A bout of volatility was witnessed as key benchmark indices trimmed losses after extending initial losses in morning trade. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty trimmed losses after both these key benchmark indices hit two-week low. The Sensex was currently off 158.18 points or 0.57% at 27,708.13. The broad market depicted weakness. There were more than two losers against every gainer on BSE. The BSE Mid-Cap index was off 1.11%. The decline in this index was higher than Sensex's drop in percentage terms.
Weakness in Asian stocks and drop in US index futures weighed on sentiment on the domestic bourses. Global markets have been roiled by the China's unexpected devaluation of the yuan by nearly 2% announced by the Chinese central bank yesterday, 11 August 2015. Meanwhile, Vietnam's central bank today, 12 August 2015, doubled the width of the dong's trading band. The State Bank of Vietnam widened the dong's trading band against the US dollar to 2% from 1% previously. The dong, like the yuan, is loosely pegged to the dollar.
IT stocks rose on a weak rupee. Shares of steel makers fell for the second straight day after Chinese central bank's decision to devalue its tightly controlled currency. NMDC dropped after reporting weak Q1 results. Tata Steel edged higher after the company announced first quarter results after trading hour yesterday, 11 August 2015.
In overseas markets, Asian markets slumped, feeling the aftershocks of China's surprise devaluation of the yuan, which hit US equities overnight. US stocks closed sharply lower yesterday, 11 August 2015, in the wake of a surprise devaluation of the yuan by Chinathe world's second-largest economy.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 736.81 crore yesterday, 11 August 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 130.74 crore yesterday, 11 August 2015, as per provisional data.
At 10:18 IST, the S&P BSE Sensex was down 158.18 points or 0.57% at 27,708.13. The index fell 237.31 points at the day's low of 27,628.78 in morning trade, its lowest level since 29 July 2015. The index gained 17.24 points at the day's high of 27,883.33 in early trade.
The CNX Nifty was down 54.90 points or 0.65% at 8,407.45. The index hit a low of 8,382.35 in intraday trade, its lowest level since 29 July 2015. The index hit a high of 8,446.95 in intraday trade.
The market breadth indicating the overall health of the market was quite weak. There were more than two losers against every gainer on BSE. 1,540 shares declined and 579 shares rose. A total of 65 shares were unchanged.
The BSE Mid-Cap index was down 127.11 points or 1.11% at 11,383.07. The BSE Small-Cap index was down 113.54 points or 0.95% at 11,805.50. The decline in both these indices was higher than the Sensex's drop in percentage terms.
Shares of steel makers fell for the second straight day after Chinese central bank's decision to devalue its tightly controlled currency. Steel Authority of India (down 1.72%), JSW Steel (down 1.37%), Jindal Steel & Power (down 5.46%) and Bhushan Steel (down 1.41%) edged lower.
A devalued currency will make Chinese exports becoming cheaper. Dumping of cheaper steel products by China will hurt the Indian steel industry. The devaluation will also impact India's exports to China as a weaker yuan makes resources more expensive to Chinese buyers.
Tata Steel edged higher after the company announced first quarter results after trading hour yesterday, 11 August 2015. The stock was up 1.36% at Rs 250.10. The stock hit high of Rs 256.20 and low of Rs 247.50 so far during the day. On a consolidated basis, Tata Steel's net profit jumped 126.17% to Rs 762.96 crore on 16.81% fall in total income from operations (net) to Rs 30300.33 crore in Q1 June 2015 over Q1 June 2014.
Tata Steel's bottom line in Q1 June 2015 was boosted by a surge in non-operational income and also due to one-time and exceptional items. The operating performance was weak. The company's earnings before interest, taxation, depreciation and amortization (EBITDA) after adjusting for one-time and exceptional items fell 35.28% to 2799 crore in Q1 June 2015 over Q1 June 2014. Tata Steel's non-operational income or other income jumped 252.62% to Rs 762.17 crore in Q1 June 2015 over Q1 June 2014.
Consolidated steel deliveries fell to 6.33 million tonnes in Q1 June 2015 from 6.46 million tonnes in Q1 June 2014.
Tata Steel said that there was significant import of steel into India during the quarter which depressed local steel prices. Tata Steel's turnover from its Indian operations fell 13.12% to Rs 9094 crore in Q1 June 2015 over Q1 June 2014.
