Key benchmark indices edged lower in choppy trade as increase in crude oil prices triggered concerns about India's current account deficit and fiscal deficit. The barometer index, the S&P BSE Sensex, was provisionally down 54.80 points or 0.23%, off close to 150 points from the day's high and up about 60 points from the day's low. The market breadth, indicating the overall health of the market was positive. The BSE Small-Cap index and the BSE Mid-Cap index, rose more than 1% each.
Increase in crude oil prices triggered concerns about India's current account deficit and fiscal deficit. India imports majority of its crude oil requirements. Brent gained as an ambush of Ukrainian government troops fanned tension with Russia. Brent for June settlement, which expires tomorrow, 15 May 2014, climbed as much as 57 cents, or 0.5%, to $109.81 a barrel on the London-based ICE Futures Europe exchange. Russia is the world's biggest energy exporter.
Capital goods stocks edged lower on profit booking after recent strong gains. Realty stocks edged higher. Coal India and NMDC hit 52-week high. PSU bank stocks surged as a committee appointed by the Reserve Bank of India (RBI) proposed on Tuesday the government should cut its stakes in state banks to below 50% and establish "fully empowered" bank boards. Bank of Baroda extended Tuesday's gains triggered by good Q4 results. Tata Steel surged ahead of Q4 results.
A bout of volatility was witnessed as key benchmark indices slipped into the red after opening higher. Intraday volatility continued as key benchmark indices slipped into the red once again after moving into positive zone from negative zone for a brief period in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade. Key benchmark indices hovered in negative zone in afternoon trade as European stocks edged lower in early trade there. A bout of volatility was witnessed as key benchmark indices weakened once again soon after trimming intraday losses in mid-afternoon trade. Volatility continued in late trade.
As per provisional figures, the S&P BSE Sensex was down 54.80 points or 0.23% to 23,816.43. The index lost 117.87 points at the day's low of 23,753.36 in afternoon trade. The index rose 93.44 points at the day's high of 23,964.67 in morning trade.
The CNX Nifty was down 0.85 points or 0.01% to 7,107.90, per provisional figures. The index hit a low of 7,080.90 in intraday trade. The index hit a high of 7,142.25 in intraday trade.
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The BSE Mid-Cap index was up 83.95 points or 1.1% at 7,702.57. The BSE Small-Cap index was up 98.69 points or 1.27% at 7,861.61. Both these indices outperformed the Sensex.
The total turnover on BSE amounted to Rs 3537 crore, lower than Rs 4620.58 crore on Tuesday, 13 May 2014.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,689 shares gained and 1,222 shares fell. A total of 131 shares were unchanged.
Among the 30-share Sensex pack, 15 stocks gained and rest of them fell. Dr Reddy's Laboratories (down 3.24%), HDFC (down 2.04%), and Mahindra & Mahindra (M&M) (down 3.34%) edged lower from the Sensex pack.
Asian Paints rose 2.8%. The company said at the fag end of trading session today, 14 May 2014, that the company has entered into a binding agreement with Ess Ess Bathroom Products (Ess Ess) and its promoters to acquire its entire front end sales business including brands, network and sales infrastructure, subject to satisfaction of certain conditions precedents and applicable statutory approvals. Ess Ess is a prominent player in the bath and wash business segment in India and has high quality products in this segment. The announcement came ahead of Asian Paints Q4 results today, 14 May 2014.
Tata Steel surged 6.11% to Rs 453 ahead of its Q4 results today, 14 May 2014. The stock hit 52-week high of Rs 454.45 in intraday trade.
Coal India rose 3.29% to Rs 342.55 after hitting 52-week high of Rs 345.10 in intraday trade.
NMDC rose 4.91% to Rs 159.30 after hitting 52-week high of Rs 159.80 in intraday trade.
PSU bank stocks rose as a committee appointed by the Reserve Bank of India (RBI) proposed on Tuesday the government should cut its stakes in state banks to below 50% and establish "fully empowered" bank boards. State Bank of India (SBI) (up 0.21%), Canara Bank (up 11.21%), Punjab National Bank (up 4.79%), Union Bank of India (up 8.98%), and Bank of India (up 9.5%) gained.
