A sharp setback in Chinese stocks and fears that the stock market regulator Securities and Exchange Board of India (Sebi) may tighten rules on Participatory Notes (PNs) in the wake of a report by a special investigations team on black money hit sentiment on the domestic bourses adversely. PNs are a popular offshore derivative instrument used by foreign portfolio investors to invest in Indian stocks. The barometer index, the S&P BSE Sensex, hit four week low and the 50-unit CNX Nifty hit its lowest level in more than two weeks as these two key benchmark indices extended intraday losses in late trade. The Sensex fell below the psychological 28,000 mark. The market breadth indicating the overall health of the market was weak. The Sensex was provisionally off 550.93 points or 1.96% at 27,561.38. The BSE Mid-Cap index lost 1.38%. The BSE Small-Cap index fell 1.07%. All the 12 sectoral indices on BSE ended lower today, 27 July 2015. In overseas markets, Chinese stocks tumbled as new capital inflows from authorities appeared to slow.
Metal shares fell. Capital goods also witnessed selling pressure. Telecom stocks declined.
Finance Minister Arun Jaitley reportedly said today, 27 July 2015 that the government will not react in a knee-jerk manner on a report by a special investigations team that suggested greater oversight of money laundering in stocks. Jaitley, however, said the government would apply its mind on the recommendations in due course and would avoid any decision that could hurt investor sentiment. The Special Investigation Team (SIT) tasked with curbing black money has in its Third SIT Report submitted to the finance ministry has called for identification of beneficial ownership of Participatory Notes (PN) and restrictions on transfer of PNs.
Indian stocks may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month July 2015 series to August 2015 series. The near month July 2015 derivatives contracts expire on Thursday, 30 July 2015.
Foreign portfolio investors bought shares worth a net Rs 6.62 crore during the previous trading session on Friday, 24 July 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 196.38 crore during the previous trading session on Friday, 24 July 2015, as per provisional data released by the stock exchanges.
In overseas markets, European stocks edged lower, with sentiment hit adversely by a renewed plunge in Chinese markets. Chinese stocks tumbled as new capital inflows from authorities appeared to slow. US stocks edged lower during the previous trading session on Friday, 24 July 2015, after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting the US housing market may not be firing on all cylinders.
Also Read
As per provisional closing, the S&P BSE Sensex fell 550.93 points or 1.96% at 27,561.38. The index fell 582.74 points at the day's low of 27,529.57 in late trade, its lowest level since 29 June 2015. The index rose 5.34 points at the day's high of 28,117.65 in opening trade.
The CNX Nifty fell 160.55 points or 1.88% at 8,361, as per provisional closing. The index hit a low of 8,351.55 in intraday trade, its lowest level since 10 July 2015. The index hit a high of 8,492.20 in intraday trade.
The BSE Mid-Cap index fell 153.97 points or 1.38% at 10,994.02. The BSE Small-Cap index fell 125.01 points or 1.07% at 11,543.11. The decline in both these indices was lower than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was weak. On BSE, 1,736 shares fell and 1,085 shares rose. A total of 104 shares were unchanged.
Reliance Industries' (RIL) fell 2.15% at Rs 1,003. The stock hit a high of Rs 1,035 and a low of Rs 1,001.30 in intraday trade. The company's consolidated net profit rose 4.44% to Rs 6222 crore on 25.93% decline in total income to Rs 78962 crore in Q1 June 2015 over Q1 June 2014. The result was announced after market hours on Friday, 24 July 2015. Decline in revenue was led by the 43.5% decline in benchmark (Brent) oil price in Q1 June 2015 over Q1 June 2014.
Profit before depreciation, interest and tax (PBDIT) rose 9.8% to Rs 12095 crore in Q1 June 2015 over Q1 June 2014.
The company's gross refining margin (GRM) for crude refining rose to $10.40 per barrel in Q1 June 2015 from $10.1 per barrel in Q4 March 2015 and $8.70 per barrel in Q1 June 2014. RIL said that strong gasoline cracks led by robust demand growth, lower energy cost and favourable crude differentials helped boost refining margins.
Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries said that the financial performance in Q1 June 2015 reflects the benefits of integrated hydrocarbon chain activities in a benign oil price environment. The petrochemicals business recorded a strong quarterly performance supported by high operating rates and margin strength in the ethylene chain. He said that the management is committed to accelerating the growth of operating EBITDA. The company is leveraging the strength of integrated value chains to deliver sustainable growth. The company maintained rapid progress in project construction activity at Jamnagar. Ambani further said that Reliance Jio Infocomm is in the final lap of launch of broadband services which will bring about a positive transformation in the lives of millions of Indians.
Metal shares declined. Tata Steel (down 5.15%), Hindalco Industries (down 4.36%), JSW Steel (down 3.7%), Vedanta (down 3.05%), Bhushan Steel (down 2.89%), NMDC (down 2.64%), Hindustan Copper (down 2.41%), Steel Authority of India (down 2.41%), Jindal Steel & Power (down 1.78%) and National Aluminum Company (down 1.75%) edged lower. Hindustan Zinc was up 0.18%.
