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Wednesday, February 18, 2015

BSE Small-Cap index up more than 1%
[Editor: Buy Jindal Saw Ltd at Rs.77--78, for short term targets of Rs.82-84. The price of crude oil has started to inch upwards, as was expected--in such circumstances, the SAW Pipe sector should do well. The scrip has already found a support around Rs.76-77 ranges and from today's movement it seems that this level will hold. During the Q3FY15, the profit of the company rose 23.74% to Rs.619.20 million from Rs.500.40 million  in the same quarter last year. Net sales for the December 2014, quarter  rose marginally by 3.97% to Rs.17,774.30 million, compared with Rs.17,096 million for the prior year period. Meanwhile, the DIIs have increased their stake in the company to 13.13% in the December 2014 quarter as compared to 11.94% in the September, 2014 quarter. Moreover, today recommendation came from a brokerage house to buy Jindal Steel and Power Ltd at Rs.156 for a target of Rs.162] 
February 18, 2015:  After a rangebound movement in mid-morning trade, key benchmark indices trimmed gains in early afternoon trade. The market breadth indicating the overall health of the market was positive. The barometer index, the S&P BSE Sensex, was currently up 127.67 points or 0.44% at 29,263.55. The BSE Small-Cap index was up 1.01%, outperforming the Sensex. Asian stocks edged higher amid speculation Greece will resolve its standoff with creditors.

Meanwhile, the yearly SBI Composite Index, a leading indicator for tracking primarily manufacturing activity in Indian economy, inched up to a 2-month high of 52.9 (moderate growth) in February 2015 from 52.1 (moderate growth) in January 2015.

Capital goods stocks rose. Shares of power generation companies were also in demand.

Earlier, Sensex hit its highest level in almost three weeks in mid-morning trade as the two key benchmark indices -- the Sensex and the 50-unit CNX Nifty -- extended initial gains.

Foreign portfolio investors sold shares worth a net Rs 182.80 crore during the previous trading session on Monday, 16 February 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 280.77 crore on Monday, 16 February 2015, as per provisional data. The stock market was closed yesterday, 17 February 2015, on account of Mahashivratri.

In overseas markets, Asian stocks edged higher amid speculation Greece will resolve its standoff with creditors. In the US, the S&P 500 eked out a small gain yesterday, 17 February 2015, to close at a record level for the second time this year, after reports emerged that Greece may ask for a six-month extension on its debt obligations.

In the foreign exchange market, the rupee edged lower against the dollar.

Brent crude oil futures edged lower amid oil supply glut. Nevertheless, global crude oil prices have bounced back over the past few days after a steep slide in prices over the past few months. The recent rebound in global crude oil prices will raise concerns pertaining to India's fiscal deficit, current account deficit and fuel price inflation. India imports about 80% of its crude oil requirements. On 15 February 2015, Indian Oil Corporation announced increase in petrol price by 82 paise per litre in Delhi (including state levies) and diesel price by 61 paise per litre.

At 12:19 IST, the S&P BSE Sensex was up 127.67 points or 0.44% at 29,263.55. The index jumped 200.20 points at the day's high of 29,336.08 in mid-morning trade, its highest level since 30 January 2015. The index fell 8.97 points at the day's low of 29,126.91 at the onset of trading session.

The CNX Nifty was up 29.90 points or 0.34% at 8,839.25. The index hit a high of 8,862.20 in intraday trade. The index hit a low of 8,808.90 in intraday trade.

The BSE Mid-Cap index was up 61.04 points or 0.57% at 10,799.03. The BSE Small-Cap index was up 113.26 points or 1.01% at 11,359.71. Both these indices outperformed the Sensex.

The market breadth indicating the overall health of the market was positive. On BSE, 1,504 shares advanced and 1,107 shares declined. A total of 93 shares were unchanged.