The Reserve Bank of India should be the sole regulator for the state banks, and government holdings in the lenders should be transferred to a new bank investment company, the committee said yesterday, 13 May 2014, in a 111-page report posted on the RBI's website. The Committee to Review Governance of Boards of Banks in India was constituted by the RBI Governor on 20 January 2014 and is headed by ex-chairman of Axis Bank P. Jayendra Nayak.
"The central government is a good example of a bank shareholder that has suffered deeply negative returns over decades," the panel said. "It is in the government's own interest to improve governance and management". Reducing government ownership below 50% would be beneficial because the government would continue to be the dominant shareholder in its banks and such a step "would create the conditions for its banks to compete more successfully," the report said. "It is a fundamental irony that presently the government disadvantages the very banks it has invested in," the committee said in its report, which covers 27 state-controlled lenders.
Bank of Baroda jumped 9.5% to Rs 961.30, with the stock extending Tuesday's gains triggered by good Q4 results. The stock 52-week high of Rs 976 in intraday trade. The bank's net profit rose 12.48% to Rs 1157.27 crore on 13.17% rise in total income to Rs 11614.85 crore in Q4 March 2014 over Q4 March 2013. The result was announced during market hours on Tuesday, 13 May 2014.
Bank of Baroda's (BoB) net profit rose 1.35% to Rs 4541.08 crore on 11.78% increase in total income to Rs 43402.45 crore in the year ended March 2014 over the year ended March 2013.
BoB's ratio of net non-performing assets (NPAs) to net advances stood at 1.52% as on 31 March 2014, compared with 1.88% as on 31 December 2013 and 1.28% as on 31 March 2013.
The bank's ratio of gross NPAs to gross advances stood at 2.94% as on 31 March 2014, compared with 3.32% as on 31 December 2013 and 2.40% as on 31 March 2013.
Realty stocks edged higher. Housing Development and Infrastructure (up 4.25%), D B Realty (up 3.89%), DLF (up 5.39%), Sobha Developers (up 0.61%) and Unitech (up 8.67%) gained.
Capital goods stocks edged lower on profit booking after recent strong gains. ABB (India) (down 2.33%), and L&T (down 0.84%), declined.
Bharat Heavy Electricals (Bhel) lost 1.51% to Rs 215.50, with the stock declining on profit booking after recent upmove. The stock had surged 10.25% to Rs 218.80 in a single trading session on Tuesday, 13 May 2014, after the company said it has achieved another landmark by successfully commissioning a 600 megawatts (MW) thermal unit in Odisha. The unit was commissioned at Jindal India Thermal Power (JITPL)'s upcoming 2x600 MW thermal power project located at Derang in Angul district of Odisha. Valued at Rs 2600 crore, the order for the 2x600 MW greenfield power project, was placed on Bhel by JITPL reflecting the customer's confidence in the company's technological excellence and capabilities in executing projects of this magnitude, Bhel said in a statement on Tuesday, 13 May 2014.
Bhel's scope of work in the contract envisaged design, engineering, manufacture, supply, erection and commissioning of Steam Turbines, Generators and Boilers, along with associated Auxiliaries and Electricals, besides state-of-the-art Controls & Instrumentation (C&I) and Electrostatic Precipitators (ESPs). Work on Unit 2 is progressing in full swing and the unit is also expected to be commissioned during the current year, Bhel said.
The next major trigger for the market is outcome of Lok Sabha elections. The counting of votes will take place on Friday, 16 May 2014, and the results are expected on the same day. Various exit polls on Monday, 12 May 2014, predicted that the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) would win a majority in the Lok Sabha elections which concluded on Monday, 12 May 2014. If exit polls prove correct, NDA's prime ministerial candidate Narendra Modi will become India's next Prime Minister. The term of the current Lok Sabha ends on 1 June and the new House has to be constituted by 31 May.
Modi is perceived as being more business-friendly and decisive by the business community. As chief minister for the fast-growing state of Gujarat, Modi has built a reputation for getting things done. While campaigning for the Lok Sabha elections, Modi has pledged to reinvigorate the country's manufacturing sector, create more jobs and overhaul the country's inadequate infrastructure. Investors are hoping that the BJP-led government will be better at getting things done and more business-friendly than the current Congress-party-led coalition government.
