A bout of volatility was witnessed as key benchmark indices trimmed gains after a firm start. The barometer index, the S&P BSE Sensex, was up 50.13 points or 0.24%, off close to 40 points from the day's high and up close to 30 points from the day's low. The market breadth, indicating the overall health of the market, was positive. Firmness in Asian stocks supported domestic bourses.
Shares of Apollo Tyres surged amid high initial volatility after US based tyre maker Cooper Tire & Rubber Company on Monday, 30 December 2013, announced that it has terminated the merger agreement with Apollo Tyres. GMR Infrastructure (GMR) rose after the company said it has signed a definitive agreement with Malaysian Airports Holding Berhard (MAHB) to sell its entire 40% equity stake in Sabiha Gokcen International Airport (ISGIA) and its operating company LGM Tourism (LGM) for euro 225 million (i.e. approximately Rs 1910 crore), subject to certain adjustments.
Foreign institutional investors (FIIs) bought shares worth a net Rs 116.06 crore on Monday, 30 December 2013, as per provisional data from the stock exchanges.
At 9:33 IST, the S&P BSE Sensex was up 50.13 points or 0.24% to 21,193.14. The index rose 87.87 points at the day's high of 21,230.88 in early trade. The index gained 20.24 points at the day's low of 21,163.25 in early trade.
The CNX Nifty was up 11.30 points or 0.18% to 6,302.40. The index hit a high of 6,317.30 in intraday trade. The index hit a low of 6,298.15 in intraday trade.
The market breadth, indicating the overall health of the market, was positive. On BSE, 659 shares gained and 444 shares fell. A total of 63 shares were unchanged.
Among the 30-share Sensex pack, 23 stocks gained and rest of them declined. Tata Power Company (up 1.24%), Hindalco Industries (up 0.99%) and Hero MotoCorp (up 0.88%) edged higher from the Sensex pack.
GMR Infrastructure (GMR) rose 1.23% after the company said after market hours on Monday, 30 December 2013, that it has signed a definitive agreement with Malaysian Airports Holding Berhard (MAHB) to divest its 40% equity stake in Sabiha Gokcen International Airport (ISGIA) and its operating company LGM Tourism (LGM) for euro 225 million (i.e. approximately Rs 1910 crore), subject to certain adjustments. Definitive agreements have been signed subsequent to the exercise of Right of First Refusal (ROFR) by MAHB under the existing shareholders agreement of ISG, on 23 December 2013, GMR said.
GMR said that the transaction is subject to customary closing conditions including the approval of the relevant government authorities and the project lenders to ISG.
Commenting on the transaction, G M Rao, Chairman, GMR Group said, "This transaction is yet another evidence of GMR Group's ability to implement appropriate strategy to face the challenges of changing times. We at GMR Group continue to focus on creating liquidity and enhance value by effective portfolio management under our ALAR (Asset Light Asset Right) strategy. The efforts of the Group taken in recent times shall strengthen our balance sheet".
ISG is one of the world's fastest-growing airports. It currently hosts more than 58 different carriers covering over 125 destinations. The consortium of Limak Holidng, GMR Group and MAHB was selected as the preferred bidder for upgrading and maintaining the airport in July 2007. The airport's new terminal was commissioned in October 2009, 12 months ahead of schedule. LGM undertakes the operation of non-zero services at the airport such as hotel, food & beverages, and lounge. GMR's equity investment at ISG is around euro 71.6 million.
Canara Bank rose 0.38%. The state-run bank after market hours on Monday, 30 December 2013, announced increase in lending rates. The bank has raised its base rate to 10.20% from 9.95%, with effect from 1 January 2014. The bank has raised its Benchmark prime lending rate (PLR) to 14.45% from 14.20% from 1 January 2014.
Shares of Apollo Tyres rose 3.26% to Rs 104.60 after US based tyre maker Cooper Tire & Rubber Company on Monday, 30 December 2013, announced that it has terminated the merger agreement with Apollo Tyres. The stock witnessed high initial volatility. The stock hit record high of Rs 113 at the onset of the trading session. The stock hit low of Rs 102.55 in intraday trade. High volumes accomanied initial gains in the stock. On BSE, so far 17.7 lakh shares changed hands in the counter, compared with average daily volume of 10.54 lakh shares during the past one quarter.
Cooper Chairman, Chief Executive Officer and President, Roy Armes, said: "It is time to move our business forward. While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available. The right thing for Cooper now is to focus on continuing to build our business. Our business model is strong, and despite the challenges this year, we are coming off record operating profit through the first half of the year and expect to continue to be profitable for the second half, ending the year with a strong balance sheet. We look forward to continuing to execute on our strategy in 2014, and we have a very strong base from which to do this-brands that are respected for quality, a loyal customer base, a flexible global network of manufacturing facilities, a skilled workforce, and top technical capabilities".
