Prospects of no near term policy rate cut from the Reserve Bank of India (RBI) after forecasts of deficient rains this year from the India Meteorological Department and increase in global bond yields triggered a broad based decline in Indian stocks today, 3 June 2015. The market sentiment was also hit adversely after a survey showed contraction in India's services sector in May 2015. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty lost more than 1% each. However, both these key benchmark indices trimmed losses after seeing a steep slide in intraday trade. The intraday recovery for key benchmark indices in late trade materialized as global crude oil prices dropped.
The Sensex hit its lowest closing level in almost four weeks. The barometer index fell below the psychological 27,000 mark. The 50-unit CNX Nifty hit its lowest closing level in more than three weeks. The Sensex shed 351.18 points or 1.29% to settle at 26,837.20. The broad market depicted weakness. There were more than three losers against every gainer on BSE. The BSE Small-Cap index declined 1.98%. The BSE Mid-Cap index shed 1.38%. The decline in both these indices was higher than the Sensex's decline in percentage terms. A number of stocks which are the constituents of the BSE Small-Cap index lost 2% to 20%.
The Sensex dropped for the second straight trading session today, 3 June 2015. The Nifty dropped for the third straight trading session today, 3 June 2015.
Index heavyweight and cigarette major ITC slumped on reports of Maharashtra government's decision to ban sale of loose cigarettes in the state. FMCG stocks declined after the India Meteorological Department (IMD) in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 said monsoon season is likely to be deficient. Shares of Nestle India slumped after news reports suggested that the Delhi city government conducted tests on 13 samples of Maggi noodles and 10 were found to be unsafe with lead exceeding the allowable level.
Shares of tractor major Mahindra & Mahindra slipped after IMD's forecast. Shares of two-wheeler makers also declined on concerns of weak monsoon.
Meanwhile, decline in global sovereign bonds has fuelled concerns about profit-taking in other asset classes. Higher debt yields also make equities more expensive relative to bonds. Bond yields in Australia, New Zealand and Japan edged higher today, 3 June 2015, after as a spike in US debt yields overnight. German government bond yields edged higher today, 3 June 2015, extending their sharp rise during the previous trading session. Yields rise as bond prices fall. Increase in bond yields weighed on Asian stocks.
Foreign portfolio investors sold shares worth a net Rs 673 crore into the secondary equity market yesterday, 2 June 2015, as per data from Central Depository Services (India). Domestic institutional investors (DIIs) bought shares worth a net Rs 271.64 crore yesterday, 2 June 2015, as per provisional data released by the stock exchanges.
In overseas markets, European stocks edged higher. Asian shares edged lower as global bond yields climbed to the highest levels this year. US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.
The S&P BSE Sensex shed 351.18 points or 1.29% to settle at 26,837.20, its lowest closing level since 7 May 2015. The index fell 490.12 points at the day's low of 26,698.26 in early afternoon trade. The index rose 87.84 points at the day's high of 27,276.22 in early trade.
The 50-unit CNX Nifty declined 101.35 points or 1.23% to settle at 8,135.10, its lowest closing level since 12 May 2015. The index hit a low of 8,094.15 in intraday trade. The index hit a high of 8,236.70 in intraday trade.
The BSE Mid-Cap index shed 145.05 points or 1.38% to settle at 10,329.46. The BSE Small-Cap index declined 219 points or 1.98% to settle at 10,828.18. The decline in both these indices was higher than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was quite weak, with more than three losers against every gainer on BSE. 2,127 shares fell and 603 shares rose. A total of 78 shares were unchanged.
The total turnover on BSE amounted to Rs 3490 crore, higher than turnover of Rs 3086.68 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE FMCG index (down 3.45%), BSE Healthcare index (down 1.47%), BSE Auto index (down 1.52%), BSE Bankex index (down 1.41%), BSE Capital Goods index (down 1.52%), BSE Consumer Durables index (down 1.7%), BSE Oil & Gas index (down 2.05%), BSE Power index (down 2.22%) and BSE Realty index (down 5.54%) underperformed the Sensex. The S&P BSE IT index (up 0.16%) and BSE Metal index (down 1.19%) outperformed the Sensex.
