Expectations that above-average monsoon rain will improve the odds for further monetary policy easing from Reserve Bank of India (RBI) helped key benchmark indices register modest gains on the first trading session of the week today, 15 June 2015. But, benchmark indices pared gains during the latter part of the trading session after extending intraday gains in mid-afternoon trade as fears about possible Greek default pulled European stocks lower.
The 50-unit CNX Nifty provisionally settled above the psychological 8,000 mark, having alternately moved above and below that mark in intraday trade. Earlier, the Nifty had fallen below the psychological 8,000 mark in morning trade after moving past that mark in early trade. The barometer index, the S&P BSE Sensex, was provisionally up 144.24 points or 0.55% at 26,569.54. In percentage terms, the gains for the Sensex were higher than those for the Nifty. The Nifty was provisionally up 23.60 points or 0.3% at 8,006.50. The market breadth indicating the overall health of the market was positive.
Auto stocks were in demand. Tata Motors rose after reporting data on global wholesale volumes for May 2015. Shares of Vedanta fell while those of Cairn India edged higher after Vedanta and Cairn India yesterday, 14 June 2015, announced that Cairn India will be merged with Vedanta.
Key benchmark indices edged higher today, 15 June 2015, amid optimism above-average monsoon rain may improve the odds for further monetary policy easing. For the country as a whole, the cumulative rainfall during this year's monsoon season was 5% above the Long Period Average (LPA) until 13 June 2015. The Reserve Bank of India (RBI) cut its main benchmark lending rate viz. the repo rate by 25 basis points after a monetary policy review on 2 June 2015. The central bank at that time said that the monsoon and its impact on food costs will be key to further easing. 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.
On macro front, data released by the government today, 15 June 2015, showed that the annual rate of inflation based on the monthly wholesale price index (WPI) remained in negative zone in May 2015. The index of industrial production (IIP) rose at an accelerated pace of 4.1% in April 2015 over a year ago compared with the revised growth of 2.5% in March 2015. Inflation based on consumer price index (CPI) moved up slightly to 5.01% in May 2015 from 4.87% in April 2015. Both, IIP and CPI data was announced after market hours on Friday, 12 June 2015.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 670.96 crore during the previous trading session on Friday, 12 June 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 705.58 crore on Friday, 12 June 2015, as per provisional data released by the stock exchanges
In overseas markets, European stocks edged lower as Greece's talks with lenders to avert a default ended with no agreement over the weekend. Asian stocks edged lower as talks between Greece and its European creditors collapsed over the weekend. US stocks dropped during the previous trading session on Friday, 12 June 2015, on fears about possible Greek default.
As per provisional figures, the S&P BSE Sensex was up 144.24 points or 0.55% at 26,569.54. The index jumped 303.30 points at the day's high of 26,728.60 in mid-afternoon trade, its highest level since 11 June 2015. The index fell 117.46 points at the day's low of 26,307.84 at the onset of the trading session.
The CNX Nifty was up 23.60 points or 0.3% at 8,006.50, as per provisional figures. The index hit a high of 8,057.70 in intraday trade, its highest level since 11 June 2015. The index hit a low of 7,944.85 in intraday trade.
The market breadth indicating the overall health of the market was positive. On BSE, 1,419 shares rose and 1,227 shares fell. A total of 142 shares were unchanged.
The BSE Mid-Cap index was down 1.14 points or 0.01% at 10,120.80. The BSE Small-Cap index was up 44.62 points or 0.42% at 10,618.40. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 2345 crore, higher than turnover of Rs 2204.76 crore registered during the previous trading session.
Auto stocks rose on renewed buying. Maruti Suzuki India (up 0.71%), Mahindra & Mahindra (M&M) (up 2.03%), Bajaj Auto (up 2.03%), and TVS Motor Company (up 1.67%) gained. Hero MotoCorp (down 0.07%) and Ashok Leyland (down 0.84%) declined.
Tata Motors rose after reporting data on global wholesale volumes for May 2015. The stock was up 1.04%. Tata Motors' group global wholesales, including Jaguar Land Rover, rose 2.15% to Rs 79,244 units in May 2015 over May 2014. Tata Motors' global wholesales of all commercial vehicles - Tata, Tata Daewoo and the Tata Hispano Carrocera range fell 0.33% to 29,063 units in May 2015 over May 2014. Global wholesales of all passenger vehicles rose 3.64% to 50,181 units in May 2015 over May 2014. Global wholesales of Tata passenger vehicles rose 20.02% to 11,302 units in May 2015 over May 2014. The company announced the global sales data after market hours on Friday, 12 June 2015.
