A bout of initial volatility was witnessed as key benchmark indices reversed initial losses and hit their highest level in almost two weeks with data showing substantial purchases of Indian stocks by foreign funds last month boosting sentiment. The barometer index, BSE Sensex, was up 34.49 points or 0.2%, off about 10 points from the day's high and up close to 70 points from the day's low.
Index heavyweight Reliance Industries (RIL) edge lower in early trade. Another index heavyweight and cigarette maker ITC edge higher. Some realty stocks edge lower after Reserve Bank of India's (RBI) kept repo rate unchanged after first quarter review of the Monetary Policy 2012-13 Tuesday, 31 July 2012. Cipla surged to 52-week high after strong Q1 results.
Data showing substantial purchases of Indian stocks by foreign funds last month underpinned sentiment on the domestic bourses. Foreign institutional investors (FIIs) bought shares worth Rs 879.97 crore on Tuesday, 31 July 2012, as per the provisional data from the stock exchanges. FIIs bought shares worth net Rs 10272.70 crore in July 2012 (till 30 July 2012), as per data from Securities & Exchange Board of India.
At 09:35 IST, the BSE Sensex was up 34.49 points or 0.2% to 17,270.57. The index rose 45.58 points at the day's high of 17,281.76 in early trade, its highest level since 19 July 2012. The index fell 35.91 points at the day's low of 17,200.27 in early trade.
The S&P CNX Nifty was up 8.50 points or 0.16% to 5,237.50. The Nifty hit high of 5,240.45 in intraday trade, its highest level since 19 July 2012. The Nifty hit a low of 5,214.05 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 808 shares rose and 370 shares fell. A total of 51 shares were unchanged.
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From the 30-share Sensex pack, 22 stocks rose and the rest of them fell. HDFC Bank, Sterlite Industries and Coal India dropped by between 0.72% to 0.76%. SBI, Bharti Airtel and Sun Pharmaceutical Industries rose by between 0.67% to 0.78%.
Index heavyweight and cigarette maker ITC rose 0.02% to Rs 257.75. The stock had hit a record high of Rs 260.90 in intraday trade on Tuesday, 31 July 2012. The company last week reported 20.21% growth in net profit to Rs 1602.14 crore on 15.34% growth in net sales to Rs 6652.21 crore in Q1 June 2012 over Q1 June 2011. Despite series of tax hikes, ITC's performance in cigarettes business remains robust and displays pricing power for the company.
Index heavyweight Reliance Industries (RIL) declined 0.32%. RIL has bought back 3.66 crore shares for about of Rs 2617.57 crore till 24 July 2012 under its ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 that the company's buyback program represents a highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future.
IDBI Bank declined 1.34% as the state-run bank's ratio of net non-performing assets (NPA) rose to 2.07% of net advances as on 30 June 2012 from 1.61% as on 31 March 2012 and 1.25% as on 30 June 2011. The ratio of gross NPA stood at 3.24% of gross advances as on 30 June 2012, higher than 2.49% as on 31 March 2012 and 2.1% as on 30 June 2011.
IDBI Bank's net profit rose 27.52% to Rs 427.34 crore on 12% growth in total income to Rs 6786.81 crore in Q1 June 2012 over Q1 June 2011. The bank announced the result after trading hours on Tuesday.
Jaiprakash Associates rose 0.45%. The company said after market hours on Tuesday its net profit fell 24.6% to Rs 138.84 crore on 2.1% growth in net sales to Rs 2963.57 crore in Q1 June 2012 over Q1 June 2011.
ACC declined 0.05% as the stock turned ex-dividend today, 1 August 2012, for interim dividend of Rs 11 per share for the year ending 31 December 2012.
Nestle India rose 0.58%. The stock turned ex-dividend today, 1 August 2012, for interim dividend of Rs 18 per share for the year ending 31 December 2012.
Cipla jumped 5.36% to Rs 357.55 after company said after market hours on Tuesday its profit after tax jumped 58.2% to Rs 400.76 crore on 23.6% growth in income from operations to Rs 2012.44 crore in Q1 June 2012 over Q1 June 2011. The stock hit a 52-week high of Rs 363.60 in intraday trade today. Cipla said its domestic sales grew by more than 30% and export sales grew by about 18% in Q1 June 2012.
Shares of Cipla turned ex-dividend today, 1 August 2012, for dividend of Rs 2 per share for the year ending 31 March 2012.
Car major Maruti Suzuki India rose 0.56%. The company on Tuesday, 31 July 2012, said the management remains concerned about the safety and security of its employees and hence it is not in a position to take a decision on restarting operations as the Manesar plant in Haryana. The management will announce its decision to this effect only when it is assured of employee safety, Maruti said in a statement. The labour violence which rocked the plant on 18 July 2012 led to nearly 100 injured and one fatality. Maruti on 21 July 2012 declared lock-out at unit.
