2016-04-12

Sensex, Nifty attain highest closing level in more than a week

Auto and FMCG stocks led gains for key benchmark indices after private weather forecaster Skymet forecast above normal southwest monsoon rainfall during June-September 2016. The barometer index, the S&P BSE Sensex, rose 123.43 points or 0.49% to settle at 25,145.59. The Nifty 50 index gained 37.55 points or 0.49% to settle at 7,708.95. The state-run India Meteorological Department (IMD), too, has forecast above normal rains. The IMD issued its first stage monsoon forecast after trading hours.

The Sensex and Nifty, both, attained their highest closing level in more than a week. The Sensex gained for the second day in a row and the Nifty edged higher for the third day in a row.

Shares of companies whose business is related to the rural sector gained after Skymet predicted above normal monsoon this year. Tata Steel dropped after the company announced that its British subsidiary Tata Steel UK has signed an agreement to sell its long products Europe business for a nominal consideration. Tata Motors extended previous trading session's gains triggered by the company announcing 11% growth in its global wholesales including Jaguar Land Rover in March 2016 over March 2015. Maruti Suzuki India rose as yen eased from 17-month high against the dollar.

In overseas stock markets, Asian and European stocks edged higher as the yen retreated after a rally that took it to 17-month high against the dollar yesterday, 11 April 2016. In Japan, the Nikkei Average settled 1.13% higher. The yen edged lower against the dollar after Japanese finance minister's warning against excessive yen strength. The Japanese currency is perceived as a haven in times of global economic worries. US stocks edged lower yesterday, 11 April 2016, as first-quarter earnings are expected to paint a bleak picture of corporate profits.

The Sensex rose 123.43 points or 0.49% to settle at 25,145.59, its highest closing level since 4 April 2016. The index rose 157.86 points or 0.63% at the day's high of 25,180.02. The index lost 25.72 points or 0.1% at the day's low of 24,996.44.

The Nifty rose 37.55 points or 0.49% to settle at 7,708.95, its highest closing level since 4 April 2016. The index rose 46 points or 0.59% at the day's high of 7,717.40. The index lost 8.05 points or 0.1% at the day's low of 7,663.35.

The BSE Mid-Cap index rose 1%. The BSE Small-Cap index rose 0.9%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 2464.51 crore, lower than turnover of Rs 3856.05 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Healthcare index (up 1%), the BSE Industrials index (up 1.43%), the BSE Auto index (up 1.61%) and the BSE Oil & Gas index (up 1.21%) outperformed the Sensex. The S&P BSE Energy index (up 0.46%) and the BSE Metal index (down 1.38%) underperformed the Sensex.

Stocks of public sector banks were mixed. Union Bank of India (down 0.58%), State Bank of India (down 0.24%), Syndicate Bank (down 0.8%) and Bank of Baroda (down 0.07%) edged lower. IDBI Bank (up 2.13%), Canara Bank (up 1.49%), Punjab National Bank (up 0.48%) and Indian Bank (up 0.2%) edged higher.

Stocks of private sector banks edged higher. ICICI Bank (up 1.71%), IndusInd Bank (up 0.9%), Axis Bank (up 0.83%) and Kotak Mahindra Bank (up 1.21%) edged higher. Yes Bank (down 0.02%) and HDFC Bank (down 0.55%) edged lower.

Tata Steel dropped after the company announced that its British subsidiary Tata Steel UK has signed an agreement to sell its long products Europe business for a nominal consideration. The stock shed 2.11% to settle at Rs 324.15. The sale for a nominal consideration to the family investment office Greybull Capital would be in exchange for Greybull Capital taking on the whole of the business, including assets and relevant liabilities, and securing an appropriate funding package, Tata Steel UK said. The deal would be completed once a number of outstanding conditions have been resolved, including transfer of contracts, certain government approvals and the satisfactory completion of financing arrangements, it said. The sale covers several UK-based assets including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Wokington, a design consultancy in York, and associated distribution facilities, as well as a mill in northern France. The announcement was made after market hours yesterday, 11 April 2016.

