Key benchmark indices snapped six-day winning streak today, 5 July 2016 as data showing deceleration in growth in India's services sector in June 2016 and weakness in global stocks weighed on sentiment on the domestic bourses. The barometer index, the S&P BSE Sensex, dropped 121.83 points or 0.45% at 27,156.93, as per the provisional closing data. The Nifty 50 index shed 34.75 points or 0.42% at 8,335.95, as per the provisional closing data.
The Sensex lost 151.46 points or 0.55% at the day's low of 27,127.30 in mid-afternoon trade, its lowest level since 1 July 2016. The barometer index rose 69.90 points or 0.25% at the day's high of 27,348.66 at the onset of the trading session. The Nifty lost 50.75 points or 0.6% at the day's low of 8,319.95 in mid-afternoon trade, its lowest level since 1 July 2016. The index rose 10.75 points or 0.12% at the day's high of 8,381.45 at the onset of the trading session.
The market breadth indicating the overall health of the market was negative. On BSE, 1,464 shares fell and 1,280 shares rose. A total of 149 shares were unchanged. The BSE Mid-Cap index provisionally dropped 0.08%. The BSE Small-Cap index provisionally fell 0.11%. The decline in both these indices was lower than the Sensex's fall in percentage terms.
The outcome of a monthly survey showed that growth in India's services sector decelerated in June 2016 due to a softer expansion in new work. The Nikkei India Services Business Activity Index dropped to 50.3 in June 2016 from 51 in May 2016. Anecdotal evidence suggested that strong competitive pressures restricted new business gains. A faster increase in input costs contrasted with a slowdown in charge inflation. According to respondents, activity growth over the coming year is set to be supported by aggressive marketing campaigns. Some panellists expressed concerns regarding competitive pressures.
In overseas stock markets, Asian and European stocks edged lower as investors became cautious ahead of the release the influential monthly US nonfarm payroll report. Trading in US stock index futures indicated decline for US stocks at the opening bell. Trading in US index futures indicated that the Dow Jones Industrial Average could slide 93 points at the opening bell. The US government will announce nonfarm payroll report for June 2016 on Friday, 8 July 2016.
Shares in mainland China bucked the weak trend in Asia after the latest data showed acceleration in growth in China's services sector in June 2016. The Shanghai Composite index ended 0.6% higher. In Hong Kong, the Hang Seng settled 1.46% lower. The Caixin China services purchasing managers' index (PMI) rose to an 11-month high of 52.7 in June 2016 from 51.2 in May 2016. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction.
The domestic bourses will remain shut tomorrow, 6 July 2016, on account of Id-Ul-Fitr (Ramzan Id).
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The total turnover on BSE amounted to Rs 3152 crore, higher than turnover of Rs 3012.16 crore registered during the previous trading session.
Coal India gained 1.45% after the company announced that a meeting of the board of directors of the company will be held on 11 July 2016, to consider the proposal of buyback of shares. The announcement was made during market hours today, 5 July 2016.
TCS shed 0.71%. The company announced that it is working with the Royal College of Physicians of Ireland (RCPI) to deploy iON Cloud solutions to transform how doctors interact with each other. The partnership will enable the postgraduate medical training college to create an online community which helps doctors share expertise and access online courses throughout their careers. The announcement was made during market hours today, 5 July 2016.
Jaiprakash Associates jumped 28.63% after the company said it sold its cement assets spread across five states to Ultra Tech Cement at an enterprise value of Rs 16189 crore. The board of directors of Jaiprakash Associates (JAL) approved an amendment to the definitive agreement dated 31 March 2016 and also the draft scheme of arrangement with UltraTech Cement (UTCL) for sale of cement business of JAL and its wholly-owned subsidiary, Jaypee Cement Corporation (JCCL). JAL and JCCL will together sell identified operating cement plants with an aggregate capacity of 17.20 million tonnes per annum (MTPA) spread over the states of Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh and a cement grinding unit of 4 MTPA capacity which is currently under implementation in Uttar Pradesh. An additional amount of Rs 470 crore will be paid by UTCL to JAL for completion of the grinding unit under implementation.
The transaction is subject to various regulatory approvals including the approval of stock exchanges, Competition Commission of India, financial institutions and banks, shareholders and creditors and sanction of the scheme of arrangement by High Courts at Mumbai and Allahabad. The consummation of the transaction is expected to take 9 to 12 months.
