The key benchmark indices were off the day’s lows in mid-afternoon trade as index heavyweight Reliance Industries (RIL) bounced back. Shares of commercial vehicles major Tata Motors surged for the second day in a row after it reported turnaround Q1 June 2010 results during trading hours on Tuesday, 10 August 2010. Shares of financial services firms surged after the central bank said it intends to grant limited number of new bank licences.
The market breadth was negative in contrast to positive breadth earlier in the day. The BSE 30-share Sensex was down 53.78 points or 0.38%, up close to 55 points from the day’s low and off close to 100 points from the day’s high
The market edged higher at the onset of the trading session. The market lost ground later on weak Asian stocks and as US index futures fell. The Sensex cut losses in range bound in mid-morning trade. The market hit a fresh intraday low in early afternoon trade. The market came off the lower level later. The market hit a fresh intraday low in afternoon trade. It came off the lows later.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said in an interview to a news agency on Tuesday, 10 August 2010, that one of the major factors that will soften inflationary pressure is the prospects for agricultural production, which at the moment look very good as monsoon rains are good at the moment. Montek Singh also said that the government does not want the current account deficit (CAD) to go above 3%. If Indian policy is seen as being investment friendly, if India is seen as doing something about its infrastructure, the world is quite happy to finance a CAD of 3% through a mix of equity and debt flows, Montek Singh said. The government will be hoping for longer-term debt coming into India in big projects, he said.
Meanwhile, the Reserve Bank of India (RBI) today released a discussion paper on entry of new banks in the private sector. The central bank said it intends to grant limited number of new bank licences and invited comments on the minimum capital requirements as well as promoters shareholding in new banks. A larger number of banks would foster greater competition,and thereby reduce costs, and improve the quality of service, the RBI said in the discussion paper. More importantly, it would promote financial inclusion, and ultimately support inclusive economic growth, which is a key focus of public policy, the RBI said.
There will be a minuscule impact on the economy due to the shutdown of India’s busiest port following a collision between two cargo ships late last week, according to Moody’s Analytics, a unit of global credit rating agency Moody’s. The collision, which triggered an oil slick, has hit operations at the Mumbai port and the neighbouring Jawaharlal Nehru Port after about 300 containers fell into the shipping channel used by the ports. Mumbai’s two ports account for around 40% of India’s exports, so the total value of outbound shipments in August could be marginally lower, according to Moody’s Analytics.
European shares declined after the US Federal Reserve’s measures to put economic recovery in the world’s biggest economy back on track failed to impress investors. The key benchmark indices in UK, France and Germany were down by 1.13% to 1.2%.
Most Asian stocks dropped on Wednesday, 11 August 2010, as the US Federal Reserve’s proposal to spur growth failed to ease investor concerns the world’s biggest economy is weakening. The key benchmark indices in Singapore, Hong Kong, Taiwan, Indonesia, Japan and South Korea were down by between 0.83% to 2.7%.
But, China’s Shanghai Composite rose 0.47% after the latest data indicated that the recent cooling of the Chinese economy may result in soft landing rather than hard landing. China’s industrial output grew the least in 11 months in July as the government cracked down on real-estate speculation, curbed credit and closed factories to meet energy-efficiency targets. Production rose 13.4% from a year earlier, the statistics bureau said in Beijing today. Inflation quickened to 3.3%, the fastest in 21 months, boosted by a low year- earlier base for comparison and rising food costs. The spike in consumer inflation was caused by severe floods that affected many area of the country.
China’s retail sales rose 17.9% year-on-year, slowing from June’s 18.3% rise and below market expectation of a rise of more than 18%. Urban fixed-asset investment growth for the January-July 2010 period was up 24.9%, easing from the 25.5% growth reported last month for January-June 2010 period. Other data showed Chinese banks issued 533 billion yuan ($78 billion) in new loans during the month, down from the 603 billion yuan in June. Mortgage related lending, indicated by medium-to-long-term loans, fell to 126 billion yuan for the month, down from 142 billion in June and 192 billion in May.
Trading in US index futures indicated that the Dow could fall 93 points at the opening bell on Wednesday, 11 August 2010.
US stocks fell on Tuesday, 10 August 2010, but closed off their lows after the Federal Reserve said it would take new steps to counter a weak economic recovery. The Dow, which was down about 100 points before the Fed’s announcement, briefly turned positive, though buying interest waned on the Fed’s more pessimistic assessment of the economy.
The Fed’s Open Market Committee said in a post-meeting statement on Tuesday that it would begin funneling proceeds from maturing mortgage bonds into longer-term government debt to keep borrowing costs low. The hope is that this will send long-term rates on debt and mortgages lower, stimulating lending to consumers and businesses. The US central bank also issued an assessment of the economy that was darker than a month earlier, saying the pace of the economic recovery will likely be more gradual than previously thought. The Fed also left benchmark overnight interest rates steady in a zero to 0.25% range, and renewed its pledge to keep them low for an extended period.
