Key benchmark indices registered small losses as IT and pharma stocks dropped. The barometer index, the S&P BSE Sensex, alternately swung between positive and negative zone throughout the trading session. The 50-unit CNX Nifty languished in negative zone for most part of the trading session as Cairn India, Bosch, Punjab National Bank, Kotak Mahindra Bank, Tech Mahindra, Asian Paints, Zee Entertainment Enterprises, Bank of Baroda and HCL Technologies edged lower. All these stocks are Nifty constituents but are not a part of the Sensex. After registering small losses for the trading session, the Sensex hit its lowest closing level in more than 33 weeks. The Nifty hit its lowest closing level in more than 32 weeks. Weakness in Asian and European stocks weighed on sentiment on the domestic bourses. The market breadth indicating the overall health of the market was negative. The Sensex fell 41.84 points or 0.16% to settle at 26,481.25.
IT stocks fell as the rupee edged higher against the dollar. Bank shares were mixed after the Reserve Bank of India (RBI) after trading hours yesterday, 8 June 2015, announced that banks can undertake a Strategic Debt Restructuring (SDR) of a stressed assets by converting loan dues into equity shares. Realty stocks edged lower. Cipla dropped on reports a foreign brokerage has said that the launch of asthma drug by Mylan in the UK is negative for Cipla because Cipla was earlier expected to be the first company to launch this drug.
In overseas markets, European shares edged lower, tracking losses in Asia and the US triggered by bond market volatility, uncertainty over the future of Greece and concerns surrounding the impact of an interest rate rise in the US.
The Sensex dropped for the 6th straight trading session today, 9 June 2015. The Nifty dropped for the 7th straight trading session today, 9 June 2015.
Foreign portfolio investors (FPIs) sold shares worth Rs 745.33 crore into the secondary equity market yesterday, 8 June 2015, as per data from Central Depository Services (India). Domestic institutional investors (DIIs) bought shares worth a net Rs 529.82 crore yesterday, 8 June 2015, as per provisional data released by the stock exchanges.
The S&P BSE Sensex fell 41.84 points or 0.16% to settle at 26,481.25, its lowest closing level since 20 October 2014. The index lost 84.77 points at the day's low of 26,438.32 in late trade. The index rose 81.56 points at the day's high of 26,604.65 in mid-afternoon trade.
The CNX Nifty fell 21.75 points or 0.27% to settle at 8,022.40, its lowest closing level since 27 October 2014. The index hit a low of 8,005.15 in intraday trade. The index hit a high of 8,057.15 in intraday trade.
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The BSE Mid-Cap index fell 32.75 points or 0.32% to settle at 10,161.25. The BSE Small-Cap index fell 35.71 points or 0.33% to settle at 10,661.85. The fall in both these indices was higher than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was negative. On BSE, 1,577 shares declined and 1,057 shares rose. A total of 114 shares were unchanged.
The total turnover on BSE amounted to Rs 2218 crore, higher than turnover of Rs 1873.55 crore registered during the previous trading session.
Among sectoral indices on BSE, the S&P BSE Realty index (down 1.54%), the S&P BSE Healthcare index (down 1.41%), the S&P BSE Auto index (down 0.73%), the S&P BSE IT index (down 0.7%), the S&P BSE Teck index (down 0.66%) and the S&P BSE Capital Goods index (down 0.35%), underperformed the Sensex. The S&P BSE Oil & Gas index (down 0.04%), the S&P BSE FMCG index (down 0.03%), the S&P BSE Bankex (up 0.24%), the S&P BSE Power index (up 0.35%), the S&P BSE Metal index (up 0.81%) and the S&P BSE Consumer Durables index (up 0.97%) outperformed the Sensex.
Pharma shares declined. Strides Arcolab (down 2.39%), Dr Reddy's Laboratories (down 2.34%), Sun Pharmaceutical Industries (down 2.05%), Cadila Healthcare (down 1.6%), Glenmark Pharmaceuticals (down 0.98%), Aurobindo Pharma (down 0.66%), IPCA Laboratories (down 0.6%), Lupin (down 0.57%) and Divi's Laboratories (down 0.03%), edged lower. Wockhardt (up 0.40%), GlaxoSmithKline Pharmaceuticals (up 0.57%) and Piramal Enterprises (up 0.68%), edged higher.
Cipla fell 3.35% to Rs 593.50 on reports a foreign brokerage has said that the launch of asthma drug by Mylan in the UK is negative for Cipla because Cipla was earlier expected to be the first company to launch this drug. Mylan had recently announced the launch of the first generic version of GlaxoSmithKline's Seretide Evohaler (salmeterol xinafoate/fluticasone propionate) under the brand name Sirdupla (pMDI), 125/25 mcg and 250/25 mcg with 120 doses strengths, in the UK. Sirdupla is indicated in the treatment of asthma in adults aged 18 years and over. The brokerage sees this as negative for Cipla, as earlier it had estimated Cipla was the first player to launch generic Seretide pMDI in the UK.
