The Repo Rate Hike: Inflation Gave the Cover, the Rupee Gave the Reason

End-Session: IT stocks nudge higher

19-Jun-14: Key benchmark indices declined in choppy trade as macroeconomic worries resurfaced along with increase in crude oil prices. India imports majority of its crude oil requirements. The barometer index, the S&P BSE Sensex, shed 44.45 points or 0.18%, off 224.05 points from the day's high and up 132.14 points from the day's low. The market breadth indicating the overall health of the market was negative.

IT stocks gained after the US Federal Reserve on Wednesday, 18 June 2014, gave a positive assessment of the world's largest economy and committed to retaining its accommodative monetary policy. 

Index heavyweight and cigarette major ITC gained after a block deal was executed on the counter on BSE today, 19 June 2014. Shares of PSU OMCs and state-run upstream oil firms dropped after international crude oil prices firmed up. Another trigger for the slide in the shares of ONGC and Oil India was reports that oil ministry has proposed that gas price hike should be restricted to incremental production rather than the entire production. Those reports also weighed on the shares of another gas producer Reliance Industries. Many PSU stocks declined after market regulator the Securities and Exchange Board of India (Sebi) at its board meeting today, 19 June 2014, recommended that all listed companies including PSUs should have at least 25% public shareholding in three years.

Shares of United Spirits dropped as the open offer made by Diageo, the world's largest liquor maker, to acquire additional stake in the company ends today, 19 June 2014. Shares of companies whose fortunes are linked to orders from Indian Railways rose on reports the government is moving swiftly to allow foreign direct investment in railways. Among FMCG stocks, Colgate Palmolive (India) scaled record high. VIP Industries and D B Realty hit 52-week high. Rallis India and MindTree scaled record high. Shares of Bharat Electronics hit 52-week high. ALSTOM India also scaled 52-week high. Metal and mining stocks were mixed. Sugar stocks edged lower.

The S&P BSE Sensex shed 44.45 points or 0.18% to settle at 25,201.80, its lowest closing level since 16 June 2014. The index lost 176.59 points at the day's low of 25,069.66 in early afternoon trade. The index jumped 179.60 points at the day's high of 25,425.85 in early trade.

The CNX Nifty shed 17.50 points or 0.23% to settle at 7,540.70, its lowest closing level since 16 June 2014. The index hit a low of 7,502.55 and a high of 7,606.45 in intraday trade.

The market breadth indicating the overall health of the market was negative. On BSE, 1,586 shares declined and 1,406 shares gained. A total of 93 shares were unchanged.

The BSE Mid-Cap index shed 37.90 points or 0.42% to settle at 8,997.35. The BSE Small-Cap index lost 30.66 points or 0.31% to settle at 9,842.98. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 3710 crore, lower than Rs 4288.99 crore on Wednesday, 18 June 2014.

Among the 30-share Sensex pack, 17 stocks declined and the rest of them gained.

Index heavyweight and cigarette major ITC rose 0.99% to Rs 336.35 on volume of 14.40 lakh shares. A block deal of 12.61 lakh shares was executed on the counter at Rs 336.35 per share at 14:55 IST on BSE today, 19 June 2014.

United Spirits dropped 7.88% as the open offer made by Diageo, the world's largest liquor maker, to acquire additional stake in the company ends today, 19 June 2014.

Diageo made an open offer to public shareholders of United Spirits to acquire an additional 26% stake at Rs 3,030 per share. The offer opened on 6 June 2014 and ends today, 19 June 2014.

Diageo, through a subsidiary Relay B V, is the largest shareholder of USL, with a 28.78% stake (as on 31 March 2014).

United Spirits is yet to announce its Q4 and year ended 31 March 2014 results.

Colgate Palmolive (India) rose 3.9% to Rs 1,584.80, also its record high.

Mahindra & Mahindra rose 1.6% to Rs 1178, with the stock recovering on bargain hunting after recent slide. Shares of Mahindra & Mahindra (M&M) had declined 5.7% in three trading sessions to settle at Rs 1,159.40 on Wednesday, 18 June 2014, from a recent high of Rs 1,229.50 on 13 June 2014.

Oil and gas stocks dropped. State-run GAIL (India) declined 1.88%. Private sector oil explorer Cairn India fell 1.36%.

Shares of PSU OMCs dropped after international crude oil prices firmed up. BPCL (down 4.79%), HPCL (down 3.9%) and Indian Oil Corporation (down 2.88%), edged lower.

