Intraday volatility continued as key benchmark indices skidded to hit fresh intraday low in early afternoon trade. The BSE Sensex was down 55.07 points or 0.29%, off close to 180 points from the day's high and up about 5 points from the day's low. The market breadth, indicating the overall health of the market, was weak.
IT stocks rose on positive economic data in US and on weak rupee, with TCS hitting record high. Jaiprakash Associates hit 52-week low. PSU OMCs declined on higher crude oil prices. Index heavyweight Reliance Industries (RIL) extended intraday gain. Coal India dropped after announcing monthly production and offtake data for July 2013.
A bout of initial volatility was witnessed as key benchmark indices trimmed gains after a firm start triggered by the government's decision on Thursday, 1 August 2013, to relax foreign direct investment (FDI) rules in a number of sectors. Intraday volatility continued as the barometer index, the S&P BSE Sensex, regained positive zone after slipping into the red in morning trade. The Sensex once again moved into positive terrain after hitting fresh intraday low in mid-morning trade. The market skidded to hit fresh intraday low in early afternoon trade.
At 12:20 IST, the S&P BSE Sensex was down 55.07 points or 0.29% to 19,262.12. The index fell 62.02 points at the day's low of 19,255.17 in early afternoon trade. The index jumped 134.51 points at the day's high of 19,451.70 in early trade.
The CNX Nifty was down 25 points or 0.44% to 5,702.85. The index hit a low of 5,702.70 in intraday trade. The index hit a high of 5,761.85 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,131 shares fell and 668 shares rose. A total of 119 shares were unchanged.
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Among the 30-share Sensex pack, 18 stocks fell and rest of them rose. Sterlite Industries (down 4.32%), Hindustan Unilever (down 3.42%) and NTPC (down 2.94%), edged lower.
PSU OMCs declined on higher crude oil prices. BPCL (down 3.98%) and HPCL (down 3.27%), edged lower. US crude oil futures for September delivery climbed 41 cents to $108.30 a barrel in electronic trading today, 2 August 2013.
Higher crude oil prices could increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.
The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas after trading hours on Thursday, 1 August 2013, said that the under-recovery on high speed diesel (HSD) applicable for first fortnight of August 2013 went down to Rs 9.29 per/litre from Rs 9.45 per litre for the second fortnight of July 2013. The under-recovery on, both, PDS Kerosene and Domestic LPG, has risen sharply for August 2013. The under-recovery on PDS Kerosene has surged to Rs 33.54 per litre for August 2013, from Rs 30.52 per litre in July 2013. The under-recovery on Domestic LPG has surged to Rs 412 per cylinder for August 2013, from Rs 368.58 per cylinder in July 2013. While the under-recovery on diesel is calculated on fortnightly basis, the under-recovery on PDS Kerosene and Domestic LPG is calculated on monthly basis.
PSU OMCs are currently incurring combined daily under-recovery of about Rs 379 crore on the sale of diesel, PDS Kerosene and Domestic LPG at government controlled prices.
Oil marketing companies hiked petrol price by 70 paise per litre and diesel by 50 paise a litre effective Thursday, 1 August 2013.
Indian Oil Corporation (IOC) dropped 2.32%. The Union Cabinet on Thursday, 1 August 2013, approved a proposal to sell a 10% stake in state-run refiner and fuel retailer Indian Oil Corporation (IOC). The government currently owns 78.92% stake in IOC.
Coal India fell 5.36%. The company announced during market hours today, 2 August 2013, that the company and its subsidiaries achieved 98% of targeted production at 32.77 million tonnes in July 2013. The company achieved 106% of targeted offtake at 38.22 million tonnes in July 2013.
Index heavyweight Reliance Industries (RIL) rose 2.25%, with the stock extending intraday gain.
IT stocks rose on positive economic data in US and on weak rupee. US is the biggest outsourcing market for the Indian IT firms.
TCS rose 1.85% to Rs 1848.70 after hitting a record high of Rs 1849 in intraday trade today, 2 August 2013.
Infosys (up 1.42%), Wipro (up 3.01%) and HCL Technologies (up 2.1%), edged higher.
A weak rupee also supported IT stocks. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. The partially convertible rupee was at 60.78 against the dollar, lower than Thursday's close of 60.43/44.
Jaiprakash Associates declined 0.46% to Rs 32.30 after hitting a 52-week low of Rs 30.40 in intraday trade today, 2 August 2013.
