Prime Minister Narendra Modi's comments in an interview to a foreign newspaper indicating that further economic reforms are on the cards triggered the latest rally on the domestic bourses. The barometer index, the S&P BSE Sensex, surged 485.51 points or 1.88% to settle at 26,366.68. The gains for the Sensex were higher in percentage terms than those for the Nifty 50 index. The Nifty surged 134.75 points or 1.7% to settle at 8,069.65. The Nifty moved past the the psychologically important 8,000 level and the Sensex surpassed the psychologically important 26,000 mark. The Nifty hit a 30-week closing high. The Sensex attained its highest closing level in more than 29 weeks.
Modi said he had opened up more of the economy to foreign investment and made changes to curb corruption, fill gaps in rural infrastructure and make it easier to do business. He also said that he has an enormous task ahead. The Prime Minister said that he expects the goods and services tax (GST) bill to pass this year. The BJP led National Democratic Alliance (NDA) government completed two years in office today, 26 May 2016. The prime minister said that he would look to state governments to further liberalize the country's rigid labour laws.
Strong Q4 March 2016 results from engineering and construction major L&T and the company's guidance of a 15% growth in order inflow during the current financial year also aided the latest rally on the bourses. L&T shares surged 13.85% after the company announced the results and the order inflow guidance after trading hours yesterday, 25 May 2016.
The Sensex and the Nifty extended gains during the second half of the trading session after hovering in positive zone throughout the trading session after opening with upward gap.
Capital goods stocks edged higher after the Union Cabinet approved the National Capital Goods policy to support and boost development of this crucial sector. Bank stocks edged higher after global credit rating agency Moody's Investors Service said in a report that the new bankruptcy code will address several key inefficiencies in the current legal framework for asset resolution in India and is credit positive for Indian banks. Yes Bank edged higher after the Cabinet Committee on Economic Affairs cleared the bank's proposal for increase in foreign investment limit in the bank's equity capital to 74% from 41.87% without any sub-limits.
In overseas stock markets, Asian and European stocks edged higher as gains in crude oil prices boosted investors' risk appetite. Energy and materials shares sector stocks led gains in US stocks yesterday, 25 May 2016, following a jump in crude oil prices triggered by a weekly report showing a decline in US crude inventories.
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The Sensex surged 485.51 points or 1.88% to settle at 26,366.68, its highest closing level since 4 November 2015. The Sensex jumped 517.77 points, or 2% at the day's high of 26,398.94. The index rose 60.34 points, or 0.23% at the day's low of 25,941.51.
The Nifty surged 134.75 points or 1.7% to settle at 8,069.65, its highest closing level since 29 October 2015. The Nifty jumped 148.10 points, or 1.87% at the day's high of 8,083. The index rose 13.60 points, or 0.17% at the day's low of 7,948.50.
The market breadth indicating the overall health of the market was positive. On BSE, 1,408 shares rose and 1,142 shares fell. A total of 197 shares were unchanged. The BSE Mid-Cap index rose 1%. The BSE Small-Cap index rose 0.86%. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 2920 crore, higher than turnover of Rs 2323.39 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE Capital Goods index (up 8.78%), the S&P BSE Industrials index (up 3.97%), the S&P BSE Bankex (up 2.22%) and the S&P BSE Finance index (up 1.89%) outperformed the Sensex. The S&P BSE Realty index (up 1.82%), the S&P BSE Power index (up 1.51%), the S&P BSE FMCG index (up 1.23%), the S&P BSE IT index (up 1.23%), the S&P BSE Teck index (up 1.14%), the S&P BSE Auto index (up 1.09%), the S&P BSE Oil & Gas index (up 0.96%), the S&P BSE Metal index (up 0.89%), the S&P BSE Basic Materials index (up 0.85%), the S&P BSE Consumer Discretionary Goods & Services index (up 0.84%), the S&P BSE Utilities index (up 0.77%), the S&P BSE Energy index (up 0.49%), the S&P BSE Telecom index (up 0.4%) and the S&P BSE Consumer Durables index (up 0.07%) underperformed the Sensex. The S&P BSE Healthcare index ended almost unchanged at 15,098.72, underperforming the Sensex.