Higher crude oil prices could increase under-recoveries of PSU OMCs on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Shares of state-run upsteam oil firms dropped on concerns their subsidy burden will rise along with increase in crude oil prices. ONGC lost 4.95% at Rs 421.25. Oil India shed 6.24% at Rs 561. ONGC and Oil India share part of the under-recoveries of state-run oil refining-cum-marketing firms (PSU OMCs ) arising from the government-imposed price caps on prices three key fuels -- diesel, LPG for domestic use and kerosene.

ONGC and Oil India also slipped after media reports suggested that the petroleum ministry has proposed that higher gas price as per the Rangarajan formula could be allowed only for incremental production over and above the current levels. This is an alternative to applying the formula unconditionally from 1 July 2014. Restricting the higher price to additional output, the ministry feels, would incentivise production while also protecting the interests of consuming industries like power and fertilisers, reports said.

Private sector oil major Reliance Industries was down 2.51% to Rs 1,040.05. The stock hit a high of Rs 1,076 and a low of Rs 1,031.85.

IT stocks gained after the US Federal Reserve on Wednesday, 18 June 2014, gave a positive assessment of the world's largest economy and committed to retaining its accommodative monetary policy. US is the biggest outsourcing market for the Indian IT firms.

Tata Consultancy Services (TCS) (up 2.36%), Infosys (up 1.83%), HCL Technologies (up 1.57%), Wipro (up 1.22%) and Tech Mahindra (up 0.49%) gained.

MindTree advanced 3.82% to Rs 862 after hitting a record high of Rs 872 in intraday trade.

Dr Reddy's Laboratories rose 0.79%. The US Food and Drug Administration has reportedly announced that Dr Reddy's Laboratories is recalling 13,560 bottles of the high blood pressure drug metoprolol succinate in the United States after it failed a dissolution test. Metoprolol succinate extended release is a cheaper generic form of AstraZeneca Plc's Toprol XL. The recall was voluntarily started by Dr Reddy's on 23 May 2014, reports suggest.

Maruti Suzuki India fell 3.4%. Maruti Suzuki India during market hours today, 19 June 2014, said that the company has commissioned a 1 megawatts photovoltaic solar power plant at Manesar this month. Built with an investment of Rs 10.30 crore, the solar power plant will help the company offset CO2 emissions to the tune of over 1200 tonnes annually, Maruti Suzuki India said. The power generated from the solar plant at Manesar is synchronized with the natural gas based captive power plant and is used to complement the power requirement in the facility, Maruti said.

Kotak Mahindra Bank fell 3.96% as the Reserve Bank of India after market hours on Wednesday, 18 June 2014, notified that the foreign share holding in the private sector bank by Foreign Institutional Investors (FIIs) under Portfolio Investment Scheme (PIS) has reached the trigger limit. Hence, further purchases of equity shares of this company would be allowed only after obtaining prior approval of the Reserve Bank of India.

Many PSU stocks declined after market regulator the Securities and Exchange Board of India (Sebi) at its board meeting today, 19 June 2014, recommended that all listed companies including PSUs should have at least 25% public shareholding in three years. Under the current rule, while non-PSUs are required to have minimum 25% public shareholding, PSUs are required to have only 10% minimum public shareholding.

Coal India (down 2.07%), Steel Authority of India (Sail) (down 4.41%), National Aluminium Company (Nalco) (down 3.55%) and NHPC (down 0.76%) declined. MMTC (up 2.38%) and NMDC (up 0.71%) rose. The government holds a stake of 80% or more in these state-run companies.

Zee Entertainment Enterprises was down marginally by 0.02% to Rs 276. A block deal of 10.79 lakh shares was executed on the counter at Rs 276.20 per share at 14:57 IST on BSE today, 19 June 2014.

Zee Media Corporation shed 0.25%. Zee Entertainment Enterprises after market hours on Wednesday, 18 June 2014, said its subsidiary Taj Television India will now distribute all the channels of Zee Entertainment Enterprises and Zee Media Corporation while also representing Turner channels as its authorized agent. Taj Television is India's largest distribution agency and has a repertoire of over 45 leading television channels.

Shares of companies whose fortunes are linked to orders from Indian Railways rose on reports the government is moving swiftly to allow foreign direct investment in railways. Simplex Casting (up 5%), Stone India (up 4.91%), Kalindee Rail Nirman (Engineers) (up 4.98%), Titagarh Wagons (up 4.99%), Kernex Microsystems (India) (up 1.52%), BEML (up 1.26%) edged higher.

As per reports, the commerce and industry ministry has initiated the exercise to allow 100% foreign direct investment (FDI) in several segments of railways, moving beyond its earlier plan to open select sectors such as high-speed train systems, dedicated freight lines built through the public-private partnership route and in certain areas of suburban rail networks. Currently, there is a complete ban on any kind of FDI in railways, except mass rapid transport systems.