Global wholesales for Jaguar Land Rover (JLR) totaled 38,879 vehicles in May 2015. This includes figures of CJLR. CJLR is a joint venture between JLR and Chery Automobiles and is an unconsolidated subsidiary for JLR.
Eicher Motors rose 3.57% on reports a foreign brokerage has initiated coverage on the stock with a buy rating. The foreign brokerage reportedly said that the structural growth from Royal Enfield is likely to continue and it expects Eicher Motors to deliver sector-leading growth. The brokerage noted that the industry demand is shifting towards premium bikes and Eicher's premium valuations are likely to be sustained going ahead, as per reports.
Shares of Vedanta fell while those of Cairn India edged higher after Vedanta and Cairn India yesterday, 14 June 2015, announced that Cairn India will be merged with Vedanta. Vedanta shed 1.52% to Rs 181.20. The stock hit high of Rs 189.20 and low of Rs 180.05 in intraday trade.
Cairn India rose 3.24% to Rs 186.60. The stock hit high of Rs 188.85 and low of Rs 176 in intraday trade.
As per the merger scheme, minority shareholders of Cairn India will receive one equity share of Vedanta for each share held in the company. The minority shareholders of Cairn India will additionally get one 7.5% redeemable preference share (RPS) of Vedanta of a face value of Rs 10 each for each share held in the company. No shares will be issued to Vedanta or any of its subsidiaries for their shareholding in Cairn India. Approximately 75.2 crore of each of equity shares and RPS will be issued to the minority shareholders of Cairn India by Vedanta pursuant to the merger. Post completion of the transaction, Vedanta plc's ownership in Vedanta is expected to decrease to 50.1% from its current 62.9% shareholding. Cairn India minority shareholders will own 20.2% and Vedanta minority shareholders will own a 29.7% stake in the enlarged entity. The transaction is expected to be tax-neutral for Vedanta, Cairn India and their shareholders under Indian law. Vedanta would further consider consolidation of some of its wholly owned foreign subsidiaries. Vedanta will continue to be listed on the BSE and NSE, with American Depository Shares (ADS) listed on the New York Stock Exchange (NYSE), and Vedanta plc will continue to be premium listed on the London Stock Exchange (LSE). Cairn India's BSE and NSE listings will be cancelled following completion of the merger.
This merger accounting would be done under pooling of interest method. As part of this accounting treatment, goodwill appearing in the books of Vedanta and Cairn India would be adjusted against reserves including securities premium account. This will have no impact on cash or the profit and loss account. The transaction is expected to close in the first quarter of calendar year (CY) 2016.
Meanwhile, in the global commodities market, Brent crude futures extended previous session's losses as high production offset strong refinery runs. Brent for July settlement was off 72 cents at $63.15 a barrel. The contract had fallen $1.24 or 1.9% a barrel to settle at $63.87 a barrel during the previous trading session. Near month July contract expires today, 15 June 2015. Brent for August settlement was down 59 cents at $64.05 a barrel.
The decline in global crude oil prices and deregulation of diesel price announced by the Indian government in October 2014 will help reduce the government's fuel subsidy burden and help contain its fiscal deficit. The slide in global crude oil prices will also help India in containing its current account deficit and fuel price inflation. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports. India imports 80% of its crude oil requirement.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 64.095 compared with its close of 64.065 during the previous trading session.
India's industrial production rose at an accelerated pace of 4.1% in April 2015 over a year ago compared with the revised growth of 2.5% in March 2015. The growth in industrial production for March 2015 was scaled up to 2.5% in the first revision compared with 2.1% reported provisionally. Meanwhile, the growth in January 2015 has been revised slightly upwards to 2.83% in the second and final revision compared with 2.77% at the first revision and 2.55% released provisionally.
Inflation based on consumer price index (CPI) moved up slightly to 5.01% in May 2015 from 4.87% in April 2015. An increase in inflation for transportation and communication contributed to the rise in overall CPI inflation, while food items inflation declined restructuring the increase in overall CPI inflation in May 2015. The core CPI inflation rose to 4.4% in May 2015 from 4% in April 2015 and 3.9% in March 2015.
The data on both industrial production and CPI was announced after market hours on Friday, 12 June 2015.
