Sensex & Nifty end strong, Fed outcome eyed; metals surge
29 October 2014
The market saw a stellar ending as investors eye outcome of Federal Reserve meeting and its stance on interest rates.
Ahead of October F&O expiry tomorrow, the Nifty ended tad below 8100-mark, up 62.85 points at 8090.45 while the Sensex was up 217.35 points at 27098.17. About 1589 shares advanced, 1374 shares declined, and 115 shares were unchanged.
The US Federal Reserve's two-day policy review meeting will be over later tonight. At its last meeting in September, the Fed had decided to maintain its main rate at a record low of between zero and 0.25 percent for 'a considerable period of time' after its asset purchase program ends. The central bank is expected to declare the end of that quantitative easing programme when it releases its statement tonight.
According to Christopher Palmer, Henderson Global Investors will stick to announcing the end of quantitative easing (QE) and in fact there might be a shift in language towards other instruments to maintain liquidity without directly purchasing bonds which the markets are likely to be interested in.
He thinks the global economy is ready for new approaches and the consensus has now started to move towards where liquidity injected by bond purchases is not having much impact or at least incremental impact in the US.
Palmer says India is unlikely to be impacted negatively from anything that Fed does in the next six months. India will be impacted only by domestic inflation and global crude prices, but at present both are trending down, he added.
The dollar was under light selling pressure and major government bond yields were marginally lower, as currency and fixed income markets anticipated a soothing message from the Fed when it ends its two-day policy meeting later in the day.
Losers and gainers
Metal stocks were on buyers' radar with gainers like Hindalco and Tata Steel. Buoyed up good earnings, Sesa Sterlite was up 2 percent. The Vedanta Resources Group company's net profit declined 31.7 percent (up 23.6 percent quarter-on-quarter) to Rs 1,658 crore in July-September quarter from Rs 2,429 crore in the year-ago period. Profit was supported by forex gain and lower finance cost during the quarter.
Total income from operations slipped 22.7 percent (up 13.5 percent sequentially) to Rs 19,448 crore in the quarter ended September 2014 compared to Rs 25,170 crore in same quarter last year.
Tata Motors, Infosys and Bajaj Auto were other major gainers in the Sensex. The losers include NTPC, Sun Pharma, Bharti Airtel and SBI.
Dragged by disappointing Q2 results, Dr Reddy fell 1 percent. The drug maker's second quarter consolidated net profit fell 16.8 percent to Rs 574 crore compared to Rs 690.2 crore in the year-ago period.
Among the midcaps, OBC and PI Industries struggled in trade post announcing Q2 earnings. OBC lost over 4 percent on concerns of weak asset quality. Reeling under results impact was Jubilant Life (down 11 percent) as Q2 loss widened.
Pipavav Defence, Risa International and Westlife were other midcap laggards.
Meanwhile SRF jumped 20 percent as Sept quarter net grew 61 percent. Top midcap gainers include BF Utilities, Max India, Sobha Developer and AIA Engineering.
03:30 Market closing
The market ended with smart gains ahead of October F&O expiry tomorrow. The Nifty was up 62.85 points at 8090.45 while the Sensex ended up 217.35 points at 27098.17.
About 1589 shares advanced, 1374 shares declined, and 115 shares were unchanged.
Hindalco was up 6 percent while Tata Steel, Tata Motors, Infosys and Bajaj Auto were other major gainers in the Sensex. Among the losers were NTPC, Sun Pharma, Dr Reddy's Labs, Bharti Airtel and SBI.
03:15 pm Buzzing
Investors of SRF are rejoicing as its shares hit record high at Rs 805.85, up 20 percent intraday. The manufacturer of chemical-based industrial intermediates reported a 60.87 percent increase in net profit at Rs 76.85 crore for the second quarter ended September 2014. The company had posted a net profit of Rs 47.77 crore for the corresponding quarter a year ago. Total income from operations during the quarter under review increased 9.98 percent to Rs 928.17 crore as against Rs 843.89 crore a year ago, SRF said in a filing to the BSE.