Commenting on the divestment, Manoj Gaur, executive chairman, Jaypee Group said that the Jaypee Group is determined to reduce its overall debt through its proactive divestment initiatives to help the Group tide these current turbulent times caused by economic slowdown in the country. He added that post this deal, Jaypee Group will retain an aggregate cement manufacturing capacity of 10.60 MTPA with plants spread in the states of Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka. The Group would continue to leverage expertise in the fields of engineering & construction, real estate and project execution in a committed manner.
After the consummation, UTCL's cement cement capacity will stand augmented to 91.1 MTPA, including its overseas operations. Shares of Ultra Tech Cement dropped 0.99% to Rs 3,376.90. The stock hit high of Rs 3,600 and low of Rs 3,355.85 in intraday trade.
Auto stocks declined. Mahindra & Mahindra (M&M) (down 0.72%), Eicher Motors (down 0.46%), Hero MotoCorp (down 1.76%), Tata Motors (down 1.75%), Bajaj Auto (down 1.28%) and TVS Motor Company (down 2.27%) declined. Maruti Suzuki India rose 0.02%.
Ashok Leyland fell 5.67% after a domestic brokerage reportedly downgraded the stock to 'sell', citing signs of demand moderation in commercial vehicles segment. According to reports, the brokerage has reduced its target price on Ashok Leyland stock to Rs 85 from Rs 110 earlier. The brokerage has reportedly said in a research note that freight demand in the economy is weak while replacement demand for medium & heavy commercial vehicles is also moderating. Slowdown in the below 25 ton segment is even more steep while truck freight rates are not increasing, the brokerage has said according to media reports.
The BSE Auto index had outperformed the market over the past one month till 4 July 2016, rising 2.5% compared with 1.62% rise in the Sensex. The index had also outperformed the market in past one quarter, gaining 10.02% as against Sensex's 7.4% rise.
L&T rose 0.5% after the company announced that Mumbai Metro Rail Corporation has announced the commencement of the Mumbai Metro Line 3 project to be executed by Heavy Civil Infrastructure Business of L&T Construction, along with its partner, STEC of China, for a value worth Rs 5273 crore. The scope of the project includes design and construction of underground stations and associated tunnels for Package 1 and Package 7 in Line 3 of Mumbai metro project. The prestigious EPC project includes underground stations at Cuffe Parade, Vidhan Bhavan, Church Gate, Hutatma Chowk with associated tunnels from Cuffe Parade to CST for Package 1 and underground stations at Marol Naka, MIDC and SEEPZ with associated tunnels from International Airport to SEEPZ for Package 7. The project is scheduled to be completed in 48 months. The announcement was made during market hours today, 5 July 2016.
Separately, L&T announced that the company through its joint venture companies L&T-MHPS Boilers Private Limited (LMB) and L&T-MHPS Turbine Generators Private Limited (LMTG) has secured export orders worth $71.3 million from Mitsubishi Hitachi Power Systems Limited (MHPS). LMB contract includes supply of pressure parts for 2,000 megawatts (MW) power plant in Indonesia and contains furnace header, panel, coils and piping. LMB is currently executing nine export orders for the supply of pulverisers and pressure parts for various MHPS projects in Japan and Indonesia. LMTG contract includes supply of turbines for the 2,000 MW plant. The order takes LMTG's tally of export orders to 22 units out of which 11 are presently being executed, thus increasing its global footprint of subcritical to ultra supercritical steam turbines and components to the Americas, Middle East and the Far East. The announcement was made during market hours today, 5 July 2016.
Meanwhile, Prime Minister Narendra Modi today, 5 July 2016, carried out a major expansion of his Council of Ministers, inducting 19 new faces, including several dalit and OBC leaders from poll-bound states like Uttar Pradesh. Environment minister Prakash Javadekar has been promoted to Cabinet rank. Five ministers in Modi's council were reportedly dropped to make way for the new entrants since constitutionally the council can have only 82 ministers. According to reports, the five ministers dropped from the Cabinet are Minister of State (MoS) for Chemicals and Fertilizers Nihal Chand Meghwal, MoS HRD Ram Shankar Katheria, MoS Water Resources Sanwar Lal Jat, MoS Tribal Affairs Manuskhbhai D. Vasva and MoS Agriculture M.K. Kundariya.
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