Sensex extends initial gains

Key benchmark indices extended initial gains and hit fresh intraday high in morning trade. The barometer index, the S&P BSE Sensex, was up 155.65 points or 0.76%, up about 90 points from the day's low and off close to 10 points from the day's high. The market breadth, indicating the overall health of the market, was strong. All the thirteen sectoral indices on BSE were in the green. Gains in Asian stocks and overnight upmove in US stocks boosted sentiment on the domestic bourses. The market sentiment was also boosted by data showing that foreign funds remained net buyers of Indian stocks on Thursday, 20 February 2014.

IT stocks gained on positive economic data in US, the biggest outsourcing market for the Indian IT firms. TCS gained after the company on Thursday said it has partnered with the Finnish Wheelchair Curling Team, supporting the team in their quest for Olympic glory at the Paralympic Winter Games in Sochi. Among pharma shares, Dr. Reddy's Laboratories scaled record high.

The market edged higher in early trade on firm Asian stocks. The Sensex extended initial gains and hit fresh intraday high in morning trade.

The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Thursday, 20 February 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 206.46 crore on Thursday, 20 February 2014, as per provisional data from the stock exchanges.

Asian stocks edged higher on Friday, 21 February 2014, after a larger-than-forecast climb in a measure of US manufacturing in February tempered concern about global growth. US economy is the world's biggest economy.

At 10:20 IST, the S&P BSE Sensex was up 155.65 points or 0.76% to 20,692.29. The index jumped 168.38 points at the day's high of 20,705.02 in morning trade, its highest level since 19 February 2014. The index rose 63.27 points at the day's low of 20,599.91 in early trade.

The CNX Nifty was up 49.95 points or 0.82% to 6,141.40. The index hit a high of 6,144.80 in intraday trade, its highest level since 19 February 2014. The index hit a low of 6,108 in intraday trade.

The BSE Mid-Cap index was up 36.17 points or 0.57% at 6,413.19. The BSE Small-Cap index was up 40.86 points or 0.64% at 6,402.71. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,322 shares rose and 545 shares fell. A total of 99 shares were unchanged.

Among the 30-share Sensex pack, 29 stocks rose and only one fell. ICICI Bank (up 2.04%), AXIS Bank (up 1.59%) and GAIL (India) (up 1.41%) edged higher from the Sensex pack.

Dr. Reddy's Laboratories rose 0.65% to Rs 2,731.15 after hitting record high of Rs 2,736 in intraday trade.

IT stocks gained on positive economic data in US, the biggest outsourcing market for the Indian IT firms. Tech Mahindra (up 0.68%), Wipro (up 0.62%), HCL Technologies (up 0.53%) and Infosys (up 0.9%) gained.

TCS gained 0.49% after the company said after market hours on Thursday, 20 February 2014, that it has partnered with the Finnish Wheelchair Curling Team, supporting the team in their quest for Olympic glory at the Paralympic Winter Games in Sochi. TCS will serve as a partner to the team for one year and provide support for the team towards their equipment, logistics and digital devices such as smart phones at Sochi.

Shares of power generation companies edged higher. GVK Power & Infrastructure (up 1.1%), NTPC (up 0.04%), NHPC (up 0.28%), Torrent Power (up 0.23%) and Reliance Power (up 0.8%) gained.

Coal India rose 0.16%.

Power Minister Jyotiraditya Scindia on Thursday, 20 February 2014, said that coal imports by power generation companies in India jumped 31% to 66 million tonnes in April-January compared with the same period a year earlier. In April-January power producers imported 31 million tonnes of coal to blend them with lower quality varieties and about 35 million tonnes for plants that depend exclusively on coal from overseas, Scindia said. India's coal-based power generation rose 8% to 587.64 billion kilowatt hour during the period from a year earlier. Power companies are likely to import 82 million tonnes this fiscal year ending 31 March 2014, Scindia said.

