Volatility continued as key benchmark indices regained strength in early afternoon trade. The market snapped recent losses after the Reserve Bank of India (RBI) on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. The S&P BSE Sensex was up 156.13 points or 0.87%, off close to 165 points from the day's high and up about 80 points from the day's low. The market breadth, indicating the overall health of the market, was strong. Metal stocks declined. Vedanta group stocks declined after spurting on Tuesday, 21 August 2013.
The market surged amid initial volatility after the Reserve Bank of India (RBI) on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. The Sensex trimmed gains to hit fresh intraday low in morning trade. A bout of volatility was witnessed as key benchmark indices trimmed gains once again to hit fresh intraday low after regaining strength in mid-morning trade. It regained strength in early afternoon trade.
At 12:20 IST, the S&P BSE Sensex was up 156.13 points or 0.87% to 18,404.25. The index surged 321.66 points at the day's high of 18,567.70 in early trade, its highest level since 19 August 2013. The index rose 77.20 points at the day's low of 18,323.32 in mid-morning trade.
The CNX Nifty was up 47.05 points or 0.87% to 5,448.50. The index hit a high of 5,504.10 in intraday trade, its highest level since 16 August 2013. The index hit a low of 5,432.55 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,205 shares rose and 633 shares fell. A total of 138 shares were unchanged.
Among the 30-share Sensex pack, 18 stocks rose and rest of them fell. Bhel (up 6.31%), State Bank of India (up 3.59%), HDFC Bank (up 5.06%) and Tata Power Company (up 3.74%), edged higher.
Metal stocks declined. Jindal Steel & Power (down 0.54%), Tata Steel (down 0.25%), JSW Steel (down 0.47%), and Sail (down 0.23%), edged lower.
Vedanta group stocks declined after spurting on Tuesday, 21 August 2013. Hindustan Zinc declined 3.71%. The stock had jumped 13.1% on Tuesday triggered by reports that the legal hurdle has been cleared for government's stake sale in the company and BALCO. Government of India holds 29.54% stake in Hindustan Zinc while Sterlite Industries (India) has 64.92% stake as of 30 June 2013.
Sesa Goa fell 2.3% after rallying 15.93% on Tuesday. Sterlite Industries (India) declined 2.04% after galloping 9.91% on Tuesday. Sesa Goa on Monday, 19 August 2013, said that the merger of Sterlite Energy (SEL) with Sesa Goa and the demerger of the aluminium business undertaking of Vedanta Aluminium (VAL) into Sesa Goa pursuant to the Scheme of Amalgamation and Arrangement have become effective. The company's wholly owned subsidiary, Bloom Fountain, would acquire 38.68% stake in Cairn India together with the associated debt, effective 26 August 2013. Further, the company has also approved the acquisition of 1,215 MW thermal power plants situated at Jharsuguda and 90 MW co-generation facility at Lanjigarh, from its wholly owned subsidiary, VAL, on a going concern basis.
Sesa Goa (Sesa Goa) and Sterlite Industries (India) (Sterlite) in a joint statement issued on Saturday, 17 August 2013, said that the merger of Sterlite and The Madras Aluminium Company (MALCO) with Sesa Goa and transfer of MALCO power plant to Vedanta Aluminium (VAL) pursuant to the Scheme of amalgamation and arrangement amongst Sterlite, MALCO, Sterlite Energy (SEL), VAL and Sesa Goa and their respective Shareholders and Creditors (Composite Scheme) and the Scheme of Amalgamation of Ekaterina (Ekaterina) with Sesa Goa and their respective Shareholders and Creditors (Ekaterina Scheme) has become effective. The companies have fixed 28 August 2013 as the record date for determining the list of the shareholders of Sterlite, MALCO and Ekaterina to whom the equity shares of the Sesa Goa will be allotted as per terms of the scheme as already announced on 25 February 2012.
As per the swap ratio, every equity shareholder of Sterlite holding 5 equity shares of the company will be entitled to be issued 3 shares of the Sesa Goa.
The RBI on Tuesday, 20 August 2013, said it would repurchase government bonds to increase the availability of cash in the banking system, a step that appears to be a partial reversal of the slew of measures it took since mid-July to tighten liquidity. In a late evening news release, the RBI said it would buy back Rs 8000-crore of government bonds on Friday, 23 August 2013. Further repurchase will depend on evolving market conditions, it said. It is important to ensure that the liquidity tightening doesn't harden long-term bond yields and impact the flow of credit to productive sectors of the economy, the central bank said, referring to its buyback plan.
The RBI on Tuesday also relaxed some rules that will help banks deal with the notional or marked-to-market (MTM) loss in their government bond portfolios due to a recent sharp fall in bond prices. They now don't have to record their current marked-to-market losses immediately as the RBI has allowed them to spread the losses equally over the remaining period of this fiscal year.
Bond prices surged after the RBI on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.3423%, sharply lower than its close of 8.9028% on Tuesday, 19 August 2013. Bond yield and bond prices are inversely related.
The rupee weakened against the dollar. The rupee was hovering at 63.43, weaker than its close of 63.25/26 on Tuesday, 19 August 2013.
Most Asian stocks fell on Wednesday, 21 August 2013, before the release of minutes of the Federal Reserve's July meeting. Key benchmark indices in Singapore, Hong Kong, China, and South Korea were down by 0.37% to 1.08%. Key benchmark indices in Japan and Indonesia rose by 0.21% to 1.19%. Taiwan's Taiwan Weighted was flat.
Trading in US index futures indicated a flat opening of US stocks on Wednesday, 21 August 2013. US stocks on Tuesday, 20 August 2013, mostly climbed, with the S&P 500 halting its longest losing streak this year, as retailers including Best Buy Co. beat estimates and as Wall Street looked to clues about future US monetary policy. The Federal Open Market Committee (FOMC) later in the global day today, 21 August 2013, will issue minutes of its recent policy meeting held on 30 and 31 July 2013. The minutes of FOMC meet may help provide clues about the future of Fed's bond-buying program.
The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.
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