"The overall operations performed well this quarter. The company's strategy of growing the chemicals business is paying dividends. Our traditional business should pick once economy rebounds," SRF managing director Ashish Bharat Ram said.
Investors of SRF are rejoicing as its shares hit record high at Rs 805.85, up 20 percent intraday on Wednesday. The manufacturer of chemical-based industrial intermediates reported a 60.87 percent increase in net profit at Rs 76.85 crore for the second quarter ended September 2014. The company had posted a net profit of Rs 47.77 crore for the corresponding quarter a year ago. Total income from operations during the quarter under review increased 9.98 percent to Rs 928.17 crore as against Rs 843.89 crore a year ago, SRF said in a filing to the BSE. "The overall operations performed well this quarter. The company's strategy of growing the chemicals business is paying dividends. Our traditional business should pick once economy rebounds," SRF managing director Ashish Bharat Ram said.
02:50 pm LPG rate hike
Subsidised cooking gas (LPG) rates have been hiked by Rs 3 per cylinder after the government raised the commission paid to dealers.
The commission paid to dealers was last week hiked by Rs 3 per 14.2-kg cylinder to Rs 43.71. Consequently, retail selling price of subsidised LPG too have been increased in the same proportion, officials said.
Dealers' commission was last revised in December 2013 when it was hiked by Rs 3.46 per cylinder to Rs 40.71. The increase in commission - which as per practice is passed on to consumers - has been effected from October 23.
Subsidised LPG in Delhi now costs Rs 417 per 14.2-kg cylinder as against Rs 414 previously. In Mumbai, subsidised LPG will cost Rs 452 per 14.2-kg cylinder as against Rs 448.50 previously. Prior to the December hike in LPG rates, price of cooking gas was raised in October 2012 when because of an increase in dealers' commission the rates were raised from Rs 399 per cylinder to Rs 410.50.
02:30pm Moody's on domestic banks
International rating agency Moody's today retained its negative outlook on the domestic banking system, citing high leverage in the corporate sector that may prevent any meaningful recovery in asset quality.
"Our outlook for the country's banking system remains negative, as it has been since November 2011. The negative outlook reflects our view that high leverage in the corporate sector could prevent any meaningful recovery in asset quality, notwithstanding a moderate rebound in economic growth," the agency Moody's Investors Service said in a note issued from Singapore.
The report further said continuing poor asset quality, wherein the NPAs levels are set to touch 4.5 percent of the system, will require continued provisioning and strengthened
capital buffers. After provisions, profitability of public sector banks will generate insufficient internal capital for loan growth, the report added.
The negative outlook pertains mainly to the public sector banks as they represent more than 70 percent of total banking system assets. These banks have experienced higher growth rates in non-performing and restructured loans, as well as greater weakening in profits, than their private sector peers, Moody's said.
The report says while these trends are unlikely to improve for public sector banks, in contrast, private sector banks have stronger margins, reserves, and capital levels, which serve as buffers against conditions that remain challenging.
On growth, which inched up to surprising 5.7 percent in the first quarter of the current fiscal after logging in sub-5 percent growth in the past two fiscals, Moody's said GDP will
pick up moderately this fiscal, but remains constrained by the high interest rates due to inflation.
02:00pm Market Check
Equity benchmarks maintained morning gains supported by auto, metals, FMCG, oil and technology stocks. The Sensex rose 144.26 points to 27025.08 and the Nifty climbed 39.55 points to 8067.15.
About 1527 shares have advanced, 1297 shares declined, and 108 shares are unchanged.
Hindalco Industries, DLF, JSPL and Tata Steel topped the buying list, up 4-5 percent followed by Tata Motors, M&M and Bajaj Auto with 2-3 percent.
However, Dr Reddy's Labs reported a weak Q2 earnings as profit fell 16 percent year-on-year to Rs 574 crore while Grasim Industries reported pressure in its viscose staple fibre business, standalone profit dropped 28 percent to Rs 299 crore while Oriental Bank of Commerce shares lost 5 percent as bad loans increased in second quarter.