Meanwhile, data released by the government today, 15 June 2015, showed that the annual rate of inflation based on the monthly wholesale price index (WPI) remained in negative zone in May 2015. WPI inflation was negative 2.36% (provisional) for the month of May 2015 as compared to a reading of negative 2.65% (provisional) for April 2015. Build up inflation rate in the financial year so far was 0.91% compared to a build up rate of 0.94% in the corresponding period of the previous year.
Meanwhile, the weekly data released by the Ministry of Agriculture after trading hours on Friday, 12 June 2015, showed that the total sown area for Kharif crops as on 12 June 2015 stands at 75.10 lakh hectares, which is lower than 82.87 lakh hectares at this time last year.
Meanwhile, the India Meteorological Department (IMD) said in its daily monsoon update yesterday, 14 June 2015, that the southwest monsoon has further advanced into some parts of north Arabian Sea & Gujarat region, remaining parts of Maharashtra, some parts of Saurashtra and Madhya Pradesh and some more parts of Chhattisgarh, south Odisha and northwest Bay of Bengal. The IMD said that conditions are favourable for further advance of southwest monsoon into some more parts of north Arabian Sea, Gujarat state, Madhya Pradesh, Chhattisgarh and Odisha, remaining parts of Coastal Andhra Pradesh, northwest Bay of Bengal and West Bengal and some parts of Jharkhand and Bihar during next 3 days. The Southwest Monsoon has been vigorous over West Madhya Pradesh, Chhattisgarh and Telangana and active over Arunachal Pradesh, Gangetic West Bengal, Odisha, East Madhya Pradesh, Konkan & Goa, Marathawada, Vidarbha, Coastal Andhra Pradesh and Kerala during past 24 hours, the weather office said.
For the country as a whole, the cumulative rainfall during this year's monsoon season was 5% above the Long Period Average (LPA) until 13 June 2015. Region wise, the southwest monsoon was 22% above the LPA in East & Northeast India, 10% below the LPA in Northwest India, 6% below the LPA in Central India and 4% below the LPA in South Peninsula.
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.
Meanwhile, data on the first installment of advance tax payment by corporate taxpayers may provide cues on likely Q1 June 2015 corporate earnings. Companies have to pay 15% of the full year's estimated tax liability as the first installment of the advance tax on or before 15 June every year.
The Reserve Bank of India (RBI) on Friday, 12 June 2015, issued final guidelines for introduction of 6-year and 13-year cash settled interest rate futures (IRF) on Government of India Securities with residual maturity of 4-8 years and 11-15 years respectively. The RBI also expanded the residual maturity for the existing 10-year cash settled IRF from 9-11 years to 8-11 years. This would provide market participants greater choice and flexibility to hedge their interest rate risk across different tenors, the RBI said in a press release.
In overseas markets, European stocks declined today, 15 June 2015, as Greece's talks with lenders to avert a default ended with no agreement over the weekend. Key benchmark indices in UK, France and Germany were off by 0.71% to 1.25%.
The International Monetary Fund last week halted bailout talks with Greece over a lack of progress toward a deal to avert a Greek default. Greece has a debt repayment of 1.6 billion euros ($1.8 billion) due at the end of this month to the International Monetary Fund after the European nation bundled all its four June repayments into one.
Greece Finance Minister Yanis Varoufakis reportedly told a German newspaper that he would rule out a 'Grexit', or the country's exit from the euro zone, because it's not a sensible solution. Varoufakis told the newspaper that his country could reach a deal with creditors quickly if there was a restructuring and if German Chancellor Angela Merkel was part of talks. Varoufakis said that Greece doesn't want any more money as it has been given far too much already, according to reports.
The eurozone's trade surplus widened in April as imports fell, but the growth of exports slowed in a fresh sign the weakened euro is delivering only a modest boost to the currency area's economic recovery. The European Union's statistics agency said today, 15 June 2015, that the eurozone had a surplus in its trade in goods with the rest of the world of 24.9 billion euros ($28.05 billion), up from EUR14.9 billion in April 2014.
Asian stocks edged lower today, 15 June 2015, after Greece's talks with lenders to avert a default ended with no agreement over the weekend. Key benchmark indices in China, Singapore, Hong Kong, Taiwan, Indonesia, Japan, and South Korea shed by 0.09% to 2%.
US stocks dropped during the previous trading session on Friday, 12 June 2015, on fears about possible Greek default.
A two-day meeting of the Federal Open Market Committee (FOMC) to review US monetary policy starts tomorrow, 16 June 2015. The FOMC meeting is being keenly watched for further indication of the timing of an expected rate hike by the US central bank later this calendar year.
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