Key benchmark indices extended gains and hit fresh intraday high in mid-afternoon trade as the Reserve Bank of India (RBI) after a monetary policy review raised its main lending rate viz. the repo rate by 25 basis points as expected and decided to infuse liquidity into the banking system. The S&P BSE Sensex was up 359.28 points or 1.75%, up about 435 points from the day's low and off close to 5 points from the day's high. The market breadth, indicating the overall health of the market, was positive. The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Monday, 28 October 2013. Gains in Asian and European stocks also underpinned sentiment on the domestic bourses.
Metal and mining stocks edged higher. Car major Maruti Suzuki India extended intraday gain triggered by strong Q2 result.
The market slipped into the red after opening higher. A bout of volatility was witnessed as key benchmark indices trimmed losses soon after hitting fresh intraday low in morning trade. The S&P BSE Sensex and the 50-unit CNX Nifty, both, hit 1-1/2-week low. Volatility ruled the roost as key benchmark indices reversed intraday losses after the Reserve Bank of India (RBI) after a monetary policy review raised its main lending rate viz. the repo rate by 25 basis points as expected and decided to infuse liquidity into the banking system. The Sensex trimmed gains after hitting fresh intraday high in mid-morning trade. Key benchmark indices surged to hit an intraday high in afternoon trade. The Sensex extended gains and hit fresh intraday high in mid-afternoon trade.
The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month October 2013 series to November 2013 series. The near month October 2013 derivatives contract expire on Thursday, 31 October 2013.
The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Monday, 28 October 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 636.78 crore on Monday, 28 October 2013, as per provisional data from the stock exchanges.
At 14:20 IST, the S&P BSE Sensex was up 359.28 points or 1.75% to 20,929.56. The index jumped 364.76 points at the day's high of 20,935.04 in mid-afternoon trade, its highest level since 24 October 2013. The index fell 76.62 points at the day's low of 20,493.66 in morning trade, its lowest level since 18 October 2013.
The CNX Nifty was up 120.60 points or 1.98% to 6,221.70. The index hit a high of 6,224.45 in intraday trade, its highest level since 24 October 2013. The index hit a low of 6,079.20 in intraday trade, its lowest level since 18 October 2013.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,203 shares rose and 1,051 shares fell. A total of 156 shares were unchanged.
Among the 30-share Sensex pack, 29 stocks rose and only one fell. ICICI Bank (up 5.62%), SBI (up 2.99%), and Hindustan Unilever (up 2.36%), edged higher from the Sensex pack.
Car major Maruti Suzuki India jumped 7.01%, with the stock extending intraday gain triggered by strong Q2 result. The company after trading hours on Monday, 28 October 2013, said its net profit jumped 194.7% to Rs 670.20 crore on 26.5% growth in net sales to Rs 10211.80 crore in Q2 September 2013 over Q2 September 2012. The company said that base effect aided strong growth in bottomline in Q2 September 2013 -- the company's performance in Q2 September 2012 was adversely impacted by labour problems at its Manesar plant. Higher localization and cost reduction initiatives by the company also contributed significantly to bottomline growth in Q2 September 2013, Maruti said. The overall impact of foreign exchange was positive during the quarter, Maruti said.
Maruti said that the company's new diesel engine facility at Gurgaon and the third assembly facility at Manesar went on stream during Q2 September 2013. With this, the company's total capacity for vehicle assembly has risen to 1.5 million vehicles per annum.
Metal and mining stocks edged higher. Bhushan Steel (up 0.33%), JSW Steel (up 0.79%), Sesa Sterlite (up 3.22%), Tata Steel (up 4.03%), Jindal Steel & Power (up 0.8%), NMDC (up 0.74%), Sail (up 3.1%), and Hindalco Industries (up 3.8%), gained.
Shares of FMCG major Marico edged higher in choppy trade after the company reported good Q2 results. The stock was up 0.09% at Rs 212.35. The scrip hit high of Rs 221 and low of Rs 210.60 so far during the day.
Marico's consolidated net profit rose 25% to Rs 106 crore on 5% growth in revenue from operations to Rs 1118 crore in Q2 September 2013 over Q2 September 2012. The company announced result during market hours. These financial results represent Marico's FMCG business only. Marico's skin care business under the Kaya brand has been demerged into a separate company called Marico Kaya Enterprises (MaKE) as per a demerger scheme.
Marico said that the company's net profit after adjusting the impact of a change in the method of depreciation rose 23% to Rs 104 crore in Q2 September 2013 over Q2 September 2012.
Marico said that the market prices of Copra which is a key input have rallied in the last few months. The average market prices of copra during Q2 September 2013 were up by 29% compared to Q2 September 2012. The company expects that there may be some input cost inflation in the second half of the year. This has led the company to initiate price increases. Marico said that the company derives comfort and confidence from the pricing power that its brands enjoy.
The business environment in the immediate term is challenging particularly in the urban areas, Marico said. The new categories that the company has entered into in the recent past are growing at a slower pace. The growth momentum in rural and middle India is intact. Moreover, the company is likely to invest significantly behind distribution which could give immediate gains, Marico said. Given the challenges, the company is expected to deliver a volume growth of about 8% to 10% in the short to media term for its India FMCG business. With inflation setting in and necessitating some price increases the overall top line growth could be in the region of 10% to 13%. This is expected to improve from FY 2015, Marico said. Marico said that operating margin of about 17% to 18% for the India FMCG business is sustainable in the short to medium term. The Youth brands portfolio is expected to grow by about 25%.