Realty stocks declined. Unitech (down 7.7%), Housing Development and Infrastructure (HDIL) (down 3.57%), Oberoi Realty (down 3.53%), Indiabulls Real Estate (down 3.31%), Phoenix Mills (down 2.25%), Sunteck Realty (down 1.88%), Anant Raj (down 1.21%), Sobha (down 1.11%), Prestige Estates Projects (down 0.5%) and Peninsula Land (down 0.42%), edged lower. Godrej Properties (up 0.42%), Parsvnath Developers (up 0.48%) and D B Realty (up 0.49%), edged higher.
Realty major DLF rose 0.77% to Rs 110.60. The stock hit high of Rs 111.70 and low of Rs 107.70 in intraday trade.
IT stocks fell as the rupee edged higher against the dollar. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. Tech Mahindra (down 1.97%), Wipro (down 1.76%), CMC (down 0.98%), MindTree (down 0.81%), TCS (down 0.8%), HCL Technologies (down 0.73%), Persistent Systems (down 0.45%) and Infosys (down 0.38%), edged lower. MphasiS (up 0.41%), Hexaware Technologies (up 0.42%) and Oracle Financial Services Software (up 1.73%) edged higher.
Bank shares were mixed after the Reserve Bank of India (RBI) after trading hours yesterday, 8 June 2015, announced that banks can undertake a Strategic Debt Restructuring (SDR) of a stressed assets by converting loan dues into equity shares.
Among PSU banks, United Bank of India (down 1.76%), Punjab and Sind Bank (down 1.75%), Bank of Baroda (down 1.64%), Punjab National Bank (down 1.48%), Indian Bank (down 1.3%), Canara Bank (down 1.06%), Corporation Bank (down 1.06%), Bank of Maharashtra (down 0.56%), Union Bank of India (down 0.07%) and Allahabad Bank (down 0.05%), edged lower. Dena Bank (up 0.33%), Vijaya Bank (up 0.34%), Central Bank of India (up 0.51%), Andhra Bank (up 0.58%), Syndicate Bank (up 0.79%), Bank of India (up 0.89%), UCO Bank (up 0.95%), State Bank of India (up 1%) and IDBI Bank (up 1.15%) edged higher.
Among private sector banks, Kotak Mahindra Bank (down 1.82%), IndusInd Bank (down 0.44%), HDFC Bank (down 0.09%) and Yes Bank (down 0.05%), edged lower. City Union Bank (up 0.60%), Axis Bank (up 0.89%), ICICI Bank (up 1.36%) and Federal Bank (up 1.54%), edged higher.
SDR will provide banks with enhanced capabilities to initiate change of ownership in cases of restructuring of accounts where borrower companies are not able to come out of stress due to operational/managerial inefficiencies despite substantial sacrifices made by the lending banks, the RBI said. At the time of initial restructuring, the Joint Lenders' Forum (JLF) must incorporate, in the terms and conditions attached to the restructured loan/s agreed with the borrower, an option to convert the entire loan (including unpaid interest), or part thereof, into shares in the company in the event the borrower is not able to achieve the viability milestones and/or adhere to 'critical conditions' as stipulated in the restructuring package. This should be supported by necessary approvals/authorisations (including special resolution by the shareholders) from the borrower company, as required under extant laws/regulations, to enable the lenders to exercise the option effectively. Restructuring of loans without the required approvals/authorisations for SDR is not permitted. If the borrower is not able to achieve the viability milestones and/or adhere to the 'critical conditions' as stipulated in the restructuring package, the JLF must immediately review the account and examine whether the account will be viable by effecting a change in ownership. If found viable under such examination, the JLF may decide on whether to invoke the SDR, i.e. convert the whole or part of the loan and interest outstanding into equity shares in the borrower company, so as to acquire majority shareholding in the company.
In order to achieve the change in ownership, the lenders under the JLF should collectively become the majority shareholder by conversion of their dues from the borrower into equity, according to the RBI notification. However, the conversion by JLF lenders of their outstanding debt (principal as well as unpaid interest) into equity instruments shall be subject to the member banks' respective total holdings in shares of the company conforming to the statutory limit in terms of Section 19(2) of Banking Regulation Act, 1949. Post the conversion, all lenders under the JLF must collectively hold 51% or more of the equity shares issued by the company. The share price for such conversion of debt into equity will be determined as per a formula prescribed by the RBI.
Provisions of the SDR would also be applicable to the accounts which have been restructured before the date of this circular provided that the necessary enabling clauses are included in the agreement between the banks and borrower, the RBI said.