The Dow Jones Industrial Average was down 54.50 points or 0.51% at 10,644.25. The Standard & Poor’s 500 Index was down 6.73 points, or 0.60% at 1,121.06. The Nasdaq Composite Index was down 28.52 points, or 1.24% at 2,277.17. US business productivity fell for the first time in 1-1/2 years in the second quarter and labor costs hardly rose, according to government data that underlined the halting pace of economic recovery.
Back home, the Reserve Bank of India on Tuesday extended the interest subsidy scheme of two percentage points on rupee export credit to additional sectors like leather and leather manufacturers, jute manufacturing, engineering goods and textiles. The subvention scheme will be available from 1 April 2010 to 31 March 2011, the Reserve Bank of India said in a notification.
Foreign institutional investors (FIIs) continue to mop up Indian equities. As per provisional figures released by the stock exchanges, foreign funds on Tuesday, 10 August 2010, bought shares worth Rs 599.33 crore. Domestic funds sold shares worth Rs 540.67 crore on that day.
Foreign funds bought equities worth a net Rs 3883.65 crore in the first seven trading days this month, till 10 August 2010, absorbing selling of Rs 1715.79 crore from domestic funds, as per data from the stock exchanges.
Foreign funds had bought shares worth a net Rs 8320.50 crore in July 2010, absorbing selling by domestic institutional investors. Domestic funds sold shares worth a net Rs 6323.13 crore in July 2010.
Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.
The government early this week relaxed the requirement of a minimum 25% public shareholding for listed state-run firms. It may be recalled that the government in early June 2010 had announced changes in the Securities Contracts (Regulation) Rules 1957, so as to ensure that all listed companies maintain a minimum public float of 25%. Existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding, the government had said at that time. The new rule had raised concerns there will be a deluge of share sales from government-owned firms to meet the minimum 25% public shareholding requirement.
As per the relaxed norms, listed state-owned companies that have less than 10% public stake will have to reach that threshold over a period of three years. The modified rules also give a breather to the private sector companies. While they will have to comply with the minimum 25% public float within three years, they now have flexibility in how the limit is reached i.e. the requirement of a minimum annual 5% increase has been scrapped.
On the corporate front, the combined net profit of a total of 2,534 Indian companies fell 9.4% to Rs 62,263 crore on 20.6% rise in sales to Rs 7,59,748 crore in Q1 June 2010 over Q1 June 2009.
The government will announce industrial output data for the month of June 2010 on Thursday, 12 August 2010.
Analysts expect the Reserve Bank of India to raise interest rates by 25 basis points at a mid-quarter monetary policy review on 16 September 2010, to rein in inflation and inflation expectations. The latest data showed the food price index rose 9.53% in the year to 24 July 2010 while the fuel price index climbed 14.26%. Food inflation eased from the week-ago figure of 9.67% and fuel inflation also eased from the previous week’s reading of 14.29%. The primary articles index rose 14.36%, compared with the week-ago reading of 14.5%.
The yield on the most traded 8.13% 2022 bond declined to 7.98% from Tuesday’s (10 August 2010) close of 8.04%
The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 raised a key lending rate by 25 basis points to curb surging inflation. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said at that time. The RBI also signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn’t dilute the effectiveness of policy-rate actions.
Most automobiles firms including Tata Motors, Maruti Suzuki, Hero Honda and Bajaj Auto have reported strong sales in the month just gone by.
Car sales in India rose an annual 38% in July 2010 to a record 1,58,764 unit, compared with 1,15,084 units a year ago, as per the latest data. Sales of trucks and buses, a barometer of economic activity, rose an annual 37% to 51,481 units in July 2010. Motorcycle sales in July 2010 rose to 7,10,621 units from 546,233 units a year earlier.
Meanwhile, a further improvement in monsoon rains has accelerated kharif planting. The total area brought under the crops is estimated to be higher than last year’s level by good 8.4%, reports suggest. The overall rainfall in the whole country was 16% above normal in the week ended 4 August 2010.
The overall kharif prospects remain bullish as 85% of the country’s total area has received normal or above normal rainfall, reports suggest. The area coverage is more than last year in the case of all crops, including rice, coarse cereals, pulses, oilseeds, sugarcane, cotton and jute, reports suggest. The crop stand is reported to be good and so far there has been no report of any major attack of disease or pests. Though white fly pest has appeared on cotton in some pockets of Punjab and Rajasthan, but the incidence is below the threshold level till now in most cases.
The improvement in rainfall has also resulted in a spectacular improvement in the water stock in reservoirs, reports suggest. The total water storage in the 81 major reservoirs stood at 52.09 billion cubic metres (BCM) as on 5 August 2010, against 28.65 BCM a fortnight ago. The present storage is a mere 6% short of normal, against 35% a fortnight ago, reports suggest. However, the water balance is still worrisome in reservoirs in the eastern region where the monsoon is yet to pick up full momentum.
