composite rose 0.75%.
Chinese Premier Wen Jiabao said on Tuesday that the government`s top priority was now stabilizing economic growth rather than long-term restructuring, with policies to include business-tax cuts and more targeted investment, according to state-run media reports.
China is due to release Q2 June 2012 GDP growth data, along with industrial output and other June metrics, tomorrow, 13 July 2012.
The Bank of Japan left ultra-low interest rates unchanged at its policy meeting on Thursday. The BoJ reaffirmed its commitment to steadily increasing the size of its asset purchase program, but didn`t announce any immediate increase in the overall size of the program.
The Bank of Korea on Thursday unexpectedly cut borrowing costs for the first time in more than three years, joining an international push for monetary stimulus as Europe`s debt crisis threatens to undermine global growth. Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 3% the first cut since February 2009, the central bank said in a statement in Seoul today.
Australian employers unexpectedly reduced payrolls in June and the jobless rate rose, increasing speculation of a fifth interest-rate cut by the central bank in nine months as Europe`s clouded outlook restrains global growth. The number of people employed fell by 27,000, led by a loss of full-time jobs and almost erasing a revised 27,800 job gain in May, the statistics bureau said in Sydney today. The jobless rate rose for a second month, to 5.2% from 5.1%.
The World Bank on Thursday revised down its 2013 Indonesia growth forecast to 6.4% from 6.5% a month ago, but said a severe global downturn could send growth tumbling even further to 4%. Stefan Koeberle, the Indonesia country director for the World Bank, said that while Indonesia still enjoys robust growth compared to other emerging economies--thanks to the strength of domestic consumption and investment--it will not be spared the impact of a global downturn, especially if global commodity prices and demand from economies such as China were to be adversely affected. Shubham Chaudhuri, Indonesia lead economist of the World Bank, also reiterated the bank`s estimate for Indonesian growth this year of 6.0%. Both were speaking at a joint press conference with the Indonesian Investment Board, known as BKPM.
In its June global outlook summary the World Bank estimated that Indonesia would grow 6.5% in 2013, lower than the 6.8%-7.2% expansion suggested by the Indonesian finance minister in May 2012. Indonesia`s economy grew 6.5% last year--its fastest since the 1997-1998 Asian crisis--with its vast domestic market helping shield it from the economic turmoil battering its more export-oriented neighbors.
The Asian Development Bank said in a report released today, 12 July 2012, that weaker global demand is helping ease international oil and food prices in Asia, which is reducing inflationary pressures in the region. The bank trimmed its inflation forecast for developing Asia for this year to 4.4% from 4.6% previously. It cut its inflation forecast for China this year to 3.7% from 4% previously.
Trading in US index futures indicated that the Dow could fall 43 points at the opening bell on Thursday, 12 July 2012. Lack of clarity from the US Federal Reserve on future easing measures sent US stocks lower on Wednesday. A few Federal Reserve policy makers said the central bank will probably need to take more action to boost the labor market and meet its inflation target, according to minutes of their June meeting.
"A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee`s goal," according to the record of the Federal Open Market Committee`s June 19-20 gathering released on Wednesday. Two participants said additional bond purchases are appropriate, while two others said they would be warranted in the absence of "satisfactory progress" in cutting unemployment or if downside risks increase. FOMC members also said strains in global markets stemming from Europe`s debt crisis had increased since their April meeting, and that US fiscal policy would be more contractionary than anticipated.
Italian government tests sentiment in debt markets with a bond sale scheduled tomorrow, 13 July 2012.
Powered by Capital Market - Live News