Volatility continued as key benchmark indices trimmed losses soon after extending intraday slide in early afternoon trade. The barometer index, the S&P BSE Sensex, trimmed losses soon after hitting 6-week low. The market breadth indicating the overall health of the market turned negative from positive. The Sensex was currently off 29.73 points or 0.11% at 27,572.28. The rupee edged lower against the dollar on speculation an improving US economy will strengthen the dollar and damp demand for emerging-market assets.
Pharma stocks advanced on a weak rupee. IL&FS Engineering and Construction Company jumped after the company said its subsidiary received a contract worth about Rs 464 crore. OnMobile Global surged after announcing share buyback.
Meanwhile, media reports today, 12 December 2014, suggested that the Centre and the state governments have made a significant headway on the goods & services tax (GST). Meanwhile, the latest data showed that the government's total indirect tax collections jumped 19.4% to Rs 44060 crore in November 2014 over November 2013.
The Reserve Bank of India (RBI) Governor Raghuram Rajan reportedly said today, 12 December 2014, that the central bank will start talks with the government for an appropriate timeline to ensure that the economy is within a medium term inflation target of 2% to 6%.
Foreign portfolio investors sold shares worth a net Rs 808.27 crore yesterday, 11 December 2014, as per provisional data.
In overseas markets, Asian stocks rose after US data on retail sales and unemployment claims boosted optimism in the world's largest economy. US stocks registered modest gains yesterday, 11 December 2014, after a trio of economic releases underlined that the US economy remains on an upward trajectory.
In the foreign exchange market, the rupee edged lower against the dollar on speculation an improving US economy will strengthen the dollar and damp demand for emerging-market assets.
Brent crude futures dropped on persistent concerns over a supply glut and a bearish demand outlook. Deregulation of diesel price announced by the Indian government in October 2014 and a sharp decline in global crude oil prices over the past few months will help reduce the government's fuel subsidy burden and help contain its fiscal deficit. The steep slide in global crude oil prices will also help India in containing its current account deficit and fuel price inflation. India imports 80% of its crude oil requirement. 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.
At 12:16 IST, the S&P BSE Sensex was down 29.73 points or 0.11% at 27,572.28. The index lost 70.09 points at the day's low of 27,531.92 in early afternoon trade, its lowest level since 31 October 2014. The index rose 90.31 points at the day's high of 27,692.32 in morning trade.
The CNX Nifty was down 2.75 points or 0.03% at 8,290.15. The index hit a low of 8,276.30 in intraday trade. The index hit a high of 8,321.90 in intraday trade.
The BSE Mid-Cap index was up 16.37 points or 0.16% at 10,256.07. The BSE Small-Cap index was up 16.67 points or 0.15% at 11,253.20. Both these indices outperformed the Sensex.
The market breadth indicating the overall health of the market turned negative from positive in early afternoon trade. On BSE, 1,275 shares declined and 1,232 shares gained. A total of 115 shares were unchanged.
Pharma stocks advanced on a weak rupee. Aurobindo Pharma (up 3.52%), Ipca Laboratories (up 2.5%), Glenmark Pharmaceuticals (up 2.54%), Wockhardt (up 2.1%), Lupin (up 1.53%), Sun Pharmaceutical Industries (up 1.55%), Divi's Laboratories (up 1.39%), Ranbaxy Laboratories (up 0.75%), Cipla (up 0.83%) and GlaxoSmithkline Pharmaceuticals (up 0.53%) edged higher.
A weak rupee will boost sales of pharma companies in rupee terms as pharma firms derive substantial revenue from exports.
Dr Reddy's Laboratories fell 0.39% at Rs 3,416.75. The stock hit a high of Rs 3,427.60 and a low of Rs 3,384.95. The company after market hours yesterday, 11 December 2014, in a clarification with regard to news item titled "Germany bans 80 generic drugs for insufficient trials", said that the company through its local entity Betapharm is proceeding in line with the instructions of the regulator. Overall, the impact on the financials of this action is expected to be non-material, Dr Reddy's said.
OnMobile Global was locked at 5% upper circuit at Rs 72.60. The company after market hours yesterday, 11 December 2014, said its board at its meeting held yesterday 11 December 2014, decided to buyback the company's equity shares from open market through stock exchange mechanism at a price not exceeding Rs 86 per equity share payable in cash for an aggregate amount not exceeding Rs 49 crore. The maximum buyback price of Rs 86 is 18.45% premium to the ruling market price.