Shree Renuka Sugars (SRS) fell 5.11% to Rs 21.35 on equity dilution worries after the company after trading hours on Thursday, 20 February 2014, said it has entered into an agreement with Wilmar International (Wilmar), through its 100% subsidiary Wilmar Sugar Holdings (WSH), to facilitate the investment of approximately $200 million in primary capital into SRS. The company said that this investment into the company would be done in two steps. The first step would involve an investment of upto Rs 517 crore by WSH in SRS through a preferential allotment of upto 25.75 crore shares of fresh equity to WSH at a price of Rs 20.08 per share. After this preferential issue, the existing promoters and WSH would hold 27.5% each of SRS' expanded equity share capital.

As per Sebi guidelines, there will also be an open offer by WSH and the existing promoters for up to 26% of the expanded equity share capital of the SRS at a price of Rs 21.89 per share. The second step would involve Wilmar and the existing promoters of SRS jointly participating in a rights issue to raise upto Rs 725.40 crore of primary equity capital for SRS, the company said in a statement.

Under a joint venture (JV) agreement signed between the existing promoters, WSH and the company, SRS would be jointly controlled by the existing promoters and Wilmar, with both parties holding equal shareholding and board representation in SRS. The existing promoters will continue with the management of the company with Wilmar being actively involved in strategic decisions. The investment is subject to approval of shareholders of SRS, anti-trust clearances in India and Brazil and such other statutory clearances as may be deemed necessary, SRS said in a statement.

SRS said that the proceeds of this investment/fund-raising would be used to pay down existing debt of SRS in India. As a strategic shareholder, WSH's shareholding in SRS and the capital infusion will strengthen the company's financial and business position and also provide a further platform for growth, it added. Wilmar's global reach and strong presence in key sugar producing countries is complementary to Shree Renuka's business, the company said in a statement.

Narendra Murkumbi, Vice-Chairman and Managing Director of SRS said, "This is a path-breaking move in the sugar business which would create a very strong partnership in some of the key global markets for sugar. Wilmar's leadership position in the edible oil business globally and its strong reach in several countries across the world would be synergistic with our large footprint in India and Brazil, the two largest sugar producers in the world. Wilmar's trading expertise, strong financial strength and history of entrepreneurial growth makes it an ideal partner."

Kuok Khoon Hong, Chairman and CEO of Wilmar said, "We are very pleased to be partnering with Mrs. Vidya Murkumbi and Mr. Narendra Murkumbi. India is a very important market for Wilmar. Besides the benefit for our sugar business, this venture will complement the development of our edible oils and other businesses in India."

Jean-Luc Bohbot, Managing Director of Wilmar Sugar and Group Sugar Head at Wilmar said, "Shree Renuka Sugar, with their two well-located refineries, large storage capacity and competitive milling operations in India, good mills and logistics assets in Brazil, fits perfectly with Wilmar Sugar's existing global footprint and provides us with a unique opportunity to participate in the Indian sugar industry. Their unique expertise will be of great value to our partnership."

Wilmar International, founded in 1991 and headquartered in Singapore, is today Asia's leading agri-business group. Wilmar is ranked amongst the largest listed companies by market capitalisation on the Singapore Exchange and has a market capitalization of about $17 billion and revenues of $44.1 billion, with profit of $1.3 billion in FY 2013. Wilmar's business activities include oil palm cultivation, oilseeds crushing, edible oils refining, sugar milling and refining, specialty fats, oleochemicals, biodiesel and fertilisers manufacturing and grains processing.

In the foreign exchange market, the rupee edged higher against the dollar on global risk-on sentiment. The partially convertible rupee was hovering at 62.14, compared with its close of 62.26/27 on Thursday, 20 February 2014.