Capital goods stocks edged higher. Suzlon Energy (up 14.16%), Pipavav Defence and Offshore Engineering Company (up 13.17%), Punj Lloyd (up 7.42%), Bharat Electronics (up 5.34%), BEML (up 4.63%), Lakshmi Machine Works (up 1.93%), ALSTOM India (up 1.84%), SKF India (up 1.61%), Jindal Saw (up 1.44%), Praj Industries (up 1.01%), AIA Engineering (up 0.89%), ABB (up 0.45%), Havells India (up 0.17%) and Crompton Greaves (up 0.09%) edged higher.

Bharat Heavy Electricals (down 0.04%), Alstom T&D India (down 0.16%), Siemens (down 0.59%) and Thermax (down 0.89%) edged lower.

Index heavyweight and engineering and construction major Larsen & Toubro was up 1.33%.

Shares of power generation companies were in demand. GMR Infrastructure (up 2.46%), Tata Power (up 2.14%), Reliance Power (up 2.08%), NTPC (up 2.05%), Adani Power (up 1.68%), JSW Energy (up 1.38%), Reliance Infrastructure (up 1.03%), NHPC (up 0.97%) and Torrent Power (up 0.76%) edged higher.

Jaiprakash Power Ventures rose 8.08%. The company won the Amelia North coal block in Madhya Pradesh for Rs 712 per tonne, according to the results of e-Auction for Schedule II coal mines announced by the Ministry of Coal yesterday, 17 February 2015.

CESC fell 1.79%. The company said on Tuesday, 17 February 2015, that following an e-auction conducted by the Ministry of Coal, Government of India on 15 February 2015 and the results thereof since posted on the Ministry's website, CESC has submitted the closing bid of Rs 470 per metric tonne (MT) for Sarisatolli coal mine in the state of West Bengal. A formal letter to the company from the Ministry allocating the said mine is expected in due course, CESC said.

The coal ministry has started auctioning coal blocks after the Supreme Court in September last year cancelled the allocation of more than 200 coal mines allotted between 1993 and 2010 after ruling that they were arbitrary and illegal.

Sundaram Finance fell 0.13% to Rs 1,545. The company announced during trading hours that Sundaram Finance (SFL) and RSA Group, UK, (RSA) have reached an agreement whereby RSA has agreed to sell its entire 26% equity stake in Royal Sundaram Alliance Insurance Company (RS), to SFL, for a consideration of Rs 450 crore, subject to all regulatory approvals. Sundaram Finance currently holds 49.9% in RS. After the completion of the transaction, Sundaram Finance and its associates would hold 100% of the shareholding of RS.

RS, the first private sector non-life insurance company to be granted a licence, in the year 2000. RS is a leading player in the general insurance sector in India.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 62.255, compared with its close of 62.1575 during the previous trading session on Monday, 16 February 2015. The foreign exchange market was closed yesterday 17 February 2015, on account of Mahashivratri.

Brent crude oil futures edged lower amid oil supply glut. Brent for April settlement was off 35 cents at $62.18 a barrel. The contract had risen $1.13 a barrel, or 1.84% to settle at $62.53 a barrel during the previous trading session.

Meanwhile, the yearly SBI Composite Index, a leading indicator for tracking primarily manufacturing activity in Indian economy, inched up to a 2-month high of 52.9 (moderate growth) in February 2015 from 52.1 (moderate growth) in January 2015. In contrast, the monthly index slipped to 48.3 (low decline) in February 2015 from 52.1 (moderate growth) in January 2015. The sharp contraction in the month on month index may be attributed to less number of working days in February compared to January, according to Ecowrap which is an economics research publication from State Bank of India (SBI). According to Ecowrap, a revival in automobile sales, capital goods and consumer non-durables productions and possible upturn in the credit offtake by the large corporates segment highlights possible recovery in the economic activity in coming months. Consumer durable sales have not yet bottomed out. Bank credit and deposits continues to remain sluggish. Interestingly, growth in credit card outstanding continues to push up credit growth. The contraction in the in the monthly index could probably drag down the yearly index after a while, according to Ecowrap.

According to Ecowrap, benign wholesale as well as retail inflation accompanied by a lower cost of borrowing is expected to boost positive sentiment in the economy in coming months and possibly drive credit cycle and growth.