According to the RBI notification, JLF and lenders should divest their holdings in the equity of the company as soon as possible. On divestment of banks' holding in favour of a new promoter, the asset classification of the account may be upgraded to 'Standard'. However, the quantum of provision held by the bank against the said account as on the date of divestment, which shall not be less than what was held as at the 'reference date', shall not be reversed. At the time of divestment of their holdings to a 'new promoter', banks may refinance the existing debt of the company considering the changed risk profile of the company without treating the exercise as 'restructuring' subject to banks making provision for any diminution in fair value of the existing debt on account of the refinance. Banks may reverse the provision held against the said account only when all the outstanding loan/facilities in the account perform satisfactorily during the 'specified period', i.e. principal and interest on all facilities in the account are serviced as per terms of payment during that period. In case, however, satisfactory performance during the specified period is not evidenced, the asset classification of the restructured account would be governed by the extant IRAC norms as per the repayment schedule that existed as on the reference date, assuming that 'stand-still'/above upgrade in asset classification had not been given. However, in cases where the bank exits the account completely, i.e. no longer has any exposure to the borrower, the provision may be reversed/absorbed as on the date of exit.
The Sensex slipped for the sixth straight trading session today, 9 June 2015. The Sensex has slumped 1,367.74 points or 4.91% in the past six trading sessions from a recent high of 27,848.99 on 1 June 2015. The Sensex has lost 1,018.17 points or 3.70% in this calendar year so far (till 9 June 2015). From a 52-week low of 24,878.66 on 23 June 2014, the Sensex has risen 1,602.59 points or 6.44%. The Sensex is off 3,543.49 points or 11.80% from a record high of 30,024.74 hit on 4 March 2015.
In the global commodities market, Brent crude oil prices edged higher. Brent for July settlement was up 97 cents at $63.66 a barrel. The contract had lost 62 cents or 0.97% to settle at $62.69 a barrel during the previous trading session.
Higher crude oil prices could increase fiscal deficit and current account deficit and stoke fuel price inflation. However, the recovery in rupee against the dollar will mitigate the negative impact of higher crude oil price. Gains in local currency will reduce the cost of imports. India imports about 80% of its crude oil requirements.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was currently hovering at 63.94, compared with close of 64.09 during the previous trading session.
Meanwhile, the India Meteorological Department (IMD) said in its daily monsoon update yesterday, 8 June 2015, that the southwest monsoon has further advanced into some more parts of central Arabian sea, entire Goa, some parts of south Konkan, remaining parts of coastal Karnataka and some more parts of south interior Karnataka. The Southwest Monsoon was active over Arunachal Pradesh and Assam & Meghalaya during past 24 hours, the IMD said yesterday, 8 June 2015.
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.
In overseas markets, European shares edged lower today, 9 June 2015, tracking losses in Asia and the US triggered by bond market volatility, uncertainty over the future of Greece and concerns surrounding the impact of an interest rate rise in the US. Key benchmark indices in UK, France and Germany were off 0.36% to 1.34%.
According to media reports, Greece and its creditors are discussing an extension of Greece's bailout program through March 2016. Greece deferred a payment to the International Monetary Fund last week and needs to crack a deal or get another extension before its euro-area bailout package expires on 30 June 2015.
A revival in government spending, and a pickup in investment, was offset by a rise in imports to leave the eurozone's growth rate unchanged in the first three months of the year, according to revised figures released today, 9 June 2015. The European Union's statistics agency confirmed that the combined gross domestic product of the 19 countries that use the euro rose by 0.4% from the final three months of 2014, but raised its estimate of growth in that final quarter to 0.4% from 0.3%.
Asian stocks edged lower today, 9 June 2015, on worries about Greece and on expectations that the US Federal Reserve will start raising interest rates in September. Key benchmark indices in Singapore, South Korea, Taiwan, Japan and Indonesia were off 0.06% to 2.3%.
Chinese shares slipped after weak inflation data. In mainland China, the Shanghai Composite index was off 0.36%. In Hong Kong, the Hang Seng index was off 1.2%. China's consumer inflation in May was at its weakest level in four months, official data showed today, 9 June 2015. China's consumer price index rose 1.2% in May from a year earlier, slower than a 1.5% year-over-year rise in April, data from the National Bureau of Statistics showed. The producer-price index, which measures prices of goods at the factory gate, dropped 4.6% in May from a year earlier, matching a 4.6% year-over-year fall in April. Factory-level prices have now been declining for 39 consecutive months since March 2012 as weak demand leaves excess capacity in key industries like steel and cement and drives prices lower.
Investors in China await MSCI Inc.'s decision in New York later in the global day today, 9 June 2015, on whether to include Chinese domestic stocks in its indexes, which are tracked by billions of dollars of global funds and could draw millions of new investors into Chinese shares.
US stocks declined yesterday, 8 June 2015, with the tech stocks leading the market lower. The slump in the main stock-market indexes marked the third consecutive session, with the Dow industrials erasing year-to-date gains.
A two-day meeting of the Federal Open Market Committee (FOMC) to review US monetary policy is scheduled on 16-17 June 2015.
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