Some realty stocks edge lower after Reserve Bank of India's (RBI) kept repo rate unchanged after first quarter review of the Monetary Policy 2012-13 Tuesday, 31 July 2012. Purchases of both residential and commercial property are largely driven by finance. DLF, Unitech and Oberoi Realty shed by between 0.02% to 1.39%.
The Indian government on Tuesday, 31 July 2012, announced a key cabinet reshuffle with Home Minister P. Chidambaram named as the new Finance Minister. Power minister Sushilkumar Shinde was named as the new Home Minister. Minister of Corporate Affairs M. Veerappa Moily has been assigned the additional charge of the Ministry of Power.
The post of the Finance Minister was left empty after Pranab Mukherjee resigned from the post to contest Presidential election. Prime Minister Dr. Manmohan Singh handled the Finance Ministry portfolio for a brief period after Pranab Mukherjee's resignation as Finance Minister on 26 June 2012. This is the third time that Chidambaram is holding the Finance Ministry portfolio.
The manufacturing Managers' Index (PMI) for July 2012 will be out today, 1 August 2012. The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years.
An panel of ministers on Tuesday, 31 July 2012, approved steps to contain the impact of a near-drought situation. The steps include providing diesel-price subsidies to farmers, increasing the subsidy on seed supplies, and removal of the import tax on oil meals, Farm Minister Sharad Pawar told reporters on Tuesday. He said there is a major decline in planting areas of rice, coarse cereals and lentils due to weak monsoon rains. The diesel-price subsidy announced by the government will be 50% on the sale price for drought-hit farmers and total expenditure would be around Rs 1260 crore, which would be shared equally by the central government and respective state governments.
The monsoon rainfall until July 31 was 19% below the long-term average, with some areas getting little or no rain and some others seeing excessive rain and flooding. There will be an impact on foodgrain output, but it is too early to give any estimate, Mr. Pawar said. The worst affected states due to scanty rains are Punjab, Haryana, Karnataka, and parts of Maharashtra and Gujarat, he added. Punjab and Haryana are major rice producers. Maharashtra and Gujarat are major producers of oilseeds and cotton.
With the monsoon season almost halfway through, India is facing the prospect of a full-blown drought in some of its provinces. Mr. Pawar said the government will raise subsidies for the supply of various seeds for alternate crops in affected areas.
Minister of State for Agriculture Harish Rawat early this week said rainfall in August, a critical month for summer crops, is likely to be 84%-85% of the long-term average, below the previous forecast of 96%. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year.
The All India Consumer Price Index Number for Industrial Workers (CPI-IW) for the month of June 2012 increased by 2 points and stood at 208. The point to point rate of inflation based on CPI-IW (General) declined to 10.05% in June 2012 from 10.16% in May, 2012. Inflation based on Food Index declined to 10.45% in June 2012 from 10.61% in May 2012, the Ministry of Labour & Employment said in a statement on Tuesday, 31 July 2012.
The Reserve Bank of India (RBI) on Tuesday, 31 July 2012, kept its key policy rate viz. the repo rate unchanged at 8% after first quarter review of Monetary Policy 2012-13 in an effort to keep a lid on inflation and inflation expectations. The central bank cut the statutory liquidity ratio (SLR) of scheduled commercial banks to 23% their net demand and time liabilities (NDTL) from current 24%, with effect from the fortnight beginning 11 August 2012, to ensure that liquidity pressures do not constrain the flow of credit to productive sectors of the economy. The cash reserve ratio (CRR) of scheduled banks has been retained at 4.75% of their net demand and time liabilities.
RBI said the current economic slowdown has to be seen in reference to the trend rate of growth in order to assess its inflationary implications. In this context, investment activity has remained subdued over the last two years, RBI said. External demand has also remained weak due to the slowdown in global growth. Consequently, the post crisis trend rate of growth, which was earlier estimated at 8% has dropped to 7.5%. While the current rate of growth is clearly lower than trend, the output gap will remain relatively small. Under these conditions, demand pressures on inflation can re-emerge quite quickly, exacerbating the existing supply pressures, RBI said.
RBI said the conduct of monetary policy will continue to condition and contain perception of inflation in the range of 4% to 4.5%. This is in line with the medium-term objective of 3% inflation consistent with India's broader integration into the global economy, RBI said.
Principal adviser to the Planning Commission Pronab Sen last week said slowing investment due to weak confidence in the economy is hurting growth. Mr. Sen said Indian companies aren't facing any shortage of funds. Many of them are sitting on piles of cash and aren't even repatriating overseas borrowings, he added.
The government should take steps to meet the fiscal deficit target set out in the budget and that would improve sentiment and revive investments, Mr. Sen said. He said the government should scale back its spending and slash subsidies on fuels, food and fertilizers to help check its budget deficit.
Slowing growth in investment remains a cause for concern for India. Investment makes up 35% of India's economic activity.
The services purchasing managers' index for July 2012 is expected to be released on Friday, 3 August 2012. HSBC's services purchasing managers' index, which gauges the activity of around 400 firms in India, dropped to 54.3 in June from 54.7 in May. However, it has kept above the 50 mark that signifies growth since November.