Jindal Steel & Power slumped 9.13% to Rs 183.20 after hitting a 52-week low of Rs 181.55 in intraday trade today, 2 August 2013.
The government on Thursday approved liberalisation of FDI norms in a dozen sectors, including 100 per cent in telecom and higher caps in insurance and defence sectors, to boost the sagging economy. In the contentious insurance sector, it was decided to raise the sectoral FDI cap from 26 per cent to 49 per cent under automatic route under which companies investing do not require prior government approval. A bill to raise FDI cap in the sector is pending in the Rajya Sabha. It was also decided to allow 49 per cent FDI in single brand retail under the automatic route and beyond, through the Foreign Investment Promotion Board (FIPB) route. In case of PSU oil refineries, commodity bourses, power exchanges, stock exchanges and clearing corporations, FDI would be allowed up to 49 per cent under automatic route as against the current routing of the investment through FIPB. In basic and cellular services, FDI was raised to 100 per cent from the current 74 per cent. Of this, up to 49 per cent would be allowed under automatic route and the remaining through FIPB approval. A similar dispensation would be allowed for asset reconstruction companies and tea plantations. FDI of up to 100 per cent was allowed in courier services under automatic route. Earlier, similar amount of investment was allowed through FIPB route. In credit information firms, 74 per cent FDI under automatic route has been allowed. While the FDI cap in defence sector remained unchanged at 26 per cent, it was decided that higher limits of foreign investments in 'state-of-the-art' technology manufacturing would be considered by the Cabinet Committee on Security.
The Union Cabinet on Thursday, 1 August 2013, approved the proposal for amendment in the existing FDI policy in Multi-Brand Retail Trading (MBRT). At least 50% of total FDI brought in the first tranche of $100 million, shall be invested in 'backend infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units. For instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon his business requirements.
The government also said at least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries which have a total investment in plant & machinery not exceeding $2 million. This valuation refers to the value at the time of installation, without providing for depreciation. The 'small industry' status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a 'small industry' for this purpose even if it outgrows the said investment of $ 2 million, during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers cooperatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/ processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.
It added retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.
The amendment in the extant FDI policy relating to Multi-Brand Retail Trading in respect of 'small industry' will bring in a balance between the business exigencies of the MBRT entity and intent of the policy which is to extend the benefits of the FDI policy in multi-brand retail trading to a larger constituency of small industries. The amendment in the provision regarding 'back-end infrastructure' will give more clarity to the policy. The amendment to the provision regarding location of retail outlets will bring in parity in the policy as it is proposed to extend such dispensation to all States.
Asian stocks rose on Friday, 2 August 2013, as global manufacturing reports beat forecasts and central banks in Europe vowed to maintain stimulus. Key benchmark indices in Hong Kong, China, Indonesia, Japan, Singapore, Taiwan and South Korea rose by 0.14% to 3.29%.
China's non-manufacturing purchasing managers' index is scheduled to be released tomorrow, 3 August 2013 after the manufacturing gauge unexpectedly strengthened in July, data yesterday showed.
Indonesia's economy grew less than 6% last quarter, adding to risks for the Southeast Asian nation as investments ease, inflation accelerates and the currency slumps. Gross domestic product increased 5.81% in the three months ended June 30 from a year earlier, the Central Bureau of Statistics said in Jakarta today.
Trading in US index futures indicated that the Dow could gain 23 points at the opening bell on Friday, 2 August 2013. US stocks kicked off the month by rallying Thursday, 1 August 2013, to all-time highs in the wake of upbeat economic signals from around the globe. Factory output from the US to China and Europe expanded in July, reports on Thursday showed, while American jobless claims fell to a five-year low. The Institute for Supply Management's US factory index increased to 55.4 in July 2013, the strongest since June 2011, from 50.9 in June 2013. Readings above 50 indicate expansion.
The influential US non-farm payroll data for July 2013 is due later in the global day today, 2 August 2013. The job data is a key piece of data which the Federal Reserve monitors in its assessment of its monetary-stimulus program. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth.
The European Central Bank on Thursday, 1 August 2013, kept its key financing rate at a record low, and ECB President Mario Draghi said interest rates would remain at or below present levels for an extended period of time. The Bank of England also on Thursday also left its benchmark interest rate and bond-buying program unchanged.
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