Marico said that the company will focus on deriving synergies as a result of the combination of domestic and international FMCG businesses. The company will target top line growth in the region of 15% to 20% in the medium term with an operating margin in the band of 14% to 15%. The company will focus on building capabilities to set it up for growth in the long run, Marico said.
The board of directors of Marico and MaKE have fixed 5 November 2013 as the record date for determining the shareholders of the company to whom 1 fully paid share of MaKE with a face value of Rs 10 each shall be issued for every 50 fully paid shares of Marico with a face value of Re 1 each.
NRB Bearings rose 0.72% after reporting Q2 result. The company's net profit declined 7.1% to Rs 10.55 crore on 3.7% growth in net sales to Rs 151.04 crore in Q2 September 2013 over Q2 September 2012. The Q2 result was announced after market hours on Monday, 28 October 2013.
In the foreign exchange market, the rupee reversed initial losses against the dollar after the Reserve Bank of India (RBI) after a monetary policy review raised its main lending rate viz. the repo rate by 25 basis points as expected and decided to infuse liquidity into the banking system. The partially convertible rupee was hovering at 61.48, compared with its close of 61.52/53 on Monday, 28 October 2013.
Bond prices rose after the Reserve Bank of India (RBI) after a monetary policy review raised its main lending rate viz. the repo rate by 25 basis points as expected and decided to infuse liquidity into the banking system. The yield on the federal benchmark paper 7.16% GS 2023 was hovering at 8.6091%, lower than its close of 8.6557% on Monday, 28 October 2013. Bond yield and bond prices are inversely related.
The Reserve Bank of India after a monetary policy review today, 29 October 2013, raised its main lending rate viz. the repo rate by 25 basis poinst to 7.75%. With the more recent upturn of inflation, and with inflation expectations remaining elevated anticipating the pass-through of exchange rate depreciation and ongoing adjustment in administered fuel prices, it is important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth, the RBI said. It is in this context that the LAF repo rate has been increased by 25 basis points, the RBI said.
Keeping in view the need to infuse liquidity into the banking system to normalise liquidity conditions, the RBI has decided to increase the liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of NDTL of the banking system to 0.5% with immediate effect. RBI has also reduced the marginal standing facility (MSF) rate by 25 basis points from 9% to 8.75% with immediate effect. With the reduction of the MSF rate and the increase in the repo rate in this review, the process of re-aligning the interest rate corridor to normal monetary policy operations is now complete, the RBI said. Going forward, however, the more durable strategy for mitigating mismatches between the supply of, and demand for, funds is for banks to step up efforts to mobilise deposits, the RBI said.
The policy stance and measures in this review are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth, the RBI said. These will help strengthen the environment for growth by fostering macroeconomic and financial stability. The Reserve Bank of India will closely monitor inflation risk while being mindful of the evolving growth dynamics, the central bank said in a statement.
The pass-through of rupee depreciation into prices of manufactured products is acting, along with elevated food and fuel inflation, to offset possible disinflationary effects of low growth. While food price pressures may ease with the arrival of the kharif harvest and the usual seasonal moderation, overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year, warranting an appropriate policy response, the RBI said. Retail inflation measured by the consumer price index (CPI) has also risen sharply across food and non-food constituents, including services, keeping inflation expectations high. Notwithstanding the expected edging down of food inflation, retail inflation is likely to remain around or even above 9% in the months ahead, absent policy action, RBI said.
Headwinds to growth from domestic constraints continue to pose downside risks, and vulnerabilities to sudden shifts in the external environment remain, the RBI said. The revival of large stalled projects and the pipeline cleared by the Cabinet Committee on Investment may buoy investment and overall activity towards the close of the year.
The Reserve Bank of India said its developmental measures over the next few quarters will be built on five pillars viz. clarifying and strengthening the monetary policy framework, strengthening banking structure through new entry, branch expansion, encouraging new varieties of banks, and moving foreign banks into better regulated organisational forms, broadening and deepening financial markets and increasing their liquidity and resilience so that they can help absorb the risks entailed in financing India's growth, expanding access to finance to small and medium enterprises, the unorganised sector, the poor, and remote and underserved areas of the country through measures to foster financial inclusion and improving the system's ability to deal with corporate distress and financial institution distress by strengthening real and financial restructuring as well as debt recovery.
European stocks edged higher on Tuesday, 29 October 2013, after US economic data backed the case for the Federal Reserve to maintain stimulus to the US economy. Key benchmark indices in France and UK were up 0.19% to 0.28%. Germany's DAX fell 0.16%.
Asian stocks edged higher in choppy trade on Tuesday, 29 October 2013, after US economic data backed the case for the Federal Reserve to maintain stimulus to the US economy. Key benchmark indices in Hong Kong, Taiwan, Singapore, and South Korea rose 0.07% to 0.18%. Key benchmark indices in China, Japan and Indonesia shed 0.23% to 0.98%.
The People's Bank of China conducted 13 billion yuan ($2.13 billion) of seven-day reverse-repurchase agreements today, 29 October 2013. That compares with the 102.5 billion yuan drained from the banking system in the last two weeks as existing contracts matured and the monetary authority suspended sales of new agreements as corporate tax payments fell due.
Trading in US index futures indicated that the Dow could gain 16 points at the opening bell on Tuesday, 29 October 2013. US stocks were little changed on Monday as investors found few catalysts to push equities higher. Economic data showed pending home sales slumped 5.6% in September, a rate that was far steeper than expected and the biggest drop in more than three years.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting today, 29 October and tomorrow, 30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus amid concerns about the strength of the economic recovery.
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