Prime Minister Dr. Manmohan Singh has decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued Monday, 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said.
Dr. Singh last month constituted an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012.
An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty.
Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government for implementing the controversial anti-avoidance tax proposal viz. the GAAR state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities.
Voting for the country's new vice president takes places on 7 August 2012 -- a day before the monsoon session of parliament kicks off.
The monsoon session of the parliament will begin on 8 August 2012 and the session will conclude on 7 September 2012, Parliamentary Affairs Minister Pawan Kumar Bansal said on Wednesday, 18 July 2012. The government hasn't yet finalized the agenda for the session, but the expectation is that Prime Minister Dr. Manmohan Singh -- who took charge of the finance ministry after Mr. Pranab Mukherjee resigned to contest the presidential elections -- will try and push through long-pending legislations. These could include the Direct Tax Code and the insurance, pension and banking bills. The government would also place before lawmakers the first demand for additional spending for this fiscal year which began April 1.
Corporate affairs minister Veerappa Moily said in a newspaper interview published on 11 July 2012 that the government is hopeful of the passage of the pension bill in the monsoon session of parliament.
Investors' focus is currently on Q1 June 2012 earnings. DLF and Steel Authority of India unveil Q1 results on 6 August 2012. Mahindra & Mahindra and Bharti Airtel unveil Q1 results on 8 August 2012. Tata Motors and Ranbaxy Laboratories unveil quarterly results on 9 August 2012. Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on 10 August 2012. ONGC announces Q1 results on 11 August 2012. Coal India announces Q1 results on 13 August 2012. Hindalco Industries and IDFC will unveil Q1 results on 14 August 2012.
Asian stock moved mostly lower Wednesday, the first day of the new month, as investors fretted that central bankers wouldn't introduce major stimulus measures when the US Federal Reserve wraps up its two-day meeting later in the global trading day and the European Central Bank and the Bank of England meet Thursday. Optimism for central-bank monetary measures rose last week when ECB President Mario Draghi said that the bank would do whatever was needed to save the euro. Key benchmark indices in Indonesia, South Korea, Japan, Singapore and Taiwan fell by between 0.01% to 0.89%. Key benchmark indices in China and Hong Kong rose by between 0.04% to 0.92%.
China manufacturing activity weakened at a slower rate in July, as an increase in factory output helped offset a sharp drop in employment, according to data released by HSBC on Wednesday. HSBC's final reading of its manufacturing Purchasing Managers' Index came in at 49.3 for July, up from June's print at 48.2, but still below the 50-point threshold that divides expansion from contraction. The final result fell short of the survey's preliminary reading, released late last month, which had come in at 49.5.
Data released earlier on Wednesday showed an official gauge of China's manufacturing PMI based on a survey compiled by the China Federation of Logistics & Purchasing dropped to 50.1 in June from 50.2 in the previous month.
The Governing Council of the European Central Bank (ECB) holds a monthly monetary policy review on interest rates for the euro area on Thursday, 2 August 2012. ECB is widely expected to leave interest rates unchanged after it cut the benchmark one-week lending rate to a fresh record low earlier this month. ECB President Mario Draghi last week said that the bank would do whatever was needed to save the euro.
The Monetary Policy Committee of Bank of England holds a monthly policy meeting on interest rates in the United Kingdom (UK) on the same day.
Germany's Federal Constitutional Court will announce a decision on lawsuits challenging the country's participation in the permanent euro-zone rescue fund, the European Stability Mechanism, and the fiscal pact on 12 September 2012. The court held a public hearing earlier this month to examine complaints that participation in the fund and the fiscal pact violated German law by taking some authority over the national budget away from parliament.
US shares ended with mild losses on Tuesday, as investors fretted that central bankers wouldn't introduce major stimulus measures when the US Federal Reserve wraps up its two-day meeting later in the global trading day and the European Central Bank and the Bank of England meet Thursday.
The Federal Open Market Committee's (FOMC) two-day policy meeting on US interest rates ends today, 1 August 2012. It remains to be seen if the FOMC announces or at least gives indication of another round of asset purchases, known as quantitative easing, to give the US stalling economy a jolt. US gross domestic product which is the value of all goods and services produced in the country, rose at a sluggish 1.5% clip in Q2 June 2012 as consumers pared spending and businesses invested at a slower pace, the Commerce Department reported on 27 July 2012.
A report from Automatic Data Processing, Inc. (ADP) on private-sector employment in the United States in July 2012 is due on Wednesday, 1 August 2012. On the same day, a manufacturing survey for July 2012 from the Institute for Supply Management is also due for release. Data on weekly jobless claims in the US and data on factory orders are due for release on Thursday, 2 August 2012. On the same day, US retailers will unveil monthly same-store sales data.
The influential US government data on non-farm payroll for July 2012 is due on Friday, 3 August 2012. In June, the United States created 80,000 jobs, the third straight month of job growth of under 100,000.
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