Telecom stocks declined. Bharti Airtel (down 3.97%), Tata Teleservices (Maharashtra) (down 3.51%), Idea Cellular (down 3.22%), Reliance Communications (down 1.76%) and Mahanagar Telephone Nigam (down 0.52%) edged lower.
Capital goods declined. Havells India (down 5.03%), Siemens (down 4.14%), Alstom T&D India (down 3.85%), ABB India (down 3.76%), Punj Lloyd (down 3.62%), Larsen & Toubro (down 3.26%), Bharat Heavy Electricals (down 2.76%), Lakshmi Machine Works (down 2.41%), SKF India (down 2.05%), Suzlon Energy (down 2.05%), BEML (down 1.69%), Crompton Greaves (down 1.67%), AIA Engineering (down 1.1%) and Pipavav Defence and Offshore Engineering Company (down 0.16%), edged lower. Thermax (up 0.45%), ALSTOM India (up 1.82%) and Praj Industries (up 2.95%), edged higher.
Shares of state-run defence equipment maker Bharat Electronics rose 0.32% at Rs 3,685.35. The company announced on Saturday, 25 July 2015, that its board approved the proposal for issue of bonus shares to the existing shareholders of the company in the ratio of 2:1 (2 bonus shares for every share held).
Net profit of Bharat Electronics rose 137.02% to Rs 60.70 crore on 7.27% rise in net sales to Rs 1069.21 crore in Q1 June 2015 over Q1 June 2014. The result was announced on Saturday, 25 July 2015.
Meanwhile, in the global commodities markets, Brent crude oil futures edged lower in volatile trade. Brent for September settlement was currently off 45 cents at $54.17 a barrel. The contract had fallen 65 cents or 1.17% to settle at $54.62 a barrel during the previous trading session.
India imports about 80% of its crude requirements and a decline in crude eases concerns on fiscal deficit, inflation and gives more room for the government to boost growth through spending on infrastructure. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was currently hovering at 64.1525, compared with its close of 64.04 during the previous trading session.
Finance Minister Arun Jaitley reportedly said today, 27 July 2015, that the government will not react in a knee-jerk manner on a report by a special investigations team that suggested greater oversight of money laundering in stocks. Jaitley, however, said the government would apply its mind on the recommendations of the Supreme Court-appointed team in due course and would avoid any decision that could hurt investor sentiment, reports added. The Special Investigation Team (SIT) tasked with curbing black money has in its Third SIT Report submitted to the finance ministry has called for identification of beneficial ownership of Participatory Notes (PN). In its recommendation on PNs, SIT has said that the information of beneficial owner with the Securities and Exchange Board of India (Sebi) should be in the form of individual whose KYC information is known to Sebi. In no case should the KYC information end with name of a company. In case a company is the holder of P notes/Offshore Derivative Instruments (ODIs), Sebi should have information of its promoters/directors who exercise effective control over the company, the SIT report states. In case of companies/trusts represented by service providers like lawyers/accountants, Sebi should have information on the real owners/effective controllers of these companies/trusts.
A Participatory Note (PN) is a derivative instrument issued in foreign jurisdictions by a Foreign Institutional Investor (FII)/sub-accounts or one of its associates, against underlying Indian securities. PNs are popular among foreign investors since they allow these investors to earn returns on investment in the Indian market without undergoing the significant cost and time implications of directly investing in the India.
The SIT has also called for restrictions on transfer of PNs. PNs are transferable in nature. This makes tracing the true beneficial owner of P notes even more difficult since layering of transactions can be made so complex so as to make it impossible to track the true beneficial owner, the SIT report said. Sebi needs to examine if this provision of allowing transferring of P notes is in any way beneficial for easing foreign investment, the SIT said.
The outstanding value of Offshore Derivative Instruments (ODIs) at the end of February 2015 stood at Rs 2.715 lakh crore. The top five locations of end beneficial owner of ODIs were Cayman Islands, USA, UK, Mauritus and Bermuda contributing to 31.31%, 14.20%, 13.49%, 9.91% and 9.10% respectively of total ODIs outstanding. According to SIT, it is clear from this data provided by Sebi that a major chunk of outstanding ODIs invested in India are from Cayman Islands i.e. 31.31%. This translates to roughly Rs 85006 crore. It does not seem conceivable that a jurisdiction with a population of less than 55,000 could invest Rs 85000 crore in one country, the SIT report says.
The remarks on PNs are among a series of suggestions on how to crack down on black money. The SIT report also refers to the misuse of exemption on long term capital gains tax on shares for money laundering, use of shell companies, trade-based money laundering through mispricing of imports/exports and betting in cricket. With the collusion of promoters, some brokers arrange for price(s) with purchase of such scrips at nominal costs and sales at exorbitant prices, with a view to receiving money on sale as capital gain when the long term gain is subjected to a nil or nominal rate of tax. The advantage for manipulative taxpayer is that he can launder such sale receipts through payment of no tax, the SIT says in its report on misuse of exemption on long term capital gains tax on shares. The SIT submitted its report to the finance ministry on Friday, 24 July 2015.