Global markets remained in fourth gear as investors are convinced that Fed will stay the course and end the third round of bond buying but also wait a ''considerable time '' before hiking short term rates. Hong Kong closed up almost 300 points while European markets were trading with almost 1 percent gains.
Meanwhile, the NDA government today submitted a list comprising 627 names of Indians having accounts in foreign banks to the Supreme Court.
1:50 pm Black money: The Narendra Modi government has submitted a list of names of 627 black money account holders to the Supreme Court. The list has been submitted in a sealed envelope and it remains to be seen whether it will be made public. The list comes a day after the Supreme Court pulled up the Centre and asked it to reveal names of all foreign account holders by Wednesday. The court had said that Special Investigation Team (SIT) will investigate black money and not the government. Finance Minister Arun Jaitley had issued a statement saying that the government will submit all the names and that the probe should be done without offending countries that are helping India on the matter.
1:30 pm Interview: Former bankers, who have served India's largest public sector bank, have found reason to believe the new selection process of PSU bank chiefs is quite a clone of existing one, which has recently been scrapped by the Centre. In an interview to CNBC-TV18, former State Bank of India chiefs - AK Purwar and Diwakar Gupta, said the new selection process suggested so far is also susceptible to malpractices. Both of them support a longer tenure for the banking chiefs. "Having short tenure stands to be a major problem for banks that may be not remedied in the near-term, " says Purwar who once served as chairman of SBI. They also advocate the need for each bank to have its own Executive Director and CMD, handpicked by a professional board.
The market maintains its uptrend with support from global cues. The Sensex is up 148.73 points at 27029.55 and the Nifty is up 37.05 points at 8064.65. About 1473 shares have advanced, 1225 shares declined, and 101 shares are unchanged.
Hindalco, Tata Motors, M&M, Tata Steel and Infosys are top gainers in the Sensex. Among the losers are, BHEL, GAIL and Sun Pharma.
Dr Reddy's is under pressure on disappointing September earnings. Its topline missed estimates while margins declined on account of higher R&D spends. Oriental Bank of Commerce falls 4 percent on deteriorating asset quality in Q2.
The US Federal Reserve is expected to shutter its bond-buying programme, closing one controversial chapter in its crisis response even as it struggles to manage a full return to normal monetary policy.
The Fed is likely to announce at the end of a two-day meeting that it will no longer add to its holdings of Treasury bonds and mortgage-backed securities, halting the final USD 15 billion in monthly purchases under a program that at its peak pumped USD 85 billion a month into the financial system.
An important symbolic step, the end of the purchases still leaves the Fed far from a normal posture. Its balance sheet has swollen to more than USD 4 trillion, interest rates remain at zero, and, if anything, recent events have increased the risk the US central bank may need to keep propping up the economy for longer than had been expected just a few weeks ago.
12:30pm Dr Reddy's Labs disappoints street
Drug maker Dr Reddy's Laboratories' second quarter consolidated net profit fell 16.8 percent to Rs 574 crore compared to Rs 690.2 crore in the year-ago period.
Profit was slightly above estimates but topline and operational performance missed street expectations. Profit was expected at Rs 537 crore on revenue of Rs 3,702 crore (up 10.3 percent) for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.
Net sales grew by 6.9 percent to Rs 3,588 crore in the quarter ended September 2014 compared to Rs 3,357 crore in same quarter last year.
Consolidated operating profit during the quarter declined 12.2 percent year-on-year to Rs 646.5 crore and margin dropped 400 basis points to 18 percent as against expectations of Rs 800 crore (up 8.8 percent) and 21.6 percent, respectively. The stock fell nearly 4 percent.
12:00pm Market Check
The market continued to trade strong on the back of positive global cues and strong buying in heavyweights like Infosys, ITC and Reliance Industries. Midcaps and Smallcaps traded with gains of more than 0.6 percent while the market breadth remained firm with two shares advancing for every share declining on the NSE.
The 30-share BSE Sensex rose 164.73 points to 27045.55 and the Nifty climbed 42.65 points to 8070.25.
Hero Motocorp held more than a percent gains as RBI allowed foreign investors to buy up to 49 percent of the paid up capital of the company. As of quarter ended September 2014, FIIs held 34.34 percent stake in the company.
