Market surges in early trade

Key benchmark indices surged in early trade as firmness in Asian stocks boosted sentiment. The barometer index, the S&P BSE Sensex, was currently up 343.08 points or 1.29% at 26,942.19. The market breadth indicating the overall health of the market was strong.

Tata Motors rose after the company announced the closing of its Rs 7500 crore rights issue offer period on 2 May 2015. Hero MotoCorp (HMCL) declined after reporting weak Q4 results. FMCG major Hindustan Unilever gained ahead of its Q4 March 2015 earnings today, 8 May 2015.

In overseas markets, Asian stocks edged higher today, 8 May 2015, on signs global bond markets are stabilising after a big selloff. US stocks rose yesterday, 7 May 2015, a day after they fell in the wake of the Federal Reserve chief's warning over high equity valuations.

Foreign portfolio investors sold shares worth a net Rs 1360.69 crore yesterday, 7 May 2015, as per provisional data. Domestic institutional investors (DIIs) bought shares worth a net Rs 1158.02 crore yesterday, 7 May 2015, as per provisional data released by the stock exchanges.

At 9:25 IST, the S&P BSE Sensex was up 343.08 points or 1.29% at 26,942.19. The index surged 374.72 points at the day's high of 26,973.83 in early trade. The index rose 215.27 points at the day's low of 26,814.38 in early trade.

The CNX Nifty was up 101.30 points or 1.26% at 8,158.60. The index hit a high of 8,168.85 in intraday trade. The index hit a low of 8,123.45 in intraday trade.

The BSE Mid-Cap index was up 140.23 points or 1.39% at 10,205.79. The BSE Small-Cap index was up 172.70 points or 1.62% at 10,820.69. Both these indices outperformed the Sensex.

The market breadth indicating the overall health of the market was strong. On BSE, 1,017 shares rose and 182 shares fell. A total of 27 shares were unchanged.

FMCG major Hindustan Unilever gained 0.98% ahead of its Q4 March 2015 earnings today, 8 May 2015.

Hero MotoCorp (HMCL) declined after reporting weak Q4 results. The stock fell 3.63% to Rs 2,268.55. The company's net profit after exceptional item fell 14.05% to Rs 476.53 crore on 4.31% growth in total turnover (net sales & other operating income) to Rs 6793.87 crore in Q4 March 2015 over Q4 March 2014. The result was announced after market hours yesterday, 7 May 2015.

There was an impairment cost of Rs 155.04 crore ($25 million) in Q4 March 2015, pertaining to equity investment in Erik Buell Racing, Inc. a Delaware Corporation (EBR) through HMCL NA Inc, subsidiary of HMCL. EBR has filed an Assignment for Benefit of Creditors under Chapter 128 of the Wisconsin Statutes, which is similar to the federal bankruptcy law of the United States of America.

Pawan Munjal, Vice Chairman, Chief Executive Officer & Managing Director of HMCL said that the auto industry has remained sluggish due to the slowing rural economy on account of poor crop realization and moderating wages in the rural markets. Going forward, the company remains cautiously optimistic in its near to medium term outlook, Munjal said. An overall improvement in the economy and positive market sentiments are required for the industry to get back to the trend of healthy double digit growth, he added. HMCL will continue to focus on its strengths and keep providing the best of products to its customers in India and across the globe, Munjal said.

Index heavyweight Reliance Industries rose 0.14%. The stock turned t ex-dividend today, 8 May 2015, for dividend of Rs 10 per share for the year ended 31 March 2015.

Tata Motors rose 2.15% after the company announced after market hours yesterday, 7 May 2015, the closing of its Rs 7500 crore rights issue offer period on 2 May 2015. Tata Motors offered up to 15.06 crore ordinary shares at a price of Rs 450 each in the ratio of 6 ordinary shares for every 109 fully paid-up ordinary shares and up to 2.65 crore 'A' ordinary shares at a price of Rs 271 each in the ratio of 6 'A' ordinary shares for every 109 fully paid-up 'A' ordinary shares, in each case on a rights basis. The share issue commenced on 17 April 2015 and closed on 2 May 2015. Tata Motors also facilitated participation in the share issue by eligible holders of its American Depositary Shares by offering up to 64.09 lakh American Depositary Shares, each representing 5 ordinary shares (ADSs), at a price of $39.42 per ADS at the rate of 0.055045 ADS rights for each ADS held.The Share Issue was oversubscribed by 1.21 times and Tata Motors collected an amount of Rs 9040.56 crore. Ordinary shares were oversubscribed by 1.17 times, with an amount of Rs 7956.73 crore collected on applications and 'A' Ordinary Shares were oversubscribed by 1.51 times, with an amount of Rs 1083.83 crore collected on applications.