T V Narendran, Managing Director of Tata Steel India and South East Asia, said that the Indian steel industry continued to bear the brunt of a surge in imports and tepid domestic demand which led to a sharp drop in steel prices over the quarter. Phased commissioning of the 3 MTPA greenfield expansion project at Kalinganagar has started and the company is gearing up to commence commercial production in second half of year ending 31 March 2016.
With regard to European operations, Tata Steel said that the European operations' liquid steel production and deliveries, both, increased by more than 7% on year-on-year basis in Q1 June 2015, reflecting the more stable operating platform. But surging EU imports, especially from China, and, in the case of the UK operations, the appreciation of sterling against the euro, led to lower turnover and EBIT for the European operations, Tata Steel said. The company is combating these headwinds by progressing market differentiation strategy, improving cost base and shifting focus increasingly from volume to value, the company said.
At the EBIT level, the European operations of Tata Steel reported a loss of Rs 124 crore in Q1 June 2015 as against profit of Rs 136 crore in Q1 June 2014. EBITDA of Tata Steel's European operations fell 42.21% to Rs 575 crore on 13.91% decline in turnover to Rs 17855 crore in Q1 June 2015 over Q1 June 2014.
Separately, Tata Steel also said that the company yesterday, 11 August 2015, sold 1.93 crore shares (2.18% stake) of Titan Company to Tata Sons through a market sale for a net consideration of Rs 637.46 crore. Tata Steel made the announcement after market hours yesterday, 11 August 2015.
Shares of Titan Company shed 1.04%.
NMDC dropped after reporting weak Q1 results. The stock fell 4.42% to Rs 98.50. The stock hit a low of Rs 98.45, which was also a 52-week low for the stock. The company reported 47.25% fall in net profit to Rs 1010.12 crore on 48.04% fall in total income from operations (net) to Rs 1806.43 crore in Q1 June 2015 over Q1 June 2014. The result was announced after market hours yesterday, 11 August 2015.
Shares of other metal stocks also declined. National Aluminum Company (Nalco) (down 1.05%), Hindustan Zinc (down 1.72%), Vedanta (down 3.31%) and Hindalco Industries (down 5.03%), dropped.
Coal India declined 3.36%. The company announces Q1 results today, 12 August 2015. Meanwhile, as per reports the Union Cabinet may consider today, 12 August 2015, a proposal for divestment of 5-10% stake in Coal India. Government of India (GoI) currently holds 79.65% stake in Coal India.
IT stocks rose on a weak rupee. HCL Technologies (up 0.55%), TCS (up 0.73%), Wipro (up 0.35%) and Infosys (up 1.69%), edged higher. Tech Mahindra fell 0.37%. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was currently hovering at 64.85, compared with its close of 64.2075 during the previous trading session.
Meanwhile, investors continue to watch the progress of the monsoon rains which will have a bearing on food prices and rural income. India's weather office, the India Meteorological Department (IMD), said in a daily report issued yesterday, 11 August 2015, that for the country as a whole, cumulative rainfall during this year's monsoon season was 9% below the Long Period Average (LPA) until 11 August 2015. Region wise, the rainfall was 21% below the LPA in South Peninsula, 11% below the LPA in East & Northeast India, 9% below the LPA in Central India and 2% above the LPA in Northwest India until 11 August 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.
Among key macro economic announcements this week, the government is scheduled to unveil the consumer price index (CPI) data for the month of July 2015 and industrial production data for June 2015 at 17:30 IST today, 12 July 2015. The CPI inflation accelerated to 5.4% in June 2015 from 5.01% in May 2015. Industrial production rose 2.7% in May 2015, compared with a revised growth of 3.4% in April 2015.
The government will release data on inflation based on the wholesale price index (WPI) for July 2015 at around 12:00 noon on Friday, 14 August 2015. The WPI inflation continued to be in negative zone for the eighth straight month in June 2015. The WPI inflation stood at negative 2.4% in June 2015, unchanged from the level in May 2015.
In overseas markets, Asian stocks edged lower today, 12 August 2015, feeling the aftershocks of China's surprise devaluation of the yuan, which hit US equities overnight. Key indices in South Korea, China, Hong Kong, Taiwan, Indonesia, Japan and Singapore were off 0.45% to 3.09%.
China's central bank devalued its tightly controlled currency by nearly 2% in a surprise decision announced yesterday, 11 August 2015.
Trading in US index futures indicated that the Dow could slide 109 points at the opening bell today, 12 August 2015. US stocks closed sharply lower yesterday, 11 August 2015, in the wake of a surprise devaluation of the yuan by Chinathe world's second-largest economy.
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