SIT has also suggested prescribing a reasonable threshold for holding of cash/currency notes. This would control holding of unaccounted money to a large extent. This would also control transfer of unaccounted cash from one destination to other, which at present is rampant, may be by Angadias or by other means.
Meanwhile, Minister of State for Finance Jayant Sinha said in an interview to a news agency today, 27 July 2015, that the government will consult the Reserve Bank of India (RBI) before taking a decision on the formation of a proposed Monetary Policy Committee (MPC) -- a panel that will set benchmark policy rates. It may be recalled that a revised draft put out by the Financial Sector Legislative Reforms Commission (FSLRC) and released by the finance ministry on 23 July 2015 had suggested vesting the government with the power to appoint the majority of the members of the MPC and withdrawing the veto available to the RBI governor in an earlier report. Currently, the RBI governor has almost absolute power to set interest rates. Sinha has reportedly clarified that the recommendations of FSLRC do not reflect the government's views. Sinha has reportedly said that the government, including Prime Minister Narendra Modi, believes the RBI is capable of taking independent decisions on monetary policy.
Meanwhile, India's weather office, the India Meteorological Department (IMD), said in its daily monsoon update issued yesterday, 26 July 2015, that the Southwest Monsoon was vigorous over Rajasthan and West Madhya Pradesh and was active over Gangetic West Bengal, Odisha, Himachal Pradesh and Gujarat region during past 24 hours until 8:30 IST.
For the country as a whole, cumulative rainfall during this year's monsoon season was 5% below the Long Period Average (LPA) until 26 July 2015. Region wise, the rainfall was 15% below the LPA in South Peninsula, 7% below the LPA in Central India, 6% below the LPA in East & Northeast India and 10% above the LPA in Northwest India until 26 July 2015.
The quantum of and the spatial distribution of rainfall this month holds key; July accounts for about 33% of precipitation during the June-September monsoon season and is critical for crops. The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation.
The weekly data released by the Ministry of Agriculture after trading hours on Friday, 24 July 2015, showed a pick up in the sowing of Kharif crops. The total sown area for Kharif crops as on 24 July 2015 stood at 693.83 lakh hectares compared with 550.42 lakh hectares at this time last year.
Meanwhile, the Ministry of Water Resources announced in its weekly report issued after trading hours on Friday, 24 July 2015, that the Water storage available in 91 important reservoirs of the country as on 23 July 2015 was 58.596 BCM which is 37% of total storage capacity of these reservoirs. This storage is 115% of the storage of corresponding period of last year and 108% of storage of average of last ten years. The present storage position during current year is better than the storage position of last year and is also better than the storage of average of last ten years. States having better storage than last year for corresponding period are Himachal Pradesh, Punjab, Odisha, West Bengal, Tripura, Maharashtra, Uttar Pradesh, Uttarakhand, Madhya Pradesh, Karnataka, Kerala and Tamil Nadu. States having lesser storage than last year for corresponding period are Rajasthan, Jharkhand, Gujarat, Chhattisgarh, Andhra Pradesh and Telangana.
In overseas markets, European stocks edged lower today, 27 July 2015, with sentiment hit adversely by a renewed plunge in Chinese markets. Key indices in Germany, UK and France were off 0.05% to 1.19%.
Chinese stocks tumbled today, 27 July 2015, as new capital inflows from authorities appeared to slow. A state-owned fund called China Securities Financial Corp. had reportedly spent hundreds of billions of yuan in supporting the Chinese market after a steep slide in Chinese stocks market in the recent past. In mainland China, the Shanghai Composite index plunged 8.48%. In Hong Kong, the Hang Seng index shed 3.09%.
Meanwhile, China's National Bureau of Statistics (NBS) today, 27 July 2015, said that profit at China's industrial firms registered a decline of 0.3% on year-on-year basis in June 2015, after rising the previous two months. For the first six months of 2015, industrial profits were 0.7% lower than a year earlier, the bureau said. Among 41 industrial sectors, 30 sectors had year-on-year growth in the first half of this year, while 11 recorded drops.
In other Asian markets, key benchmark indices in Singapore, Indonesia, Japan, South Korea and Taiwan were off 0.35% to 2.41%.
US stocks edged lower on Friday, 24 July 2015, after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting the US housing market may not be firing on all cylinders. The Commerce Department said new home sales slipped 6.8% to 482,000 in June 2015 whilst May 2015 sales were also revised lower from 546,000 to 517,000.
Meanwhile, a two-day policy meeting of the Federal Reserve Open Market Committee (FOMC) has been scheduled on Tuesday, 28 July 2015, and Wednesday, 29 July 2015, to decide on interest rates in the United States. The US central bank is widely expected to keep interest rates at a record low at the meeting, but expectations are rising that a rate hike could come later this year.
Powered by Capital Market - Live News