The proceeds from the share issue are intended to be used for funding expenditure towards plant and machinery, research and product development, repayment in full or in part of certain long-term and shortterm borrowings, and general corporate purposes.

Meanwhile, proceedings in parliament are being keenly watched. The Lok Sabha on 6 May 2015, passed the Constitution Amendment Bill in respect of goods and services tax (GST). A constitutional amendment bill needs to be approved by a two-thirds majority in both houses of Parliament and ratified by half the state legislative assemblies before coming into effect. While the Bharatiya Janata Party-led National Democratic Alliance found it easy to pass the GST bill in the Lok Sabha where it is in a majority, the real test will come in the Rajya Sabha where the ruling alliance is in a minority, with 62 members in a 245-member house. The bill is expected to be introduced in the Rajya Sabha later during the budget session which ends on 13 May.

GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. At the state level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.

Meanwhile, it remains to be seen if the government is able to pass the Land Acquisition Bill during the ongoing Budget session. The amended Land Acquisition Bill seeks to scrap the consent clause for acquiring land for five sectors industrial corridors, public private partnership projects, rural infrastructure, affordable housing and defence. The bill also exempts projects in these five areas from social impact assessments and allows the purchase of irrigated multi-cropped land and other types of agricultural land.

Meanwhile, the government reportedly moved yesterday, 7 May 2015, to mollify foreign investors who were hit by bills for several years of taxes on previously untaxed gains, triggering a sell-off in financial markets. The government set up a panel to suggest ways to resolve the MAT dispute as well as some other tax issues yesterday, 7 May 2015.

Indian tax authorities reportedly suffered a setback on 5 May 2015, in their efforts to impose a so-called minimum alternative tax (MAT) on foreign investors, as UK-based Aberdeen Asset Management won temporary relief from a tax bill it was facing. Aberdeen had filed its challenge with the Bombay High Court in response to a claim for a MAT payment of about Rs 20 lakhs for one of its funds. The court granted a stay on the start of any penalty proceedings against Aberdeen by the tax authorities and asked the Income Tax Department to submit its response to Aberdeen's challenge by June 10, adding the court had scheduled a hearing on the case on 23 June 2015.

Last week, five FPIs came together to file a writ petition in the Bombay high court, challenging the income-tax department's demand for payment of MAT. Levy of MAT on foreign portfolio investors' past income has unsettled investors. The government has said that from April onwards the tax will no longer apply. But it has also refused to make that retrospective, leaving foreign funds liable to pay the tax for previous years. So far, most of the tax demand directing payment of MAT by FPIs has been only for the financial year ending 31 March 2012. But Indian law allows taxes to be recovered on income earned up to seven years earlier, so FPIs are concerned that they could face additional tax bills.

In overseas markets, Asian stocks edged higher today, 8 May 2015, on signs global bond markets are stabilising after a big selloff. Key indices in China, Hong Kong, Singapore, Taiwan, Indonesia, Japan and South Korea rose by 0.04% to 1.26%.

China's exports unexpectedly fell 6.4% in April from a year earlier, while imports tumbled by a deeper-than-forecast 16.2%, fueling expectations that Beijing will quickly roll out more stimulus to avert a sharper economic slowdown. That left the country with a trade surplus of $34.13 billion for the month, the General Administration of Customs said today, 8 May 2015.

US stocks rose yesterday, 7 May 2015, a day after they fell in the wake of the Federal Reserve chief's warning over high equity valuations. Economic news yesterday, 7 May 2015 showed jobless claims rose by 3,000 to 265,000 in the week ended May 2, the Labor Department said.

The US government will unveil US nonfarm payrolls data for April 2015 today, 8 May 2015. The payroll data may give clues to the likely timing of an anticipated rate increase by the US Federal Reserve.

In Europe, Greece defied its international creditors yesterday, 7 May 2015, refusing to cut pensions or reverse re-hiring some public employees to meet their demands, dimming prospects of progress next week towards securing financial aid.

The election polls in UK Parliamentary elections reportedly gave the Conservatives 316 of 650 seats in the lower house of parliament, still short of a majority but far better than expected.

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