Key benchmark indices extended losses and hit fresh intraday low in mid-morning trade after the results of private survey showed that India's services sector activity slowed in June. At 11:24 IST, the barometer index, the S&P BSE Sensex was down 67.71 points or 0.25% at 27,209.63. The Nifty 50 index was currently down 24.30 points or 0.29% at 8,346.40. Weakness in Asian stocks also weighed on sentiment. Investors resorted to profit booking after key indices gained for the last six sessions.
In overseas stock markets, Asian stocks edged lower on profit booking as investors took stock of a recent rally driven by the hope that central banks will provide stimulus to offset a likely downturn triggered by Brexit. China's services sector rose to an 11-month high in June, a private survey showed today, 5 July 2016. The Caixin/Markit services purchasing managers' index (PMI) for June rose to 52.7 from 51.2 in May on a seasonally adjusted basis. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction. US market remained shut yesterday, 4 July 2016, on account of Independence Day.
Closer home, the market breadth indicating the overall health of the market turned negative from positive in mid-morning trade. On BSE, 1,141 shares fell and 1,136 shares rose. A total of 115 shares were unchanged. The BSE Mid-Cap index was currently up 0.08%. The BSE Small-Cap index was currently up 0.11%. Both these indices outperformed the Sensex.
Telecom stocks were mixed. Reliance Communications (up 1.46%) and Tata Teleservices (Maharashtra) (up 6.54%) gained. Bharti Airtel (down 1.09%) and Idea Cellular (down 0.66%) declined.
The BSE Telecom index had underperformed the market over the past one month till 4 July 2016, rising 1.55% compared with 1.62% rise in the Sensex. The index had also underperformed the market in past one quarter, gaining 2.41% as against Sensex's 7.4% rise.
Shares of Bharti Infratel rose 0.08%. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
Cement stocks were also mixed. ACC (up 0.24%) and Ambuja Cements (up 0.83%) gained. Shree Cement declined 0.47%.
Grasim Industries fell 0.33%. The company said that the operations have resumed at its staple fibre plant at Nagda in Madhya Pradesh in a phased manner with immediate effect after improvement in water availability. The announcement was made after market hours yesterday, 4 July 2016. Grasim Industries had suspended production at the plant since 5 June 2016 due to water shortage. However, the availability of water has improved with the onset of monsoon, the company said. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Jaiprakash Associates jumped 32.05% after the company said it sold its cement assets spread across five states to Ultra Tech Cement at an enterprise value of Rs 16189 crore. Shares of Ultra Tech Cement rose 0.23%. The board of directors of Jaiprakash Associates (JAL) approved an amendment to the definitive agreement dated 31 March 2016 and also the draft scheme of arrangement with UltraTech Cement (UTCL) for sale of cement business of JAL and its wholly-owned subsidiary, Jaypee Cement Corporation (JCCL). JAL and JCCL will together sell identified operating cement plants with an aggregate capacity of 17.20 million tonnes per annum (MTPA) spread over the states of Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh and a cement grinding unit of 4 MTPA capacity which is currently under implementation in Uttar Pradesh. An additional amount of Rs 470 crore will be paid by UTCL to JAL for completion of the grinding unit under implementation.
The transaction is subject to various regulatory approvals including the approval of stock exchanges, Competition Commission of India, financial institutions and banks, shareholders and creditors and sanction of the scheme of arrangement by High Courts at Mumbai and Allahabad. The consummation of the transaction is expected to take 9 to 12 months.
Commenting on the divestment, Manoj Gaur, executive chairman, Jaypee Group said that the Jaypee Group is determined to reduce its overall debt through its proactive divestment initiatives to help the Group tide these current turbulent times caused by economic slowdown in the country. He added that post this deal, Jaypee Group will retain an aggregate cement manufacturing capacity of 10.60 MTPA with plants spread in the states of Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka. The Group would continue to leverage expertise in the fields of engineering & construction, real estate and project execution in a committed manner.
After the consummation, UTCL's cement cement capacity will stand augmented to 91.1 MTPA, including its overseas operations.
IDBI Bank rose 1.7% after the state-run bank announced reduction in lending rates based on marginal cost of funds for different loan tenures effective from 1 July 2016. The announcement was made after market hours yesterday, 4 July 2016. IDBI Bank's Marginal Cost of Funds based Lending Rate (MCLR) effective from 1 July 2016 for overnight loans will be 8.60%. For one month, the rate will be 9% and for three months it will be 9.15%. The MCLR on 6-month loans will be 9.25% and for one-year loans the rate would be 9.30%. MCLR for two-year loans would be at 9.55% and loans with three-year maturity would carry an MCLR of 9.70%. All rupee loans sanctioned and credit limits renewed with effect from 1 April 2016 are priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which is the internal benchmark of the concerned bank. Actual lending rates are determined by adding the components of spread to the MCLR.
On macro front, Markit Economics said today, 5 July 2016 that the business activity in the Indian service sector increased at the second-slowest rate in the current 12-month period of growth in June. Underpinning this was a softer expansion in new work. Employment rose, but only fractionally, while outstanding business was up compared to May. A faster increase in input costs contrasted with a slowdown in charge inflation. Confidence waned, although remained positive. The seasonally adjusted Nikkei India Services Business Activity Index recorded 50.3 in June, its second-lowest reading in the current 12-month sequence of above-50 readings. The headline index was down from 51 in May, pointing to a slower pace of expansion that was marginal. The seasonally adjusted Nikkei India Composite PMI Output Index rose from 50.9 in May to 51.1 in June, but remained below its long-run average and pointed to a slight pace of expansion. June saw a softer rise in services new business, with growth easing to the slowest in 11 months.
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