IL&FS Engineering and Construction Company surged 7.98% at Rs 62.90. The company after market hours yesterday, 11 December 2014, said that the company's subsidiary Maytas Infra Saudi Arabia (MISA) has received a contract from Saudi Binladin Group for construction of Abraj Kudai Project-P1360, Makkah in Kingdom of Saudi Arabia (KSA). The total value of the contract is Saudi Riyals 290.27 million (equivalent to Rs 464 crore approximately) and the completion period is 32 months.
In the foreign exchange market, the rupee edged lower against the dollar on speculation an improving US economy will strengthen the dollar and damp demand for emerging-market assets. The partially convertible rupee was hovering at 62.4275, compared with its close of 62.345 during the previous trading session.
Brent crude futures dropped on persistent concerns over a supply glut and a bearish demand outlook. Brent for January settlement was off 24 cents a barrel at $63.44 a barrel. The contract had lost 56 cents a barrel to settle at $63.68 during the previous trading session, its lowest closing level since 16 July 2009.
The Reserve Bank of India (RBI) Governor Raghuram Rajan today, 12 December 2014, reportedly said that the central bank will start talks with the government for an appropriate timeline to ensure that the economy is within a medium term inflation target of 2% to 6%. Rajan said in a lecture at an industry event that a glide path towards lowering inflation to those levels worked best for India by ensuring moderate economic growth, according to reports. The RBI governor also proposed a debate on whether India needed more institutions to ensure deficits stay within control and the quality of budgets is high, noting other countries had independent bodies that provided opinions on fiscal budgets.
The Prime Minister's office (PMO) yesterday, 11 December 2014, said that conscious of India's ambitious economic growth strategy, which would require a significant enhancement of power generating capacity, India and Russia have decided to fast-track the implementation of agreed cooperation projects between the two countries for nuclear power plants. India and Russia will strive to complete the construction and commissioning of not less than 12 units in the next two decades in accordance with the Agreement of 2008, the PMO said. Separately, a joint statement issued yesterday, 11 December 2014, during Russian President Vladimir Putin's visit to India stated that India and Russia will study the possibilities of building a hydrocarbon pipeline system, connecting the Russian Federation with India. At their bilateral meeting, Putin and India's Prime Minister Narendra Modi agreed to step up efforts for enhancing bilateral trade in the coming years and set a target of bilateral trade turnover of goods and services at $30 billion by the year 2025. It is expected that the level of mutual investments by then will be over $15 billion each way, according to the joint statement issued after bilateral meeting between the two leaders.
Meanwhile, media reports today, 12 December 2014, suggested that the Centre and state governments have made a significant headway on the goods & services tax (GST). State and central finance ministers and officials will meet again in a week's time to try and clinch a deal, according to reports. The government is likely to introduce the constitutional amendment bill for GST during the ongoing winter session of parliament. The government's intension is to implement a nationwide GST from 1 April 2016. GST is a major indirect tax reform. GST will subsume central indirect taxes such as excise duty and service tax at the central level and value added tax at the state level besides other local levies such as octroi and entry tax.
Prime Minister Narendra Modi yesterday, 11 December 2014, said his focus was to build "Team India" through a partnership with all state Chief Ministers, and by encouraging and facilitating states to take initiatives for economic growth. Modi made this comments while interacting with a group of 16 eminent economists from the United States. Stating that a person who is unhealthy cannot derive benefit from exercise, the Prime Minister said that the first six months of his government were focused on making India healthy once again. The "exercise" would begin now, he added. The Prime Minister said there would be a youth-centric focus to all policies of his government, as 65% of India's population is below the age of 35. Therefore, skill development and job creation would continue to be accorded the topmost priority, Modi said. The Prime Minister stressed on the need to inject technology into government processes and decision making, saying this would provide the best possible solution to the problem of corruption. He said the government's focus on infrastructure and "Digital India" would boost employment opportunities even in the rural areas. The Prime Minister said the success of the Pradhan Mantri Jan Dhan Yojana would not only bring economic benefits, but had also boosted the confidence within government, as a key objective of the scheme of opening bank accounts for the poor has been achieved.
