A bout of volatility was witnessed in afternoon trade as key benchmark indices trimmed losses after hiting fresh intraday low in early afternoon trade. At 13:20 IST, the barometer index, the S&P BSE Sensex was down 270.29 points or 1.01% at 26,365.46. The losses for the Nifty were lower in percentage terms than those for the Sensex. The Nifty 50 index was currently down 71.75 points or 0.88% at 8,098.30. The market dropped today, 13 June 2016, as weakness in global stocks hit investors' sentiment adversely. Back home, weak industrial production data for April 2016 released by the government after market hours on Friday, 10 June 2016 also weighed on the sentiment.
Earlier, after opening lower, key indices had extended losses with the Sensex and the Nifty 50 index hitting 2-1/2 week low in early afternoon trade. The Sensex lost 373.48 points or 1.4% at the day's low of 26,262.27 in early afternoon trade, its lowest level since 26 May 2016. The index dropped 167.48 points or 0.62% at the day's high of 26,468.27 in early trade. The Nifty lost 106.15 points or 1.29% at the day's low of 8,063.90 in early afternoon trade, its lowest level since 26 May 2016. The index fell 58.45 points or 0.71% at the day's high of 8,111.60 in early trade.
In overseas markets, European stocks edged lower in early trade after Asian stocks settled sharply lower ahead of central bank meetings in the US and Japan this week. The worries about a potential exit by the UK from the European Union also left investors scrambling for safe haven assets. The UK government holds a referendum on 23 June 2016 on whether the country should remain a member of the European Union (EU). In mainland China, the Shanghai Composite settled 3.21% lower. In Hong Kong, the Hang Seng index ended 2.8% down. In Japan, the Nikkei 225 index closed 3.51% lower. Data released today, 13 June 2016 showed that growth in China's fixed-asset investment and retail sales cooled unexpectedly in May, but factory output growth was steady, doing little to clear up uncertainty over prospects for the world's second-largest economy.
US stocks declined on Friday, 10 June 2016 as nervousness over an impending vote that could see the UK leave the European Union, as well as a drop in oil prices, spurred a global selloff.
Closer home, the broad market depicted weakness. There were more than two losers against every gainer on BSE. 1,574 shares declined and 771 shares rose. A total of 134 shares were unchanged. The BSE Mid-Cap index was currently down 0.74%. The BSE Small-Cap index was currently down 0.79%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
Shares of power generation and power distribution companies edged lower. Torrent Power (down 3.02%), GVK Power & Infrastructure (down 4.08%), NHPC (down 1.04%), NTPC (down 1.62%), Adani Power (down 1.85%), Power Grid Corporation of India (down 0.84%), Reliance Infrastructure (down 2.73%) and Reliance Power (down 2.49%) declined.
Tata Power Company dropped 0.72% and Welspun Enterprises rose 1.14% after Tata Power Renewable Energy signed a share purchase agreement to acquire Welspun Renewable Energy Private Limited. Tata Power Renewable Energy (TPREL) is a wholly owned subsidiary of Tata Power Company. Welspun Enterprises holds 15.49% stake in Welspun Energy Private Limited. Welspun Renewable Energy Private Limited (WREPL) is a subsidiary of Welspun Energy Private Limited. Tata Power said that acquisition of WREPL will enable it to expand its renewable energy portfolio. WREPL is engaged in the business of power generation in renewable sector. It has about 1,140 megawatts (MW) of renewable power projects comprising of about 990 MW solar power projects and about 150 MW of wind power projects. Out of 1,140 MW renewable portfolio, nearly 1,000 MW of capacity is operational and balance capacity is under advanced stages of implementation. After the acquisition of WREPL, TPREL will have renewable assets portfolio of about 2,300 MW, making it the largest renewable power company in India. TPREL is Tata Power's primary investment vehicle for the clean and renewable energy based power generation capacity.
The acquisition is being made at an enterprise value of Rs 9249 crore, subject to closing adjustments. WREPL reported consolidated revenue of Rs 768 crore for the year ended 31 March 2016 (FY 2016). The transaction is expected to be completed by end of September 2016
Telecom stocks also declined in a weak market. Reliance Communications (RCom) (down 3.66%), Bharti Airtel (down 1.62%), Tata Teleservices (Maharashtra) (down 2.41%) and Idea Cellular (down 3.43%) declined.
Shares of Bharti Infratel rose 0.84%. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
Tata Motors lost 3.79% and Tata Steel shares 3.48% on concerns over the 23 June 2016 referendum that could see Britain exit the European Union. Both Tata Steel and Tata Motors have large operations in UK and Europe. Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe. Tata Steel Europe has initiated the process to sell its UK business viz. Tata Steel UK. Tata Steel Europe has invited seven short listed potential investors to submit binding bids for Tata Steel UK. Tata Motors derives majority of its revenue from its British luxury car unit Jaguar Land Rover (JLR). JLR is the largest automotive manufacturer in Britain. It is one of the UK's largest exporters and generates over 80% of its revenue from exports.
Meanwhile, another trigger for the fall in the Tata Steel counter was downgrade of the stock from a foreign brokerage to "sell" from "neutral" citing expensive valuations. The brokerage has reported said in a research note that fall in steel prices in Europe would further weigh on Tata Steel counter. The brokerage has reportedly said that the Tata Steel stock is currently pricing in most of the potentially positive drivers such as higher profitability and sale of UK assets.
On the macro front, data released after market hours on Friday, 10 June 2016 showed that India's industrial production (IIP) contracted by 0.8% in April 2016. Factory output measured in terms of the IIP had expanded by 3% in April 2015. The electricity generation surged at two-year high pace of 14.6%, while the mining output also moved up 1.4% in April 2016. However, the manufacturing sector production dipped 3.1% contributing to the decline in industrial output in April 2016. The IIP growth in March 2016 has been revised upwards to 0.3% in the first revision compared with 0.05% reported provisionally. Meanwhile, the growth in January 2016 has been revised downwards to -1.6% at the final revision from -1.5% at first revision and reported provisionally.
Meanwhile, the government is scheduled to unveil the consumer price index (CPI) data (rural, urban and combined) for the month of May 2016 at 17:30 IST today, 13 June 2016. The all-India General CPI inflation surged to 5.39% in April 2016 (new base 2012=100) from six months low of 4.8% recorded in March 2016.
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