Key benchmark indices slipped into the red and hit fresh intraday low in morning trade as firm global crude oil prices and hike in railway freight rates stoked inflation worries. The government after trading hours on Friday, 20 June 2014, announced steep 14.2% increase in railway passenger fare and 6.5% hike in railway freight rate to boost revenue of the railways to meet its annual expenditure. The barometer index, the S&P BSE Sensex and the 50-unit CNX Nifty, both, hit 2-1/2-week low. The Sensex was down 44.87 points or 0.18%, off close to 135 points from the day's high and up about 35 points from the day's low. The market breadth indicating the overall health of the market was positive.
Shares of companies whose fortunes are linked to orders from Indian Railways rose after the government revised higher passenger fare and freight rates on Friday, 20 June 2014. L&T gained after the company said that it has entered into a definitive investment agreement with a wholly owned subsidiary of Canada Pension Plan Investment Board (CPPIB) viz. CPP Investment Board Singaporean Holdings 1 (CPPIBSH), for an initial investment tranche of Rs 1000 crore to be invested by CPPIBSH into the company's subsidiary L&T Infrastructure Development Projects (L&T IDPL). Shares of decorative paints maker Asian Paints scaled record high.
At 10:20 IST, the S&P BSE Sensex was down 44.87 points or 0.18% to 25,060.64. The index shed 81.55 points at the day's low of 25,023.96 in morning trade, its lowest level since 5 June 2014. The index jumped 91.99 points at the day's high of 25,197.50 in early trade.
The CNX Nifty was down 21.50 points or 0.29% to 7,489.95. The index hit a low of 7,480.10 in intraday trade, its lowest level since 5 June 2014. The index hit a high of 7,534.80 in intraday trade.
The market breadth, indicating the overall health of the market was positive. On BSE, 1,094 shares gained and 1,064 shares fell. A total of 106 shares were unchanged.
The BSE Mid-Cap index was up 9.16 points or 0.1% at 8,971.12. The BSE Small-Cap index was up 12.69 points or 0.13% at 9,773.91. Both these indices outperformed the Sensex.
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Asian Paints rose 0.01% to Rs 566.70 after hitting record high of Rs 572.15 in intraday trade.
L&T gained 0.49% to Rs 1,655 after the company said during market hours that it has entered into a definitive investment agreement with a wholly owned subsidiary of Canada Pension Plan Investment Board (CPPIB) viz. CPP Investment Board Singaporean Holdings 1 (CPPIBSH) for an initial investment tranche of Rs 1000 crore to be invested by CPPIBSH into the company's subsidiary L&T Infrastructure Development Projects (L&T IDPL).
This will be followed by a second tranche of Rs 1000 crore, or such higher amount as may be agreed between the company and CPPIBSH, after twelve months from the date of initial investment subject to any required regulatory approval at such time. CPPIBSH will invest in preference shares of L&T IDPL, compulsorily convertible into equity shares by 2018 at a valuation to be determined as per a mutually agreed process. Post conversion, CPPIBSH will hold a minority stake in the equity capital of L&T IDPL.
L&T said that this would be the first direct private investment by a Canadian pension fund into an Indian infrastructure development company.
Shares of companies whose fortunes are linked to orders from Indian Railways rose after the government revised higher passenger fare and freight rates on Friday, 20 June 2014. Stone India (up 2.4% to Rs 44.75), Kalindee Rail Nirman (Engineers) (up 0.33% to Rs 120), Texmaco Infrastructure & Holdings (up 2.47% to Rs 39.40), Simplex Casting (up 5% to Rs 53.30), Titagarh Wagons (up 1.18% to Rs 317.65), Container Corporation of India (up 1.47% to Rs 1,175), Hind Rectifiers (up 0.55% to Rs 54.85), Bharat Heavy Electricals (up 0.80%), BEML (up 1.42% to Rs 801.15), and Transformers & Rectifiers (India) (up 0.01% to Rs 173.50), edged higher.
The market edged higher amid initial volatility as the government's announcement after trading hours on Friday, 20 June 2014, to raise passenger fare and railway freight fuelled expectations that the Centre has started taking tough decisions which are required to bring the economy on growth path. But, the initial gains proved short lived as firm global crude oil prices and hike in railway freight rates stoked inflation worries. The Sensex and the 50 Nifty, both, hit their lowest level in 2-1/2 weeks in morning trade.
Indian stocks may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month June 2014 series to July 2014 series. The near-month June 2014 F&O contract expire on Thursday, 26 June 2014.
The government on Friday, 20 June 2014, raised passenger fare and freight rates. A flat 10% increase in passenger fare was announced in all classes. In addition there will be an increase of 4.2% in fares on account of FAC (Fuel adjustment Component) which is due from April 2014. The overall increase in passenger fare is 14.2%.
There has been a flat 5% increase in freight rates. In addition there will be an increase of 1.4% in fares on account of FAC (Fuel adjustment Component) which is due from April 2014. The overall increase in freight rates will be about 6.5% for major commodities. The revised passenger fare and freight rates and freight structure rationalization will come into effect from 25 June 2014.
Brent crude oil prices rose as militant violence in Iraq continues, raising concerns of oil supply from a key oil exporter of the world. Brent oil futures for August delivery were up 36 cents or 0.31% at $115.17 a barrel. Brent had dropped on Friday, 20 June 2014, after settling at its highest level in more than nine months at $115.06 a barrel on Thursday, 19 June 2014.
Increase in crude oil prices has sparked worries about India's macroeconomic situation as India imports majority of its crude oil requirements. Increase in crude oil prices has raised concerns of increase in India's current account deficit and fiscal deficit. Firm global crude oil prices and the latest hike in railway freight rate have also stoked inflation worries.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 60.1775, compared with its close of 60.185/195 on Friday, 20 June 2014.
Asian stocks rose on Monday, 23 June 2014, as upbeat news from China's factory sector and fresh highs on Wall Street on Friday, 20 June 2014 fueled appetite for riskier assets. Key benchmark indices in Japan, Indonesia, China, Hong Kong, Singapore, and South Korea were up 0.03% to 0.43%. Taiwan's Taiwan Weighted index was off 0.48%.
Activity in China's factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed on Monday, offering new signs the economy is stabilising thanks to Beijing's measures to shore up growth. The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 50.8 in June from May's final reading of 49.4. It was the first time since December that the PMI was in growth territory, and the highest reading since November, when it was also 50.8.
Trading in US index futures indicated that the Dow could gain 36 points at the opening bell on Monday, 23 June 2014. The Dow Jones Industrial Average and the S&P 500 index closed at record highs on Friday, helped by the prospect of the Federal Reserve keeping interest rates low for a long period of time.
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