The Reserve Bank of India will need to continue raising its policy interest rate given the sticky nature of inflation, the International Monetary Fund (IMF) said on Thursday, 20 February 2014. "The ingrained nature of inflation and inflation expectations mean that reducing inflation-even over a protracted horizon-will require significant increases in policy rates, which will weigh on growth. Should high inflation expectations persist and inflation remain sticky, a more front-loaded path of interest rate increases may be needed," the IMF said.

The IMF expects India's consumer price index to remain near double digits well into next year driven by food prices. The IMF has suggested giving more emphasis to consumer prices for making policy decisions. "Headline CPI should provide the principal nominal anchor for monetary policy, as food and fuel price shocks propagate rapidly into core inflation, and inflation expectations and wage formation are closely linked to CPI inflation," the IMF said. The IMF expects India's economy to grow at 4.6% in 2013-14, picking up to 5.4% in 2014-15.

The Reserve Bank of India next undertakes monetary policy review on 1 April 2014. Citing price pressures, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.

On political front, lawmakers passed a bill to create India's 29th state on Thursday despite mayhem in parliament, as opponents made a futile last attempt to stop the upper house carving landlocked Telangana from coastal Andhra Pradesh. Demands that the southern region be made a separate state have existed almost as long as independent India. Thursday's vote fulfils a promise made by the government in 2009, and comes just weeks before a national election in April.

The new state will have a population of around 3.5 crore people. The bill must now be signed by president to become law, a formality expected to take place in a few days.

Asian stocks edged higher on Friday, 21 February 2014, after a larger-than-forecast climb in a measure of US manufacturing in February tempered concern about global growth. US economy is the world's biggest economy. Key benchmark indices in Indonesia, Taiwan, Singapore, Japan, Hong Kong and South Korea were up 0.42% to 2.44%. China's Shanghai Composite fell 0.97%.

Minutes from the Bank of Japan's Jan. 22 policy meeting showed some board members said the central bank should provide a clearer explanation that an expected decline in second-quarter domestic growth was factored into its outlook.

Trading in US index futures indicated that the Dow could advance 43 points at the opening bell on Friday 21 February 2014. US stocks edged higher on Thursday, 20 February 2014, as investors found encouragement in a gauge of US manufacturing jumping to its highest level in almost four years, as well as in more M&A activity, this time involving Facebook. Late Wednesday, Facebook announced a $19 billion deal to acquire messaging service WhatsApp.

The Markit Economics preliminary index of US manufacturing increased to 56.7 in February, surpassing economists' estimates, while Labor Department figures indicated fewer applications for unemployment benefits last week. The Conference Board's index of US leading indicators, a gauge of the outlook for the next three to six months, rose in January in line with estimates.

Federal Reserve policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5%, according to minutes of their January meeting released on Wednesday, 19 February 2014. Federal Reserve Chair Janet Yellen last week said the economy has strengthened enough to withstand continued cuts to monetary stimulus, adding that only a notable change in the outlook for the economy would prompt the central bank to slow the pace of tapering.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 18-19 March 2014. After a monetary policy review, the FOMC on 29 January 2014 announced it will reduce monthly bond purchases by another $10 billion to $65 billion.

Sweeping reforms are urgently needed to boost productivity and lower barriers to trade if the world is to avoid a new era of slow growth and stubbornly high unemployment, the OECD warned on Friday. In its 2014 study on "Going for Growth", The Organisation for Economic Co-operation and Development said momentum on reforms had slowed in the aftermath of the global financial crisis, with much of it now piecemeal and incremental. "The widespread deceleration in productivity since the crisis could presage the beginning of a new low-growth era," warned Pier Carlo Padoan, deputy secretary-general and chief economist at the Paris-based OECD. "These concerns, already prevalent among advanced OECD countries for some time, now encompass emerging-market economies and are fuelled also by high unemployment and falling labour force participation in many countries."

Group of 20 finance ministers meet in Sydney this weekend, with US stimulus cuts and political turmoil from Ukraine to Venezuela stoking concern over emerging-market volatility.

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