Metal and banking stocks led a rally on the domestic bourses triggered by expectations that US interest rates will not be raised quickly. The barometer index, the S&P BSE Sensex, rose 433.80 points or 1.74% to 25,334.26 as per the provisional closing data. The gains for the 50-unit Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty rose 138.20 points or 1.82% at 7,735.20 as per the provisional closing data. The Sensex provisionally closed above the psychologically important 25,000 mark after surpassing that mark after opening with upward gap. Barring the S&P BSE Telecom index, all other eighteen sectoral indices on BSE registered gains. World stocks rose as investors welcomed the latest signal from the US Federal Reserve that it would move slowly to raise interest rates in the US.
The Sensex jumped 455.86 points, or 1.83% at the day's high of 25,356.32 in late trade, its highest level since 28 March 2016. The barometer index rose 154.96 points, or 0.62% at the day's low of 25,055.42 in morning trade. The Nifty rose 144.95 points, or 1.91% at the day's high of 7,741.95 in late trade, its highest level since 28 March 2016. The index rose 46.45 points, or 0.61% at the day's low of 7,643.45 in morning trade.
The broad market depicted strength. There were more than two gainers against every loser on BSE. 1,861 shares rose and 763 shares fell. A total of 156 shares were unchanged. The BSE Mid-Cap index was provisionally up 1.88%. The BSE Small-Cap index was provisionally up 1.90%. Both these indices outperformed the Sensex.
The total turnover on BSE amounted to Rs 2406 crore, lower than turnover of Rs 3595.61 crore registered during the previous trading session.
In overseas stock markets, Asian and European stocks edged higher tracking overnight gains in US shares as investors welcomed the latest signal from the US Federal Reserve that it would move slowly to raise interest rates in the US. US stocks edged higher yesterday, 29 March 2016, after Federal Reserve chairwoman Janet Yellen in a speech in New York reiterated a need to proceed cautiously in lifting interest rates in the backdrop of weaker-than-expected growth overseas and a cloudy US inflation outlook.
Index heavyweight and housing finance major HDFC dropped after the stock turned ex-dividend for interim dividend of Rs 3 per share for the year ending 31 March 2016 (FY 2016). The stock fell 1.03% to Rs 1,116.10. The stock hit a high of Rs 1,130.10 and a low of Rs 1,111.20 so far during the day. Before turning ex-dividend, the stock offered a dividend yield of 0.26% based on the closing price of Rs 1,127.70 yesterday, 29 March 2016.
Pharmaceuticals shares edged higher. Lupin (up 5.95%), Piramal Enterprises (up 4.76%), GlaxoSmithKline Pharmaceuticals (up 2.96%), Dr Reddy's Laboratories (up 2.42%), Cipla (up 1.95%), Strides Shasun (up 1.82%), Cadila Healthcare (up 1.27%), Wockhardt (up 0.83%), Aurobindo Pharma (up 0.80%), Divi's Laboratories (up 0.53%) and IPCA Laboratories (up 0.23%), edged higher. Glenmark Pharmaceuticals (down 0.63%) and Alkem Laboratories (down 2.11%), edged lower.
Sun Pharmaceutical Industries rose 2.26% to Rs 812 after the company announced that its wholly-owned subsidiary will acquire the portfolio consisting of 14 established prescription brands from Novartis AG and Novartis Pharma AG (together Novartis) in Japan for a cash consideration of $293 million. These brands have combined annualized revenues of approximately $160 million and address medical conditions across several therapeutic areas. Under the terms of the agreements, Novartis will continue to distribute these brands, for a certain period, pending transfer of all marketing authorizations to Sun Pharma's subsidiary. The acquired brands will be marketed by a reliable and established local marketing partner under the Sun Pharma label. The local marketing partner will also be responsible for distribution of the brands. As per the December 2015 IMS data, the size of the Japanese pharmaceutical market was estimated at $73 billion, accounting for over 7% of the $1 trillion global pharmaceutical market.
Metal and mining stocks gained on renewed buying. Vedanta (up 4.16%), Hindalco Industries (up 3.67%), Hindustan Zinc (up 3.12%), Hindustan Copper (up 2.22%), National Aluminium Company (up 2.14%) and NMDC (up 0.81%), edged higher.
Meanwhile, the High Grade Copper for May 2016 delivery was currently down 0.65% at $2.1995 per pound on the COMEX.
Steel stocks gained on reports that the government has extended safeguard import taxes on some steel products until March 2018 to curb imports of cheap Chinese steel and shield domestic mills. Bhushan Steel (up 4.43%), Steel Authority of India (up 3.82%), JSW Steel (up 3.39%), Jindal Steel & Power (up 3.22%), edged higher. The extended import duty will apply to hot-rolled flat products of non-alloy and other alloy steel in coils of 600 mm width. It would start at 20%, minus any existing anti-dumping duty, and be lowered to 10% by March 2018 depending on the value of the goods, reports indicated. The safeguard tax will not be imposed on steel products imported at or above the floor price, reports added.
Tata Steel jumped 6.5% to Rs 323.65 after the company announced that it has decided to explore all options for portfolio restructuring including the potential divestment of its UK subsidiary Tata Steel UK, in whole or in parts. Tata Steel said that its board of directors after reviewing the recent performance of the European business of the company noted with deep concern the deteriorating financial performance of the UK subsidiary in the last twelve months. The management has advised the board of its European holding company Tata Steel Europe to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts. Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe board will be advised to evaluate and implement the most feasible option in a time bound manner, Tata Steel said in a statement.
While global steel demand, especially in developed markets like Europe has remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency. These factors are likely to continue into the future and have significantly impacted the long-term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years.
Further, the Tata Steel board also reviewed the proposed restructuring and transformation plan for Strip Products UK, prepared by the European subsidiary in consultation with an independent and internationally reputed consultancy firm. Based on the review conducted, the Tata Steel board came to a unanimous conclusion that the plan is unaffordable, requires material funding support in the next two years in addition to significant capital commitments over the long term, the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain. Therefore, the board concluded that it would not be able to support the investment necessary to proceed with the proposed transformation plan for strip products UK.
Tata Steel further said that the company's discussions with Greybull in relation to a sale of the UK Long Products business would continue.
Meanwhile, in the government securities (Gsec) market, bond prices rose after the Reserve Bank of India (RBI) increased the limits for investment by foreign portfolio investors (FPI) in both Central Government Securities and State Development Loans (SDL) for the half year ending September 2016 in two tranches. The yield on 10-year benchmark federal paper 7.59% GS 2026 was currently hovering at 7.4896%, lower than 7.5144% at close in the previous trading session. Bond yields and price are inversely related.
As per the Medium Term Framework (MTF) announced in October 2015, the limit for investment by FPIs in Central Government Securities for the half year ending September 2016 will be increased in two tranches, i.e., by Rs 10500 crore from 4 April 2016 and by Rs 10000 crore from 5 July 2016. The limit for SDL will be raised in two tranches of Rs 3500 crore each from 4 April 2016 and 5 July 2016.
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