Tata Motors kept its top position in the buying list, up 2.7 percent followed by Mahindra & Mahindra and Tata Steel with more than 2 percent rally. Infosys and Reliance Industries climbed over 1.5 percent while ITC gained 0.9 percent.
Just Dial bounced back with 6 percent gains after losing 16 percent in the last 2 days.
Asian markets extended the rally with the Shanghai, Hang Seng and Nikkei rallying more than a percent on positive US cues.
11:50 am S&P report: India's plan to grant new banking licences to companies could increase risks in the banking sector given the chance that new entrants could be lax about loan standards, Standard & Poor's said in a report . The Reserve Bank of India (RBI) is cautiously opening up India's banking sector to companies.
The RBI awarded two new licences in April after a gap of 10 years in a country where only one household in two has access to formal banking services. The central bank will come out with fresh set of guidelines for companies applying for on-tap bank licences, or rolling applications that are assessed as they come, in the current fiscal year ending March.
11:30 am Results impact: Brokerages are bearish on Nestle India as third quarter (July-September) earnings were tepid. Shares of the FMCG major, however, was up 2 percent intraday.
Credit Suisse maintains underperform rating and reduced earnings by 4 percent on subdued volume growth. "The stock trades at 42 times one-year forward earnings which is at its peak valuation in the last 15 years. There has been no change in company strategy with a continued focus on portfolio rationalisation and margins. We do not see recent new launches such as Maggi Oats as material innovations which can move the needle," it said in a note.
The FMCG major's consolidated net profit was up 9.22 percent at Rs 311.29 crore in third quarter, as subdued demand continued to impact the sector. Its sales rose to Rs 2,557.8 crore, up 8.92 percent in Q3. It said high input cost especially higher cost of milk pressurised performance in September quarter.
Goldman Sachs also maintains sell rating with a reduced target of Rs 4443 from Rs 4460 per share.
The market is holding on to its gains ahead of October F&O expiry tomorrow. The Nifty is up 33.30 points at 8060.90. The Sensex is up 128.53 points at 27009.35. About 1381 shares have advanced, 869 shares declined, and 91 shares are unchanged.
Tata Motors, M&M, Tata Steel, Hindalco and ITC are top gainers in the Sensex. NTPC, GAIL, BHEL, Sesa Sterlite and Sun Pharma are among the laggards.
Gold steadied near USD 1,230 an ounce, clinging to modest gains from the previous session, ahead of the next guidance from the Federal Reserve on whether it will hike US interest rates sooner or keep them lower for longer.
The Fed wraps up its two-day policy meeting later on Wednesday at which it is expected to end its bond purchases amid signs of strength in the US economy. But policymakers will likely reinforce its stated willingness to wait longer before raising interest rates after a volatile month in financial markets.
Global markets are firm as the Dow tops 17000 , extending its gains to the fourth straight day. Strong consumer confidence data that hit 7-year high and good earnings from Facebook boosts US markets.
10:55am CCL Products hits 52-week high
CCL Products's second quarter consolidated net profit grew by 57 percent to Rs 26.1 crore from Rs 16.6 crore in the year-ago period. Consolidated net sales jumped 49 percent to Rs 247.2 crore versus Rs 166.1 crore during the same period.
10:30am Oil Update
Oil prices rose in Asia today as dealers await the outcome of a US Federal Reserve meeting and the latest US supply report.
US benchmark West Texas Intermediate for December delivery rose 26 cents to USD 81.68 while Brent crude for December was up 20 cents at USD 86.23 in mid-morning trade.
A statement on the meeting's outcome will be released at 1800 GMT tomorrow.
The US central bank is expected to announce an end to its vast asset-buying programme, which was credited with propping up the world's biggest economy after the 2008 financial
Traders, having already discounted an end to the "quantitative easing" programme, are more interested in what bank policy makers say about the future direction of US interest rates.
Dealers meanwhile are also eyeing the latest US stockpiles report for clues about demand in the world's top crude consumer, reports PTI.
