Key benchmark indices continued to hover in negative terrain in mid-morning trade as the rupee hit record low below 61 a dollar as stronger than expected US job data fuelled expectations the US Federal Reserve will slow the pace of monetary stimulus later this year. The Fed's bond-buying program which has flooded global markets with liquidity has helped support an array of assets, including equities in recent years. The S&P BSE Sensex was down 234.50 points or 1.2%, off about 65 points from the day's high and up close to 75 points from the day's low. The market breadth, indicating the overall health of the market, was negative. The weakness on the domestic bourses today, 8 July 2013, was a part of a weakness across Asian markets.
Maruti Suzuki India fell after company reported a decline in production in June 2013. PSU OMCs declined while Cairn India rose as US crude oil futures hit a 14-month high. Sun Pharmaceutical Industries and Bharti Airtel reversed intraday losses. Reliance Communications (RCom) extended intraday gains after the company's board approved a proposal for demerger of the real estate assets held by RCom into a separate company to unlock substantial value for the company's shareholders.
The market edged lower in early trade as Asian stocks fell after stronger than expected US job data fuelled expectations the US Federal Reserve will slow the pace of monetary stimulus later this year. Weakness continued in morning trade. The Sensex continued to hover in negative terrain in mid-morning trade.
The Indian rupee sank to a record low against the US dollar on Monday, 8 July 2013, mirroring losses in most emerging market currencies after strong US employment data raised fears that the US Federal Reserve would roll back its monetary stimulus. The rupee was trading at 61.05 versus dollar, compared with Friday's close of 60.225/235.
Indian government bonds also came under selling pressure on fears that foreign investors would continue to pull out of Indian debt to chase higher bond yields in the US. The yield on the most traded 8.2% GS 2025 was hovering at 7.7347%, higher that its close at 7.6731% on Friday, 5 July 2013. Bond prices and yields move in opposite directions. The Fixed Income Money Market and Derivatives Association of India, which along with the RBI oversees bond markets, said on its website that it had removed price filters on bonds for Monday's session.
At 11:20 IST, the S&P BSE Sensex was down 234.50 points or 1.2% to 19,261.35. The index declined 309.90 points at the day's low of 19,185.92 in early trade, its lowest level since 3 July 2013. The index fell 73.13 points at the day's high of 19,422.69 in early trade.
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The CNX Nifty was down 78.45 points or 1.34% to 5,789.45. The index hit a low of 5,775.55 in intraday trade, its lowest level since 3 July 2013. The index hit a high of 5,833.85 in intraday trade.
The market breadth, indicating the overall health of the market, was negative. On BSE, 993 shares fell and 711 shares rose. A total of 74 shares were unchanged.
From the 30-share Sensex pack, 23 stocks fell and rest of them rose. Tata Motors (down 4.37%), HDFC (down 3.5%) and Coal India (down 3.26%), edged lower.
Sun Pharmaceutical Industries rose 1.09%, with the stock reversing intraday losses.
Bharti Airtel gained 0.22%, with the stock reversing intraday losses.
PSU OMCs declined as US crude oil futures extended gains to hit a 14-month high a barrel on Monday, after posting their biggest weekly gain in a year last week, as better-than-expected US jobs data fueled hopes for increased economic activity. Indian Oil Corporation (down 3.11%), BPCL (down 4.49%) and HPCL (down 5.08%), edged lower.
US crude oil futures for August delivery were up 41 cents at $103.63 a barrel in electronic trading today, 8 July 2013,as unrest in Egypt left traders watching for any news of supply disruptions out of the Middle East. Egypt's new leaders late on Saturday, 6 July 2013, said they hadn't named opposition figure Mohamed ElBaradei as Egypt's interim prime minister, underscoring political instability in the country. Egypt controls the key Suez Canal and an adjacent pipeline which is used to transport a significant amount of the region's oil trade. ElBaradei is a leader of secular groups that opposed Mohammed Morsi, who was ousted last week as Egypt's president in the wake of massive protests. Clashes between Morsi supporters and critics have left more than 30 people dead, according to various reports.
Higher crude oil price will increase under-recovery of PSU OMCs on domestic sales of diesel, LPG and kerosene at government 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.
Cairn India rose 2.49%. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms like Cairn India.
Maruti Suzuki India fell 1.19% after company reported a fall in production in June 2013. The company said during market hours today, 8 July 2013 that production fell 25.36% to 61,668 units in June 2013 over June 2012. Earlier, the company had reported 12.6% fall in total sales to 84,455 units in June 2013 over June 2012. The company's domestic sales fell 7.8% to 77,002 units in June 2013 over June 2012. Exports declined 43% to 7,453 units in June 2013 over June 2012. The company announced the monthly sales data on 1 July 2013.