Capital goods stocks edged higher after the Union Cabinet approved the National Capital Goods policy to support and boost development of this crucial sector. ABB India (up 1.83%), Bharat Heavy Electricals (Bhel) (up 4.77%), BEML (up 1.02%), Bharat Electronics (up 1.02%), Punj Lloyd (up 2.15%), Siemens (up 4.13%) and Thermax (up 3.19%) gained. Crompton Greaves fell 1.23%.
The National Capital Goods policy aims at increasing production of capital goods from Rs 2.30 lakh crore in 2014-15 to Rs 7.50 lakh crore in 2025 and raising direct and indirect employment from the current 8.4 million to 30 million. The policy envisages increasing exports from the current 27% to 40% percent of production. It will increase the share of domestic production in India's demand from 60% to 80%, thus making India a net exporter of capital goods.
L&T spurted after the company's management said in a conference call held after the announcement of the company's Q4 March 2016 results yesterday, 25 May 2016, that it expects L&T's order inflow to rise 15% in the year ending 31 March 2017 (FY 2017). The stock jumped 13.85% to Rs 1,470.10. The stock hit a high of Rs 1,484 and a low of Rs 1,389.75 in intraday trade. L&T expects 12-15% growth in revenue in the year ending 31 March 2017 (FY 2017). L&T reported 18.55% rise in consolidated net profit to Rs 2453.64 crore on 17.88% rise in total income to Rs 33375.26 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 25 May 2016.
L&T said that the order inflow during Q4 March 2016 was Rs 43334 crore of which one third constituted international orders. The order intake of L&T's infrastructure division rose just 3% at Rs 29103 crore in Q4 March 2016 over Q4 March 2015. The order intake of its hydrocarbon divsion rose sharply to Rs 4963 crore in Q4 March 2016 from Rs 699 crore in Q4 March 2015.
L&T's order book stood at Rs 249949 crore as on 31 March 2016, higher by 7% on year-on-year basis. International order book constituted 28% of the total order book.
L&T said in a statement that the company continues its emphasis on operational efficiencies, faster execution of projects on hand and reduced working capital levels. Given its track record, diversified portfolio and healthy order book, the company is focusing on profitable execution of the existing order book and is confident of its growth in the near to medium term by leveraging its presence in both the domestic and international segments.
State-run ONGC rose 2.05% to Rs 214.50 after net profit rose 12.22% to Rs 4416.11 crore on 15.42% decline in total income to Rs 19776.70 crore in Q4 March 2016 over Q4 March 2015. The result was announced at the fag end of the trading session today, 26 May 2016.
ONGC's net profit fell 9.75% to Rs 16003.65 crore on 4.14% decline in total income to Rs 84584.99 crore in the year ended 31 March 2016 over the year ended 31 March 2015.
In terms of the decision of the Government of India, the company shared under-recoveries of oil marketing companies (OMCs) amounting to Rs 1096 crore for the year ended March 2016 (FY 2016) by allowing discount in the prices of crude oil based on the rates of discount communicated by Petroleum Planning and Analysis Cell (PPAC). The discount was sharply lower than Rs 36300 crore in the year ended 31 March 2015 (FY 2015). The impact on net profit was Rs 607 crore in FY 2016 as compared to Rs 20437 crore in FY 2015.
ONGC's consolidated net profit fell 22.96% to Rs 14123.80 crore on 16.63% decline in total income to Rs 139364.35 crore in the year ended 31 March 2016 over the year ended 31 March 2015.