The cumulative rainfall during the period from 1 June 2010 to 10 August 2010 was 4% below normal. Rainfall over the country as a whole for the second half (August to September) of the 2010 southwest monsoon season is likely to be normal, according to the India Meteorological Department (IMD). Quantitatively, rainfall for the country as a whole during the period August-September 2010 is likely to be 107% of long period average (LPA) with a model error of plus/minus 7%, according to the weather office.
The southwest monsoon activity was subdued over the country during the past 24 hours, the India Meteorological Department (IMD) said in its daily update on Tuesday, 10 August 2010. The weather office expects widespread rainfall with isolated heavy to very heavy fall over western Himalayan region and adjoining northern plains over the next few days. It also expects fairly widespread rainfall over central and east India in the near term.
The south west monsoon is important for India as about 60% of the country’s farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The weather office expects this year’s monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
At 14:20 IST, the BSE 30-share Sensex was down 53.78 points or 0.38% to 18,159.13. The Sensex rose 43.89 points at the day’s high of 18,263.88 in early trade. The index lost 109.15 points at the day’s low of 18,110.84 in afternoon trade.
The S&P CNX Nifty was down 12.65 points or 0.23% to 5,448.05.
The BSE Mid-Cap index fell 0.05%. The Small-Cap index rose 0.03%. Both these indices outperformed the Sensex.
The market breadth, indicating the health of the market, was negative in contrast with positive breadth earlier in the day. On BSE, 1605 shares declined while 1295 shares advanced. A total of 111 shares remained unchanged.
From 30 share Sensex pack, 22 fell and the rest rose.
Index heavyweight Reliance Industries (RIL) was down 0.13% to Rs 987. The stock came off the day’s low of Rs 980.10. A unit of the firm, last week, signed definitive agreements to enter into a Marcellus Shale gas joint venture with United States-based Carrizo Oil & Gas Inc. RIL will pay a total $392 million, comprising $340 million of cash and $52 million of drilling carry obligations, the company said.
Under the deal, Reliance will acquire a 60% interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in an equal joint venture between Carrizo and an affiliate of Avista Capital Partners. Reliance will acquire all of Avista’s stake and 20% of Carrizo’s stake in the existing joint venture, the statement said.
Commercial vehicle maker Tata Motors jumped 5.52% extending Tuesday’s surge after the company reported turnaround Q1 June 2010 results during trading hours on Thursday, 10 August 2010. The stock today hit a record high of Rs 1023.55.
The company reported consolidated net profit of Rs 1988.73 crore in Q1 June 2010 compared to a net loss of Rs 328.78 crore in Q1 June 2009. Net revenue jumped 64.2% to Rs 27055.57 crore in Q1 June 2010 over Q1 June 2009.
Tata Motors said the Jaguar Land Rover business continued to show strong profitability, with increase in volumes coupled with significantly favorable currency movement in Q1 June 2010, reporting profit before tax of Great British Pounds (GBP) 233.82 million (Rs 1590.25 crore).
India’s largest tractor maker by sales Mahindra & Mahindra fell 2.58%, with the stock falling for the second straight day. The stock was the top loser from the Sensex pack today.
Realty stocks reversed initial gains on worries higher interest rates could dent property demand. Indiabulls Real Estate, DLF, Unitech, Phoenix Mills and Housing Development & Infrastructure fell by between 0.62% to 1.91%.
IT stocks fell on recent weak economic data in the US, the biggest market for Indian IT firms. India’s largest software services exporter TCS fell 0.51%, with the stock falling for the fourth straight day. The stock on Thursday, 5 August 2010, hit a record high of Rs 882. India’s second largest software services exporter Infosys Technologies fell 0.8%, with the stock falling for the fourth straight day. India’s third largest software services exporter Wipro fell 2.14%, with the stock falling for the third straight day.
D-Link (India) shed 4.29% after the stock turned ex-dividend today, 11 August 2010, for a dividend of rupee one per share for the year ended March 2010.
India’s largest engineering and construction firm by sales Larsen & Toubro fell 0.49%. The company announced during market hours on Thursday, 5 August 2010 it bagged orders worth Rs 1749 crore from the metallurgical sector.
Among other capital goods stocks, ABB, Bharat Heavy Electricals BEML, Siemens, Praj Industries fell by between 0.41% to 1.51%.
Shares of financial services firms surged after the central bank said it intends to grant limited number of new bank licences. SREI Infrastructure Finance, IFCI, Mahindra & Mahindra Finance and LIC Housing Finance rose by between 1.36% to 5.61%. Shares Anil Dhirubhai Ambani group firm of Reliance Capital rose 2.93%.
Source:http://www.indiainfoline.com/Markets/News/Financials-rise-as-RBI-releases-discussion-paper-on-new-bank-licenses/3238381685