Index heavyweight and cigarette major ITC fell 4.59% to Rs 304.25 on reports of Maharashtra government's decision to ban sale of loose cigarettes. The state government has also banned chewing tobacco in public places, say reports. The public notification on the same is expected to be issued in couple of days.
According to reports, cigarette makers may reportedly introduce smaller pack sizes to cushion impact of the policy change. About 70% of sales from cigarette business for ITC come from lose cigarettes.
Meanwhile, shares of ITC turned ex-dividend today, 3 June 2015, for dividend of Rs 6.25 per share for the year ended 31 March 2015.
Cipla was off 0.95% at Rs 634.90. The stock hit a high of Rs 644.10 and a low of Rs 631.30 in intraday trade. Cipla after market hours today, 3 June 2015, said that the company has received approval from United States Food & Drug Administration (USFDA) for an innovative formulation Lopinavir/ritonavir (LPV/r) 40mg/10 mg oral pellets for pediatric specific treatment for infants.
Realty shares edged lower. Unitech (down 35.27%), Indiabulls Real Estate (down 8.08%), Anant Raj (down 7.12%), Housing Development & Infrastructure (down 6.48%), DLF (down 2.48%), Mahindra Lifespace Developers (down 1.08%) and Prestige Estates Projects (down 0.7%) edged lower. Sobha (up 0.42%) and Godrej Properties (up 0.14%) edged higher.
Oberoi Realty was off 4.1% at Rs 297. Oberoi Realty after market hours yesterday, 2 June 2015, said that its board of directors at a meeting held on 2 June 2015 passed enabling resolution for issue of non-convertible debentures upto an aggregate amount of Rs 1500 crore by way of private placement, in one or more offerings/tranches. The board also passed resolution for issue of equity shares and/or any other securities convertible into equity by way of one or more public offer or private placement, or both, for an aggregate amount not exceeding Rs 750 crore, including premium.
Bank stocks edged lower. Among public sector banks, Andhra Bank (down 5.44%), United Bank of India (dow 5.91%), IDBI Bank (down 4.21%), Indian Overseas Bank (down 3.17%), Corporation Bank (down 2.16%), Oriental Bank of Commerce (down 0.65%), Canara Bank (down 0.81%) and Syndicate Bank (down 1.03%) edged lower. Bank of Baroda (up 0.62%) and Union Bank of India (up 0.62%) edged higher.
State Bank of India (SBI) was off 3.27% at Rs 257.55. SBI reportedly reduced its base rate by 15 basis points after the Reserve Bank of India (RBI) cut repo rate by 25 basis points. SBI reduced its base rate or minimum lending rate to 9.70% from 9.85% effective 8 June 2015. While the Reserve Bank has cut its lending rates by 75 basis points (0.75%) in three installments, the SBI has done so by 30 bps (0.30%) in two tranches, reports added.
Punjab National Bank (PNB) was off 0.49% at Rs 150.80. PNB at the fag end of market hours today, 3 June 2015, said it has decided to cut interest rates on domestic term deposits with effect from 8 June 2015. The interest rate on domestic term deposits of less than Rs 1 crore in the maturity bucket of 91 to 179 days was cut to 6.75% from 7%. The interest on term deposits of less than Rs 1 crore in the maturity bucket of 1 to 5 years was reduced to 8.25% from 8.5%. The interest on term deposits of less than Rs 1 crore in the maturity bucket of more than 5 years to 10 years was reduced to 8% from 8.25%.
The interest rate on domestic term deposits of Rs 1 crore to Rs 10 crore in the maturity bucket of 91 to 179 days was cut to 7% from 7.25%. The interest on term deposits of Rs 1 crore to Rs 10 crore in the maturity bucket of 271 days to less than 1 year was reduced to 8% from 8.25%. The interest on term deposits of Rs 1 crore to Rs 10 crore in the maturity bucket of 1 year to 2 years was reduced to 8.25% from 8.5%. The interest on term deposits of Rs 1 crore to Rs 10 crore in the maturity bucket of more than 2 years to 5 years was reduced to 8% from 8.25%.