Separately, Tata Steel Europe announced that the company has commenced the formal process for divestment of its entire holding in its British subsidiary Tata Steel UK. It is the intention of Tata Steel Europe to run an expedited process for divestment of its entire holding in Tata Steel UK by reaching out to a wide universe of potential investors globally, Tata Steel Europe said in a statement. It may be recalled that Tata Steel had on 30 March 2016 announced its intention to explore all options for portfolio restructuring including the potential divestment of its British subsidiary Tata Steel UK due to the deteriorating financial performance of the UK subsidiary during the last twelve months.

Shares of two-wheeler makers rose after Skymet predicted above normal monsoon this year. Bajaj Auto (up 1.53%) and Hero MotoCorp (up 2.47%) edged higher. A good monsoon could boost rural incomes, which in turn could boost sales of two-wheeler makers in rural India.

Tata Motors rose 2.4% at Rs 395.10, with the stock extending previous trading session's gains triggered by the company announcing 11% growth in its global wholesales including Jaguar Land Rover at 1.18 lakh units in March 2016 over March 2015. The stock had risen 3.66% to settle at Rs 385.85 yesterday, 11 April 2016.

Maruti Suzuki India rose 2.82% at Rs 3,576.65 as the Japanese yen eased from 17-month high against the dollar. The Maruti stock had tumbled recently after the yen strengthened against the dollar. A strong yen adversely impacts Maruti's operating profit margin.

FMCG stocks edged higher after private weather forecaster Skymet has forecast above normal southwest monsoon rainfall during June-September 2016. Bajaj Corp (up 8.42%), Dabur India (up 3.72%), Jyothy Laboratories (up 1.06%), Colgate-Palmolive (India) (up 0.75%), Britannia Industries (up 1.85%), Emami (up 0.71%), GlaxoSmithkline Consumer Healthcare (up 0.09%), Procter & Gamble Hygiene and Health Care (up 0.15%), Marico (up 1.76%) and Hindustan Unilever (up 0.86%) edged higher. Tata Global Beverages (down 1.17%) and Godrej Consumer Products (down 0.63%) edged lower. FMCG firms derive substantial revenue from rural India.

Nestle India rose 4.48% at Rs 6,135.80 after the company said that the Central Food Technological Research Institute (CFTRI) has given a clean chit to its instant noodles brand Maggi. CFTRI, which submitted its analysis reports to the Supreme Court recently, has cleared all the 29 samples of Maggi Noodles that had been tested.

Nestle said the CFTRI reports have stated that lead levels for all samples are within permissible limits. The second batch of 16 samples was tested not only for lead and monosodium glutamate (MSG), but also for other safety parameters like metal contaminants, crop contaminants and toxic substances and so on, that are applicable to instant noodles as a Proprietary Food. Every single sample was found compliant, Nestle India said in a statement. In its reports, the Mysuru-based research institute also clarified that glutamic acid can be due to the presence of various ingredients, such as tomatoes and cheese, and there is no analytical method to distinguish between naturally occurring and additive MSG. It also clarified that additive MSG is allowed in select food commodities as per the Food Safety and Standards Regulation 2011.

Shares of companies whose business is related to the rural sector gained after Skymet predicted above normal monsoon this year. Insecticides (India) (up 16.14%), VST Tillers Tractors (up 10.58%), Escorts (up 10.53%), Jain Irrigation Systems (up 6.13%), P I Industries (up 5.34%), UPL (up 3.93%), Dhanuka Agritech (up 3.74%), Advanta (up 3.72%), Kaveri Seed Company (up 3.39%), Monsanto India (up 3.27%), Rallis India (up 2.32%) and Mahindra & Mahindra (up 0.67%) edged higher.