Investors are hoping that when the results of the Lok Sabha elections are out on Friday, 16 May 2014, a stable government which will complete its full term of five years in office comes to power. A party or a pre-poll alliance will need 272 MPs to form government at the Centre, which is a simple majority in 543-member Lok Sabha. Investors are expecting measures for revival of the economy, business-friendly policies and good governance from the new government that comes to power after the elections. Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis.
The BJP in its Lok Sabha polls manifesto has promised more business-friendly policies if the party comes to power after elections. The BJP has said that measures for the revival of the economy are its priority if the party comes to power after elections. India's GDP growth has slowed to a decade low of below 5%. The GDP grew 4.7% in Q3 December 2013.
The rate of inflation based on the wholesale price index is expected to remain at 5.7% in April 2014, at the same level it was in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government will unveil data on inflation based on the wholesale price index (WPI) for April 2014 at about 12:00 noon tomorrow, 15 May 2014.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar. .
European stocks edged lower on Wednesday, 14 May 2014, as investors weighed the latest round of inflation data and earnings reports. Key benchmark indices in UK, and France were off 0.04% to 0.13%. Germany's DAX rose 0.01%.
In data news, EU harmonized German inflation came in at 1.1% in April, which was broadly in line with market expectations.
Britain's unemployment rate fell to a five-year low in the first quarter as the economy created work at a record pace, evidence the recovery is sustaining momentum. The jobless rate measured by International Labour Organization methods dropped to 6.8% from 6.9% in the three months through February, the Office for National Statistics said in London today. While the data also showed wage growth outstripping inflation for the first time since 2010, it was slower than forecast.
France's consumer price index was unchanged on a month-on-month basis in April, marking a slowdown from March when prices rose 0.4%. Still, on a year-on-year basis, consumer price increases accelerated to 0.7% in April from 0.6% in March.
The upcoming European court review on the legality of the European Central Bank's (ECB) latest bond buying scheme doesn't tie the central bank's hands, an executive board member said Wednesday. "I am very optimistic that the interaction between the ECB and the Court of Justice will lead to 'a good result,'" Yves Mersch, ECB Executive Board member, said in a speech in Berlin. "Until then, we are not limited in our actions," he added, according to a copy of his speech provided by the ECB.
In February, Germany's constitutional court harshly criticized the bond-purchase program, known as "Outright Monetary Transactions," as a power grab, and referred questions to the European Court of Justice in Luxembourg--a first for the German court. The ECB created its OMT bond plan at the height of the bloc's sovereign-debt crisis in the summer of 2012. It came weeks after ECB President Mario Draghi promised to do "whatever it takes" to preserve the euro. The program is widely seen as having succeeded in calming markets, even though it has never been deployed.
The head of the International Monetary Fund warned Tuesday that inflation rates in the euro zone and other leading economies are too low and pose a risk in the outlook for the global economy. In terms of risks that we see on the horizon, one is the sustainably low--too low--inflation, particularly in the euro area but more generally in the advanced economies, said IMF Managing Director Christine Lagarde during a news conference with Chancellor Angela Merkel and the leaders of the world's main economic organizations in Berlin.
Asian stocks rose on Wednesday, 14 May 2014, as US equity gauges held at record highs on Tuesday, 13 May 2014. Key benchmark indices in Indonesia, South Korea, Taiwan, Singapore and Hong Kong were up 0.65% to 1.43%. Key benchmark indices in China and Japan were off 0.14% each.
China's central bank called on the nation's biggest lenders to accelerate the granting of mortgages, a sign that developers' price cuts and incentives alone won't boost a slumping housing market and economy. The People's Bank of China told 15 banks yesterday to improve efficiency of service, give timely approval and distribution of mortgages to qualified buyers. It also urged lenders to give priority to families buying their first homes and strengthen their monitoring of credit risks.
Trading in US index futures indicated that the Dow could fall 4 points at the opening bell on Wednesday, 14 May 2014. US stocks ended mostly higher Tuesday, with the Dow Jones Industrial Average and the S&P 500 index ending at record highs.
US retail sales increased 0.1% in April following a revised 1.5% jump in March that marked the biggest gain in four years, Commerce Department figures showed in Washington.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.
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