Crompton Greaves fell 2.09%. Crompton Greaves today, 19 June 2014, said that the company is currently not negotiating any offer for sale of its land at Kanjurmarg in Mumbai. The company issued this clarification after news reports suggested the company has put up a part of its land parcel in the eastern suburbs of Mumbai for sale.

VIP Industries jumped 4.81% to Rs 114.45 after hitting a 52-week high of Rs 118.50 in intraday trade.

Rallis India gained 3.66% to Rs 212.40 after hitting a record high of Rs 217.70 in intraday trade.

D B Realty surged 4.35% to Rs 106.70 after hitting a 52-week high of Rs 116.20 in intraday trade.

Bharat Electronics gained 6.93% to Rs 1,946.80 after scaling a 52-week high of Rs 1,989.70 in intraday trade.

ALSTOM India surged 6.12% to Rs 579.90, also its 52-week high.

Sugar stocks edged lower. Simbhaoli Sugar Mills (down 4.97%), Shree Renuka Sugars (down 3.1%), Dhampur Sugar Mills (down 2.13%), Sakthi Sugars (down 2.11%), Triveni Engineering & Industries (down 2.06%), Bajaj Hindusthan (down 1.24%), Balrampur Chini Mills (down 0.98%) and Dwarikesh Sugar Industries (down 0.38%) declined.

Indian stocks witnessed high intraday volatility today, 19 June 2014. Key benchmark indices edged higher in early trade as Asian stocks rose after the US Federal Reserve after a monetary policy review on Wednesday, 18 June 2014, said a highly accommodative stance of monetary policy for the US economy remains appropriate at this juncture. Volatility struck the bourses in morning trade as the key benchmark indices retreated from intraday high hit in early trade only to regain strength later. The 50-unit CNX Nifty regained positive zone soon after reversing intraday gain to briefly turn negative. Volatility continued in mid-morning trade as the key benchmark indices regained positive zone after hitting fresh intraday low in negative zone. Key benchmark indices extended fall and hit fresh intraday low in early afternoon trade. Key benchmark indices recovered from the day's low in afternoon trade as European stocks rose in early trade there. Key benchmark indices rebounded from intraday low to regain positive zone in mid-afternoon trade. Intraday volatility continued in late trade.

Brent crude rose as investors worried about exports from Iraq as militant violence in the country continues. Brent crude futures for August delivery were up 27 cents at $114.53 a barrel. The contract had risen 81 cents to settle at $114.26 a barrel on Wednesday, 18 June 2014, the highest level since 6 September 2013.

Increase in oil prices has triggered macroeconomic worries for India which imports majority of its crude oil requirements. Increase in crude oil prices have raised concerns of increase in fuel price inflation and increase in India's current account deficit and fiscal deficit.

European shares edged higher on Thursday, 19 June 2014, as investor sentiment received a boost from the Federal Reserve which said the US economy is rebounding and that US interest rates would stay low for some time. Key benchmark indices in UK, France and Germany were up 0.82% to 0.87%.

Asian markets edged lower on Thursday, 19 June 2014, as crude rose as investors worried about exports from Iraq as militant violence in the country continues. Key benchmark indices in Singapore, Hong Kong, Indonesia and China fell by 0.06% to 1.55%. Key benchmark indices in Taiwan, South Korea and Japan rose by 0.13% to 1.62%.

Chinese Premier Li Keqiang vowed that his nation's economy will not suffer a so-called hard landing, a report said.

Trading in US index futures indicated a flat opening of US stocks on on Thursday, 19 June 2014. US stocks rallied on Wednesday, 18 June 2014, gaining the most in four weeks, after the Federal Reserve chief signaled no hurry to raise rates.

The Federal Reserve said growth is bouncing back and the job market is improving as it continued to reduce the monthly pace of asset purchases. The Federal Open Market Committee trimmed bond-buying by $10 billion for a fifth straight meeting, to $35 billion, keeping it on pace to end the program late this year.

In a statement, the Federal Open Market Committee (FOMC) said that if the incoming information broadly supports the committee's expectation of ongoing improvement in US labor market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the committee's decisions about their pace will remain contingent on the committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. To support continued progress toward maximum employment and price stability, a highly accommodative stance of monetary policy remains appropriate at this juncture, the FOMC said. The committee was of the view that it will be appropriate to maintain the current zero to 1/4 percent target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the committee's 2% longer-run goal, and provided that longer-term inflation expectations remain well anchored.

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