Fertiliser stocks also gained after forecast of above normal monsoon this year. Coromandel International (up 5.24%), National Fertilizer (up 3.05%), Gujarat Narmada Valley Fertilizers and Chemicals (GNFC) (up 1.93%), Gujarat State Fertilizers and Chemicals (GSFC) (up 1.67%), Rashtriya Chemicals & Fertilizers (up 2.95%) and Tata Chemicals (up 1.87%) gained.

Shares of oil exploration and production (E&P) companies edged higher as crude oil prices rose. Cairn India (up 0.99%), Oil India (up 0.2%), ONGC (up 1.37%) and Reliance Industries (RIL) (up 0.7%) rose. Higher crude oil prices could result in higher realization from crude sales for oil exploration firms.

In the global commodities markets, crude oil futures extended gains. Brent for June settlement was currently up 27 cents at $43.10 a barrel. The contract had jumped 89 cents or 2.12% to settle at $42.83 a barrel during the previous trading session on a weaker dollar and higher anticipation that world's major oil players, such as Russia and Saudi Arabia, would reach a coordinated production freeze to revive prices.

The world's major crude oil producers led by Russia and Saudi Arabia have convened a meeting on Sunday, 17 April 2016, in Doha, Qatar to discuss measures to stabilise prices, including a proposal to freeze output. Saudi Arabia has said that it would freeze oil production only if Iran follows suit. Iran has ruled out freezing output until its production recovers to pre-sanction levels.

Shares of public sector oil marketing companies (PSU OMCs) edged lower as crude oil prices rose. HPCL (down 0.13%) and Indian Oil Corporation (IOC) (down 0.13%) declined. Higher crude oil prices could increase under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at government controlled prices. The government has already decontrolled pricing of petrol and diesel.

BPCL rose after the company's board of directors approved the proposal for increasing the ceiling on investment by foreign institutional investors in the company's equity to 49% from 24% in one or more tranches. The stock rose 0.2% at Rs 918.60. BPCL will seek shareholders' consent by way of postal ballot for increasing the ceiling on investment by foreign institutional investors to 49% from 24%.

Separately, BPCL announced that its board of directors at a meeting held yesterday, 11 April 2016, approved the proposal to acquire Petronet India's (PIL) 26% equity stake in Petronet CCK (PCCKL) at a total cost of Rs 78.60 crore. PCCKL is a subsidiary company promoted by BPCL and PIL. PCCKL owns and operates a petroleum product pipeline from Kochi to Karur in Tamil Nadu via Coimbatore for transportation of petroleum products. Currently, BPCL has a stake of 73.96% in the equity capital of PCCKL, PIL has a stake of 26% and financial institutions hold the remaining stake. Post completion of acquisition, BPCL's holding in PCCKL will go up to 99.96%. The announcement was made after market hours yesterday, 11 April 2016.
Shares of state-run coal mining major Coal India (CIL) fell 2.28% at Rs 274.45 after the company announcement that its board of directors has accorded its approval for giving up performance incentive for supply of higher grades of coal in the model fuel supply agreement for power and non-power sector with immediate effect with a view to improve lifting of coal. This decision was taken due to fall in international coal prices, improved supply of coal by the company and sluggishness in coal demand in general and higher grade of coal in particular.

Index heavyweight and cigarette major ITC lost 1.18% at Rs 322.65. The stock hit a high of Rs 326.40 and a low of Rs 321.20 in intraday trade. Early this month, ITC announced temporary closure of manufacturing operations at all its cigarette factories in India with effect from 1 April 2016 as it awaits clarity on the quantum of mandatory pictorial health warning on cigarette packages.

Dr Reddy's Laboratories rose after the company said that its buyback offer will commence on 18 April 2016. The stock gained 1.79% to Rs 3,082.80. The buyback is proposed to be completed within a maximum period of six months from the date of opening of the buyback. The company has set aside a maximum amount of Rs 1569.41 crore for the buyback offer, which is 14.9% of the total paid up share capital and free reserves of the company as on 31 March 2015. The maximum buyback price is fixed at Rs 3,500 per equity share, which is 15.56% premium to the stock's closing price of Rs 3,028.60 on BSE yesterday, 11 April 2016. The number of equity shares bought back will not exceed 25% of the total paid up equity capital of the company.