"While Cooper believes Apollo has breached the merger agreement, and we will continue to pursue the legal steps necessary to protect the interests of our company and our stockholders, our focus will be squarely on our business and moving it forward," Armes said.
"Addressing the situation at Cooper Chengshan Tire (CCT) in Rongcheng, China is our top priority in the near term. The issues at CCT were driven by the merger agreement, and with the agreement now terminated, Cooper is working independently to restore normal operations at CCT, including obtaining the information needed for Cooper to resume regular financial reporting as soon as possible. Once the situation at CCT is resolved and regular financial reporting has resumed, Cooper will be in a position to address additional options for the deployment of capital targeted at returning value for our stockholders," he added.
In the foreign exchange market, the rupee edged higher against the dollar in early trade. The partially convertible rupee was hovering at 61.875, compared with its close of 61.91/92 on Monday, 30 December 2013.
The Confederation of Indian Industry (CII) on Monday, 30 December 2013, said that the CII Business Confidence Index (CII-BCI) rose sharply to 54.9% in Q3 December 2013, from 45.7% in Q2 September 2013. The pick-up in BCI for the current quarter comes as a major relief for the economy which has been braving the onslaught of the slowdown for the last several quarters and awaiting the return of growth, the CII said in a statement. The survey also strikes a note of caution as the downside risks to growth have still not abated and supply side bottlenecks continue to pose a problem, CII said. "With some positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our current account deficit to decline, we believe that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth", observed Mr. Chandrajit Banerjee, Director General, Confederation of Indian Industry.
The 85th Business Outlook Survey is based on the responses from over 174 industry members. Majority of the respondents (63%) belong to large-scale firms, while 12% are from medium-scale firms and 25% were from small-scale. Further, 65% of the respondents were from manufacturing sector while 35% were from services.
The survey reveals that 58% of the respondents expect an increase in their sales in the third quarter of 2013-14, much higher than 45% who witnessed the same during the previous quarter. As regards the input cost in the current quarter, majority of the respondents also expect it to increase. The silver lining, however, is that the percentage of respondents who expect expenses on raw materials, electricity, and wages and salaries to increase has declined significantly from the last quarter, CII said.
Against the backdrop of an expected improvement in sales growth and moderation in inputs cost, majority of the respondents (43%) expect an increase in their pre-tax profit margin in the third quarter, much higher than 31% in the previous quarter.
Another positive signal emerging from the survey is that an improvement in capacity utilization is expected in the current quarter, CII said. As compared to 56% respondents experiencing less than 75% capacity utilization in the second quarter, only 45% respondents expect capacity utilization to fall below 75% in the third quarter, CII said. Underlining the need for continuing policy intervention to step up investment, 53% of firms did not expect their capacity to expand in the current quarter.
What is also encouraging is to note that the export prospects look positive in the current quarter whereas imports are seen to be restrained, CII said. 53% of firms expected their exports to increase in the current quarter, up from 49% in the previous quarter. Similarly, 56% of the respondents didn't expect their imports to increase during the current quarter.
In the 85th Business Outlook Survey, domestic economic/political instability, slackening consumer demand, high level of corruption, persistent high inflation and risk from exchange rate volatility emerged as the top five current concerns in order of severity to most firms, CII said.
The next major trigger for the market is Q3 December 2013 corporate earnings. The Q3 earnings season will begin around mid-January 2014 and continue till mid-February 2014. Investors and analysts will closely watch the management commentary that would accompany the result to see if there is any revision in their future earnings forecast of the company for the current year and/or the next year.
Asian stocks edged higher on the last trading session of the year on Tuesday, 31 December 2013, as energy shares advanced. Key benchmark indices in China, Hong Kong, and Singapore were up 0.32% to 0.87%. Taiwan's Taiwan Weighted fell 0.02%. Stock markets in Japan, South Korea, Indonesia, Thailand, the Philippines and Vietnam were closed for holidays.
China is scheduled to post its manufacturing purchasing managers' index for December 2013 tomorrow, 1 January 2014.
US stocks finished little changed on Monday, 30 December 2013, although the Dow Jones Industrial Average managed to eke out its 51st record close of 2013 in the next-to-last trading session of the year, while shares of Twitter extended a decline. The National Association of Realtors said its index of pending home sales rose 0.2% in November to 101.7, slightly above a 10-month low of 101.5 in October, but down from 103.3 in November 2012. The data had little impact on stocks.
The US Federal Reserve said after a two-day monetary policy review on 18 December 2013 that it will cut its monthly bond purchases to $75 billion from $85 billion starting in January 2014 amid an improved outlook for the job market in the world's largest economy. The US central bank is poised to continue winding down its stimulus measures gradually over the next year.
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