The next major event for the financial markets is Union Budget for 2015-16. Finance Minister Arun Jaitley will present Union Budget 2015-16 in Parliament on 28 February 2015. Analysts will scrutinize measures in the Budget for financing infrastructure projects as well as the government's own capital expenditure on infrastructure for the year ahead. This is the first full fledged Budget of the Narendra Modi government and analysts will look for a roadmap for economic growth for the next few years.

Changes in rates of dividend distribution tax, capital gains tax on sale of shares, Securities Transaction Tax (STT) and Minimum Alternate Tax (MAT), if any, will be closely watched. The dividend distribution tax is currently at 15%. The minimum alternate tax is currently at 18.5% of book profits. Short term capital gains tax on sale of shares is currently at 15% while there is zero long capital gains tax on sale of shares held for a period of more than one year.

The upcoming Budget session of the parliament assumes utmost importance as the government intends to replace the ordinances it had promulgated after the conclusion of the winter session of the parliament with Bills and get them cleared by both Houses of Parliament during the budget session. The Narendra Modi government promulgated a slew of ordinances after the last session of Parliament. Some of the key ordinances include raising the FDI in the insurance sector from 26% to 49%, e-auctioning of coal mines and amendment to the Land Acquisition Act.

The government has already started auctioning coal blocks for captive mining. The Coal Mines (Special Provisions) Bill that was moved to replace an ordinance issued earlier was passed by the Lok Sabha in the winter session but it could not be taken up in the Rajya Sabha. The government promulgated the Coal Mines (Special Provisions) Ordinance, 2014, in October to facilitate coal block auctions after the Supreme Court cancelled 204 coal blocks in September.

Through another ordinance, the government has raised the ceiling on foreign investment in the insurance sector to 49% from 26%. The government was unable to get the Insurance Laws (Amendment) Bill, 2008, passed in parliament during the winter session.

Amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 were brought in via an ordinance after the winter session of the parliament.

Analysts are also awaiting further progress on the Goods and Services Tax (GST) in the Budget session after the Constitution Amendment Bill for the introduction of GST was tabled in the Lok Sabha during the winter session of parliament. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. At the state level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.

Asian stocks edged higher today, 18 February 2015, tracking gains in the US as fears eased over Greece leaving the eurozone. Key benchmark indices in Hong Kong, Indonesia, Japan and Singapore were up 0.16% to 1.18%.

The stock market in mainland China is closed for this entire week starting today, 18 February 2015, for the Lunar New Year holiday. The stock market in Hong Kong is open for trading for only half day today, 18 February 2015, and remains shut for the rest of the week for the Lunar New Year holiday.

In Japan, the Bank of Japan (BoJ) today, 18 February 2015, stood pat on its policy and painted a rosier picture of economic conditions, despite recent poor growth data and an inflation rate that is moving away from its 2% target. After the latest policy meeting, the BOJ's policy board voted 8-1 to keep unchanged the size of the bank's annual asset purchases worth 80 trillion yen ($670 billion), its main tool to generate higher inflation.

The central bank signaled that it mostly believes that the Japanese economy has finally overcome a hit from the government's move to raise the sales tax. Specifically, the BOJ removed for the first time its reference to the tax increase from the main language in its monthly economic assessment.

Trading in US index futures indicated that the Dow could gain 11 points at the opening bell today, 18 February 2015. US stocks closed slightly higher Tuesday, 17 February 2015, as investors continued to monitor talks between Greece and its creditors in hopes that a deal will be reached to keep the country from falling out of the eurozone.

In Europe, Greece may reportedly request a six-month extension on its debt obligations. According to reports, the newly elected Greek Prime Minister Alexis Tsipras will today, 18 February 2015, request an extension on the country's loan agreement. Talks are continuing between Greece and its international creditors on the conditions that would be attached to the extension of the loan accord, according to reports. Greece is scrambling to reach a deal with creditors before it runs out of cash. Greece's current bailout plan expires on 28 February 2015.

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