10:00am Market Check
Equity benchmarks maintained strong momentum in morning trade with the Sensex rising 163.50 points to 27044.32 and the Nifty climbing 45.85 points to 8073.45 supported by auto, FMCG, oil and banks stocks.
The broader markets gained too with the BSE Midcap and Smallcap indices adding 0.6 percent and 0.9 percent, respectively. Advancing shares outnumbered declining ones by a ratio of 1394 to 551 on the Bombay Stock Exchange.
Commercial vehicle maker Tata Motors climbed nearly 3 percent after a 4 percent rally in its ADR on the NYSE. Mahindra and Mahindra jumped over 1.5 percent.
Two-wheeler maker Hero Motocorp gained 1.5 percent as RBI said FIIs/RFPIs can now invest up to 49 percent in company. Hero sees retail scooter sales at 90,000 units in October. "We are raising scooter production capacity to 1 lakh units/month by January and are confident of double digit growth in scooters this year," it added.
However, Sesa Sterlite declined 0.8 percent as the metals and mining company is likely to report a 37 percent decline in second quarter profit after tax due to Cairn's subdued numbers in Q2.
9:50 am Buzzing: Shares of Hero MotoCorp jumped over 2 percent intraday on hopes of getting more foreign investors. The Reserve Bank of India has allowed foreign investors to buy up to 49 percent of the paid up capital in Hero MotoCorp.
"Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 49 percent of the paid up capital of Hero MotoCorp under the portfolio investment scheme," the central bank said.
The stock has been on buyers' radar in this month. It had hit record high at Rs 3099 per share intraday on October 22, hoping to rake in strong sales during the festive season.
Post Diwali, Sunil Munjal, Joint MD of Hero MotoCorp said in an interview to CNBC-TV18 that the festival period has been very kind to the industry. ''A part of sales came from the branding, part came from the new launches and part of it also came from better logistics and planning and how to position the product across the market. Therefore, it was a combination of multiple things that are going on,'' he added.
9:35 am Fed meet: The Fed is expected to announce the end of the extraordinary easing program it first launched during the financial crisis, and markets could shrug it off as long as the Fed sounds dovish. "Last month, there was this intense speculation about the Fed, and they delivered pretty much nothing. Now there's no speculation, and they're expected to deliver nothing," said John Briggs, head of cross-asset strategy at RBS. Fed watchers say the Fed is unlikely to change the language in its statement about keeping rates low for a "considerable time." That was the focus of speculation last month, as was the idea that it could alter the language about labor market conditions.
The market has once again opened higher. The Nifty is inching closer to 8100, up 49.45 points at 8077.05. The Sensex is up 172.73 points at 27053.55. About 471 shares have advanced, 85 shares declined, and 16 shares are unchanged.
Hero, Tata Motors, HUL, M&M and ONGC are top gainers in the Sensex. Among the losers are Dr Reddy's Labs and TCS.
The Indian rupee opened marginally higher at 61.25 per dollar against 61.32 Tuesday.
Dollar was subdued as investors waited for the latest guidance from the Federal Reserve, while a surprisingly dovish message from Sweden's Central Bank saw the currency slump to four-year lows.
Himanshu Arora of Religare said, "USD-INR pair is expected to trade slightly higher today amid month-end dollar purchases by oil importers and caution that may persist in the market owing to ongoing US Fed meeting. Expect the trend for the USD-INR to be up and ranged between Rs 61.05-61.70/dollar."
In the US, stocks rose, with the Dow industrials extending gains into a fourth day and the S&P 500 and Nasdaq composite higher on the month, as investors embraced corporate earnings, a rise in consumer sentiment and anticipated the end of the Federal Reserve's bond buys.
European stocks ended firmly in positive territory, regaining some of Monday's losses, as investors reacted to third-quarter earnings and prepared for a key monetary policy decision from the US.
In commodities, Brent crude prices were steady above USD 86 per barrel after industry data showed a rise in us crude inventories that was in line with expectations.
From precious metals space, gold hovered near USD 1,230 an ounce, clinging to gains from the previous session.