Reliance Communications (RCom) jumped 8.85% to Rs 147.60. The company said on Sunday, 7 July 2013, that its board of directors has in-principle decided on a demerger of the real estate held by RCom into a separate unit to be called Reliance Properties, to unlock substantial value for the benefit of its shareholders. The stock hit 52-week high of Rs 148.20 in intraday trade today, 8 July 2013. The proposed separation of real estate into a separate unit is part of RCom's strategic plan to divest non-core assets, and focus on its core wireless and enterprise business. Reliance Properties will be a separate listed company. All shareholders of RCom will receive fully tradeable pro-rata shareholding in Reliance Properties, free of cost, based on their existing shareholding in RCom.
The preliminary and indicative monetisable value of RCom's real estate on development is estimated by independent valuers at over Rs 12000 crore ($2 billion), which is equal to Rs 60 ($1) per RCom share.
Reliance Properties will work with leading global partners to develop the real estate, and unlock this value for the benefit of its shareholders. The properties proposed to be developed by Reliance Properties include prime land at Dhirubhai Ambani Knowledge City, Navi Mumbai measuring nearly 135 acres, with saleable area of over 15 million square feet and prime property near Connaught Place, New Delhi measuring nearly 4 acres.
The board has constituted a committee to consider the matter in detail, and prepare the necessary Demerger Scheme, etc. in consultation with legal and other advisors. The demerger will be subject to approvals from shareholders, lenders, Courts, etc.
Neyveli Lignite Corporation rose 2.06% after market regulator Securities & Exchange Board of India approved Tamil Nadu state government to buy 5% stake in the company. In a statement issued on Sunday, 7 July 2013, the finance ministry said the department of disinvestment has requested the Tamil Nadu state government to nominate senior official for further discussions with Securities & Exchange Board of India (Sebi) with regard to its proposal to sell the proposed 5% stake of the central government in Neyveli Lignite Corporation (NLC) to the state undertakings of Tamil Nadu. The ministry said that Sebi is of the view that the proposal could get covered within the guidelines on institutional placement programme (IPP).
The ministry said that in the offer document for IPP, the seller can propose the criteria on the basis of which allocation could be made. This can be used to give preference to any set of qualified institutional buyers including stage undertakings of Tamil Nadu.
The central government has decided to sell 5% stake in NLC. The Government of India (GoI) holds 93.56% stake in NLC (as per the shareholding pattern as on 31 March 2013). The stake sale will also help the company to meet the minimum public holding norm.
Sebi has set a deadline of August 2013 for all listed central public sector units to have a minimum 10% public shareholding.
Last month, Tamil Nadu chief minister J Jayalalithaa had written to Prime Minister Dr. Manmohan Singh expressing interest to buy 5% in the company. Employee unions of the Tamil-Nadu headquartered firm are protesting against the stake sale and workers went on an indefinite strike since 3 July 2013.
Meanwhile, the union ministry of coal has allocated two coal blocks to NLC for implementing its power projects at Sirkali in Tamil Nadu and Neyveli Uttar Pradesh Power in Uttar Pradesh.
Fresenius Kabi Oncology lost 1.6% after the company said it has received a warning letter from the United States Food and Drug Administration (USFDA), inter-alia, asking for certain information and implementation of more corrective and preventive measures so as to avoid recurrence of deviations in respect of the company's API plant located at Nadia district in West Bengal. Earlier, on 26 February 2013, Fresenius Kabi said that the USFDA as part of its routine inspection made certain observations relating to GMP non-conformities in respect of manufacturing, documentation practices and product testing at the company's API plant at Nadia subsequent to which the company at that time has voluntarily put the production at the plant on hold.
Asian stocks dropped on Monday, 8 July 2013, after a better-than-forecast monthly US jobs report fueled speculation that the Federal Reserve may begin reducing stimulus this year. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, Japan, South Korea and Taiwan shed by 0.67% to 2.6%.
Chinese stocks were also hit by concerns that Beijing won't ease policies despite slowing growth. In a statement issued on Friday, 5 July 2013, elaborating on its pursuit of economic restructuring and reforms, the State Council -- China's cabinet -- indicated it would strengthen supervision of wealth-management products and emphasized financial-market stability, but it also hinted it would loosen controls on banks' interest rates only gradually. The State Council also suggested tighter controls over credit to industries with excess production capacity.
Trading in US index futures indicated a flat opening of US stocks on Monday, 8 July 2013. US stocks surged on Friday, 5 July 2013, after government data showed the nation added more jobs than forecast last month. The non-farm payrolls increased by 195,000 in June and the unemployment rate held steady at 7.6% as more people entered the workforce. Job growth in previous months also was revised higher. Federal Reserve Chairman Ben Bernanke on 19 June 2013 said that the central bank may taper the pace of its bond purchases, currently set at $85 billion a month, as early as this year if the economy continues to improve in line with its forecasts.
The minutes of Federal Open Market Committee's (FOMC) policy meeting held on 19 June 2013, will be released on Wednesday, 10 July 2013. The minutes may provide more insight into the Fed's outlook on monetary stimulus. Bernanke is also due to deliver a speech on that day.
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