Meanwhile, the Indian government intends to get the Insurance Laws Amendment Bill that seeks to enhance foreign investment limit in the capital starved insurance sector passed during the ongoing winter session of parliament. The Union Cabinet recently approved the official amendments to the Insurance Laws (Amendment) Bill, 2008 and introduction in the Rajya Sabha when the bill is taken up for consideration and passing. The Parliamentary Select Committee in its report tabled in Rajya Sabha on 10 December 2014 agreed a composite cap of 49% on foreign investment in the insurance sector, which will include all types of foreign investment as opposed to the 26% foreign direct investment (FDI) allowed at present. Finance Minister Arun Jaitley had said in his maiden budget speech in July that the composite cap in the insurance sector should be increased to 49% from the current level of 26%, with full Indian management and control.
The government's total indirect tax collections jumped 19.4% to Rs 44060 crore in November 2014 over November 2013, according to provisional figures released by the finance ministry yesterday, 11 December 2014. Total indirect tax collections rose 7.1% to Rs 328662 crore during the period April-November 2014 over the corresponding previous year period. This amount to an achievement of 52.7% of the target fixed at Rs 623244 crore in the Union Budget 2014-15 for the current fiscal year.
On the domestic macro front, inflation is seen easing further in November 2014 and growth in industrial production is seen improving a bit in October 2014. The annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India is seen easing further to 4.4% in November 2014, from 5.52% in October 2014, as per the median estimate of a poll of economist carried out by Capital Market. The government will release the data on CPI inflation for November 2014 after trading hours today, 12 December 2014.
The annual rate of inflation based on the wholesale price index (WPI) is seen easing further to 1.2% in November 2014, from 1.77% in October 2014, as per the median estimate of a poll of economist carried out by Capital Market. The government will release the inflation data based on wholesale price index (WPI) for November 2014 at 12.15 noon on 15 December 2014.
Growth in industrial production is seen inching up to 2.7% in October 2014, from 2.5% in September 2014, as per the median estimate of a poll of economist carried out by Capital Market. The government will unveil industrial production data for October 2014 after trading hours today, 12 December 2014. Industrial production growth improved to 2.5% in September 2014, from 0.5% in August 2014.
Asian stocks edged higher today, 12 December 2014, after US data on retail sales and unemployment claims boosted optimism in the world's largest economy. Key indices in China, Hong Kong, Singapore, Indonesia, South Korea, and Taiwan were up 0.02% to 0.37%.
A slate of Chinese economic data for November released today, 12 December 2014, painted a mixed picture of the state of the world's second biggest economy, with better-than-expected retail sales and weaker-than-expected industrial output. Industrial production rose 7.2% on year in November, below October's 7.7 % rise. Meanwhile, retail sales rose 11.7% on year, up from October's 11.5% rise. Fixed-asset investment for this year through November was up 15.8%, in line with expectations. This metric is tracked as an indicator of construction activity in China and reported on a year-to-date basis. Meanwhile, property sales by square meter for the same 11-month period fell 8.2%, extending a down-trend that has persisted since then end of 2013.
In Japan, the Nikkei 225 Average was up 0.66%. Polls show Japan's Prime Minister Shinzo Abe is heading for a landslide victory in the election Dec. 14.
Trading in US index futures indicated that the Dow could fall 43 points at the opening bell today, 12 December 2014. US stocks advanced yesterday, 11 December 2014, cutting weekly losses, but euphoria over increased retail sales in October faded as oil fell to another five-year low. US retail sales rose 0.7% in November, the fastest growth in eight months, supported by autos, clothing and purchases at other kinds of stores, as holiday shopping got under way, according to government data released yesterday, 11 December 2014. The number of people who applied for US unemployment benefits inched down by 3,000 to 294,000 in the week that ended Dec. 6, hitting the lowest level in three weeks, as employers continued to lay off very few workers, according to another government data released yesterday, 11 December 2014. The prices paid for imported goods fell 1.5% in November, the largest drop since June 2012, dragged down by fuel, the US Labor Department reported yesterday, 11 December 2014.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 16-17 December 2014. The policy meeting will be keenly watched for any hints on the timing of interest rate increases in the world's biggest economy. It remains to be seen whether Federal Reserve officials would signal a rate hike by dropping their assurance that rates will stay low for a considerable time.
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