Bank stocks edged higher after global credit rating agency Moody's Investors Service said in a report that the new bankruptcy code will address several key inefficiencies in the current legal framework for asset resolution in India and is credit positive for Indian banks. Among public sector banks, State Bank of India (up 5.22%), Canara Bank (up 2.51%), Bank of Baroda (up 1.28%), Vijaya Bank (up 1.67%), Union Bank of India (up 1.51%), Bank of India (up 2.41%), Punjab National Bank (up 0.74%), Andhra Bank (up 2.67%), IDBI Bank (up 0.46%) edged higher.
Among private sector banks, Federal Bank (up 4.15%), ICICI Bank (up 1.83%), Axis Bank (up 3.78%), Kotak Mahindra Bank (up 3.05%), IndusInd Bank (up 0.66%) and HDFC Bank (up 0.84%) edged higher.
Moody's said that the proposed bankruptcy law will reduce the duration of insolvency resolution process (IRP) of a delinquent borrower to maximum of 270 days which in turn will strengthen the banks' bargaining power over delinquent borrowers. The bankruptcy law will give creditors overriding authority to approve terms of any restructuring package of a delinquent borrower. Moody's also said that new law may only a have a limited benefit in addressing the current asset quality issues facing Indian banks. According to Moody's, Indian banks will still have limited avenues available to dispose off distressed assets and that the banks will in general remain reluctant to make appropriate haircuts to reflect their current weak operating conditions.
Yes Bank rose 2.93% after the Cabinet Committee on Economic Affairs cleared the bank's proposal for increase in foreign investment limit in the bank's equity capital to 74% from 41.87% without any sub-limits. In late April 2016, the Reserve Bank of India (RBI) had raised the ceiling on investment in the bank's equity capital by foreign institutional investors to 60% from 49% after the bank's board of directors and shareholders approved the proposal. The RBI had at time capped total foreign holding in the bank from all sources at 60%
Tata Steel rose 0.83% at Rs 327.05 after the company trimmed losses in Q4 March 2016. The company reported consolidated net loss of Rs 3213.76 crore in Q4 March 2016, lower than net loss of Rs 5674.29 crore in Q4 March 2015. Tata Steel's total income fell 12.33% to Rs 29636.69 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 25 May 2016.
There was a drop in realisations from steel sales across the group as steel prices slid to 10-year lows. However, despite these challenges, the consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased in Q4 March 2016 on the back of higher deliveries and better operating margins in India, cost benefits from European restructuring and improved performance of the South East Asia operations. The company continued to divest its non-core assets and raised Rs 4478 crore through monetisation of same.
Given the challenging situation faced in Europe, the company has taken several steps to restructure the European operations. Tata Steel UK signed an agreement with Greybull Capital to sell its Long Products Europe business. The deal will 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. The Tata Steel Europe board under the advise of the Tata Steel board is actively reviewing all options for the Tata Steel UK Business including a potential sale of the business.
Tata Steel announced the start of commercial production at the 3 million tonnes per annum (mtpa) Kalinganagar steel plant. The stabilisation process is currently underway. The facility will produce flat steel for high end applications enabling the company to expand its product portfolio in the ship building, defence equipment, energy & power, infrastructure, and aviation sectors. It will also consolidate Tata Steel's leadership position in the domestic automotive segment.
KNR Constructions rose 2.52% after the company secured order worth Rs 414.90 crore from Ministry of Road Transport and Highways for rehabilitation and up-gradation of Dindigul-Bangalore road to four lane with paved shoulder in Tamil Nadu on engineering, procurement and construction basis to be completed within a period of 24 months from the appointed date.
The Sensex and the Nifty edged higher for the third day in a row. The Sensex has gained 1136.32 points or 4.5% in three trading sessions from its close of 25,230.36 on 23 May 2016. The Sensex has gained 760.06 points or 2.96% in this month so far (till 26 May 2016). The Sensex has risen 249.14 points or 0.95% in calendar year 2016 so far (till 26 May 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 3,872.07 points or 17.21%. The Sensex is off 2,211.65 points or 7.73% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,658.06 points or 12.18% from a record high of 30,024.74 hit on 4 March 2015.
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