Weakness in Asian stocks triggered a weak opening as the barometer index, the S&P BSE Sensex, fell below the psychological 19,000 mark. The Sensex was down 175.52 points or 0.92%, off close to 30 points from the day's high and up about 50 points from the day's low. The market breadth, indicating the overall health of the market, was weak.
Apollo Tyres slumped over 14% after the company said it will acquire Cooper Tire & Rubber Company (Cooper), a company listed on the New York Stock Exchange in an all-cash transaction valued at approximately $2.5 billion. Sun Pharmaceutical Industries tumbled 5% after the company said it will pay a lump-sum $550 million as a part of a settlement of an ongoing patent litigation pending in the United States regarding Sun Pharma subsidiary's generic pantoprazole.
MMTC slumped after the government set the floor price for divestment of 9.33% stake in the company at a massive discount to the ruling market price. HDFC Bank declined as the stock turned ex-dividend today, 13 June 2013, for dividend of Rs 5.50 per share for the year ended March 2013.
The market sentiment was affected adversely by data showing that foreign funds remained net sellers of Indian stocks on Wednesday, 12 June 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 1060.17 crore on Wednesday, 12 June 2013, as per provisional data from the stock exchanges.
At 9:30 IST, the S&P BSE Sensex was down 175.52 points or 0.92% to 18.865.51. The index declined 225.56 points at the day's low of 18,815.57 in early trade. The index fell 143.64 points at the day's high of 18,897.49 in opening trade.
The CNX Nifty was down 52.60 points or 0.91% to 5,707.60. The index hit a low of 5,697.45 in intraday trade. The index hit a high of 5,716.25 in intraday trade.
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The market breadth, indicating the overall health of the market, was weak. On BSE, 668 shares fell and 229 shares rose. A total of 35 shares were unchanged.
Among the 30-share Sensex pack, 28 stocks fell and only two of them rose. Jindal Steel & Power (down 2.87%), Wipro (down 2.8%) and Tata Motors (down 2.52%), edged lower.
MMTC was locked at 10% lower circuit at Rs 190.35 on BSE after the government set the floor price for divestment of 9.33% stake in the company at a massive discount to the ruling market price. The government is selling 9.33 crore equity shares, aggregating to 9.33% of the total paid up equity share capital of the company through offer for sale (OFS) route via the stock exchanges mechanism on today, 13 June 2013. The government has fixed the floor price for the OFS at Rs 60 per share, a 71.62% discount to MMTC's Wednesday's closing price of Rs 211.45 on BSE.
The stake sale would help the company to meet minimum public shareholding norms given by Sebi. The Government of India currently owns 99.33% stake in MMTC (as per the shareholding pattern as on 31 March 2013). Market regulator Securities & Exchange Board of India (Sebi) has mandated minimum public shareholding of 10% for state-run firms by August 2013.
HDFC Bank declined 1.29% as the stock turned ex-dividend today, 13 June 2013, for dividend of Rs 5.50 per share for the year ended March 2013.
Bank of Baroda dipped 2.98% as the stock turned ex-dividend today, 13 June 2013, for dividend of Rs 21.50 per share for the year ended March 2013.
Punjab National Bank slumped 3.35% as the stock turned ex-dividend today, 13 June 2013, for dividend of Rs 27 per share for the year ended March 2013.
Torrent Power fell 0.36% as the stock turned ex-dividend today, 13 June 2013, for final dividend of Rs 2 per share for the year ended March 2013.
Sun Pharmaceutical Industries (Sun Pharma) tumbled 4.99%. The company announced after market hours on Wednesday, 12 June 2013, that the company together with its subsidiaries, has settled an ongoing litigation pending in the United States District Court, District of New Jersey (Court) regarding Sun Pharma subsidiary's generic pantoprazole. Under the terms of the litigation settlement between Sun Pharma, and Wyeth, (now a division of Pfizer Inc.,) and Altana Pharma AG, (now known as Takeda GmbH) the parties have dismissed all their claims. Sun Pharma will pay a lump-sum $550 million as a part of this settlement.
In 2005, Wyeth and Altana had filed a patent infringement suit against Sun Pharma after Sun Pharma filed its abbreviated new drug application for pantoprazole. Sun Pharma launched its generic pantoprazole in the US on 30 January 2008. In April 2010, a jury had determined that Altana's patent is not invalid. On 3 June 2013, the Court began a jury trial to assess the amount of past damages that Sun Pharma owed for infringing Altana's now expired patent. This settlement now culminates the ongoing litigation, Sun Pharma said in a statement. Sun Pharma can continue to sell its generic pantoprazole in the US, it said.
Apollo Tyres slumped 14.18% after the company on Wednesday said that the company has entered into a definitive merger agreement under which a wholly-owned step subsidiary of the company will acquire Cooper Tire & Rubber Company (Cooper), a company listed on the New York Stock Exchange in an all-cash transaction valued at approximately $2.5 billion. This strategic combination will bring together two companies with highly complementary brands, geographic presence, and technological expertise to create a global leader in tire manufacturing and distribution, Apollo Tyres said in a statement.
Cooper is the 11th largest tyre company in the world by revenue and it supplies premium and mid-tier tyres worldwide through renowned brands such as Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon. The combined company will be the seventh-largest tyre company in the world and will have a strong presence in high-growth end-markets across four continents, Apollo Tyres said. With a combined $6.6 billion in total sales in 2012, the combined company will have a comprehensive portfolio of signature brands and greater ability to cross-sell products in diverse countries with negligible overlap, Apollo Tyres said.
In a strong measure aimed at defending the rupee, the Centre on Wednesday announced a hike in the foreign investment limits in government debt by $5 billion. The measure aims at reversing the outflow of FII funds from debt instruments, one of the reasons for the depreciation in the rupee in recent weeks. Currently, the government debt limit stands at $25 billion. The move comes a day after the Chief Economic Advisor to the finance ministry Raghuram Rajan had said the government will be announcing measures to ensure that portfolio investor inflows are enabled and encouraged.
Global credit rating agency, Fitch Ratings on Wednesday raised its outlook on India's sovereign debt to stable from negative. Fitch cited the government's steps to contain its budget deficit despite the economic slowdown as the main reason for raising the outlook. India also made progress in addressing structural issues such as regulatory uncertainties, delays in government approvals for industrial projects and problems in sectors such as power and mining, it said.
Fitch acknowledged challenges, noting a recovery would remain slow until a healthier investment climate is created, and warning the rupee drop would limit the scope for RBI rate cuts.
Fitch expects the government to meet its deficit target of 4.8% for this fiscal year. It also expects India's economic growth to accelerate to 5.7% in the current fiscal year from last year's decade-low of 5%, and improve further to 6.5% next year. But, a stronger recovery would require more measures to boost investment, it said.
Asian equities dropped on Thursday after the World Bank cut its global growth forecast amid concern central banks may pare monetary stimulus. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, Taiwan and South Korea shed by 1.23% to 4.65%.
The World Bank cut its global growth forecast for this year after emerging markets from China to Brazil slowed more than projected, while budget cuts and slumping investor confidence deepened Europe's contraction. The world economy will expand 2.2%, less than a January forecast for 2.4% growth and slower than last year's 2.3%, the bank said in a report. It lowered its prediction for developing economies and sees the euro region's gross domestic product shrinking 0.6%. In contrast, forecasts were raised for the US and Japan, which was helped by fiscal and monetary stimulus.
US stocks fell on Wednesday as traders extended a selloff driven by concern about central banks winding down their stimulus measures. The Federal Open Market Committee meets next week after the Bank of Japan this week left its lending program unchanged.
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