At the maximum buyback price and for maximum buyback size, the indicative maximum number of equity shares bought back would be 44.84 lakh equity shares. If the equity shares are bought back at a price below the maximum buyback price, the actual number of equity shares bought back could exceed the indicative maximum buyback shares but will always be subject to the maximum buyback size.

The company will utilize at least 50% of the amount earmarked as the maximum buyback size for the buyback i.e. Rs 784.70 crore. Based on the minimum buyback size and the maximum buyback price, the company will purchase an indicative minimum of 22.42 lakh shares, Dr Reddy's Laboratories said.

Bharti Airtel rose 0.34% at Rs 349.55 after the company announced that its subsidiary Airtel M Commerce Services (AMSL) has been granted payments bank license from Reserve Bank of India yesterday, 11 April 2016. The announcement was made after market hours yesterday, 11 April 2016.

L&T was up 0.8% at Rs 1,222.55. The company after market hours yesterday, 11 April 2016, announced withdrawal of the draft red herring prospectus (DRHP) filed by its subsidiary Larsen & Toubro Infotech (L&T Infotech) with the Securities and Exchange Board of India (Sebi) for an initial public offer (IPO) due to change in the offer structure and other considerations.

Bharat Heavy Electricals (Bhel) dropped 0.16% at Rs 127.15. With respect to news report of NTPC's joint venture utility in Bangladesh awarding engineering, procurement and construction contract to Bhel for an estimated value of $2.4 billion, Bhel clarified during market hours today, 12 April 2016, that the contract for the 1,320 megawatts Maitree Power Project in Bangladesh is yet to be signed. The financial closure is under process.

The Sensex rose for the second straight day. The barometer index has risen 471.75 points or 1.91% in two trading sessions from its close of 24,673.84 on 8 April 2016. The Sensex has fallen 196.27 points or 0.77% in this month so far (till 12 April 2016). The Sensex has fallen 971.95 points or 3.72% in calendar year 2016 so far (till 12 April 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the Sensex has risen 2,650.98 points or 11.78%. The Sensex is off 3,949.02 points or 13.57% from a 52-week high of 29,094.61 hit on 15 April 2015. The Sensex is off 4,879.15 points or 16.25% from a record high of 30,024.74 hit on 4 March 2015.

According to IMD, the southwest monsoon is likely to be 106% of the Long Period Average (LPA) during the four-month period from June to September 2016, with an error margin of plus/minus 5%. As the sea surface temperature conditions over the Pacific and Indian Oceans, particularly the ENSO conditions over the Pacific (El Nino or La Nina) are known to have strong influence on the Indian summer monsoon, IMD is carefully monitoring the sea surface conditions over the Pacific and the Indian oceans. The latest forecast from the Monsoon Mission Coupled Climate Model points to El Nino conditions weakening to moderate to weak levels during the first half of the monsoon season and ENSO neutral conditions likely to get established thereafter, the weather office said in a statement.

The IMD will issue an updated monsoon forecast in June 2016 as a part of the second stage forecast. Along with the updated forecast, the IMD will issue separate forecasts for rainfall in July and August and the distribution of rainfall over the four geographical regions of India.

The IMD's forecast of above normal rains this year comes a day after private weather forecaster Skymet forecast above normal southwest monsoon yesterday, 11 April 2016. According to Skymet, monsoon 2016 is likely to be above the normal at 105% of the long period average (LPA) of 887 mm for the four-month period from June to September, with an error margin of plus/minus 4%. The weather forecaster said that normal onset of rains is expected resulting in good rainfall over Peninsular India. Skymet has forecast rainfall at 90% of LPA in June, 105% of LPA in July, 108% of LPA in August and 115% of LPA in September.

According to the private weather forecaster, central India and the West Coast might receive good amount of rainfall. Tamil Nadu, North East India and south interior Karnataka might receive less rain.

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