Among private sector banks, ICICI Bank (down 2.84%), Yes Bank (down 2.05%), Kotak Mahindra Bank (down 1.03%), Axis Bank (down 0.63%), HDFC Bank (down 0.41%) and IndusInd Bank (down 0.23%) edged lower.
FMCG stocks declined after the India Meteorological Department (IMD) in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, said that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. Jyothy Laboratories (down 3.12%), Tata Global Beverages (down 2.6%), Hindustan Unilever (down 2.46%), Colgate Palmolive (India) (down 1.59%), Dabur India (down 1.84%), Marico (down 1.26%) and GlaxoSmithKline Consumer Healthcare (down 0.64%), edged lower. Britannia Industries (up 0.86%), Bajaj Corp (up 0.22%), Procter & Gamble Hygiene & Health Care (up 1.02%) and Godrej Consumer Products (up 1.14%), edged higher.
A deficient monsoon could adversely impact rural incomes. FMCG companies derive substantial revenue from rural India.
Shares of Nestle India slumped after news reports suggested that the Delhi city government conducted tests on 13 samples of Maggi noodles and 10 were found to be unsafe with lead exceeding the allowable level. The stock plunged 9.05% to Rs 6,191.10. The Delhi government has reportedly decided to file a case against Nestle India which makes Maggi noodles.
Nestle India said in a clarification issued to the stock exchanges said that the company has not received any official communication from the authorities so far. The company has till now not received any orders from any State/Centre FDA authorities to recall Maggi noodles in the market, except an order from the Uttar Pradesh FDA dated 30 April 2015 asking the company to recall a batch of Maggi noodles manufactured in February 2014 which had already reached the 'Best Before date' in November 2014. The company said it is co-operating with the authorities who are conducting tests on Maggi noodles and awaiting their results.
Shares of tractor major Mahindra & Mahindra fell 1.52% to Rs 1,204.65 after the India Meteorological Department (IMD) in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, said that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. Scanty rains could adversely affect tractor sales.
Shares of two-wheeler makers declined after the India Meteorological Department (IMD) in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, said that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. A deficient monsoon could adversely impact rural incomes which in turn could adversely impact sales of two wheelers in rural India. Bajaj Auto fell 1.25% to Rs 2,240.80. Hero MotoCorp fell 1.14% to Rs 2,578.05. TVS Motor Company's (TVS Motor) fell 1.99% to Rs 221.40.
Bharti Airtel was up 0.79% to Rs 421.25. The stock hit a high of Rs 422.90 and a low of Rs 409.30 in intraday trade. The company announced before trading hours today, 3 June 2015, that the company has approached investors for issuance of debt instruments in the form of US dollar denominated Senior Unsecured Notes. The notes have an expected tenor 10 years. The company will use the proceeds for capital expenditure in compliance with end-use guidelines set forth in the Master Circular by the Reserve Bank of India and all laws and regulations of India applicable to the company. The notes are expected to be listed on the Singapore Stock Exchange.
The Sensex slipped for the second straight trading session today, 3 June 2015. The Sensex has slumped 1,011.79 points or 3.63% in the past two trading sessions from a recent high of 27,848.99 on 1 June 2015. The Sensex has fallen 662.22 points or 2.4% in this calendar year so far (till 3 June 2015). From a 52-week low of 24,644.88 on 5 June 2014, the Sensex has risen 2,192.32 points or 8.89%. The Sensex is off 3,187.54 points or 10.61% from a record high of 30,024.74 hit on 4 March 2015.
The India Meteorological Department (IMD) said in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. Quantitatively, the season rainfall for the country as a whole is likely to be 88% of the long period average (LPA) with a model error of plus/minus 4%. In April 2015, the IMD had forecast this year's monsoon rainfall to be 93% of the long period average with a model error of plus/minus 5%.
The latest forecast from IMD-IITM coupled model indicates El Nino conditions are likely to strengthen further and reach to moderate strength during the monsoon season. There is about 90% probability of El Nino conditions to continue during the southwest monsoon season, the IMD said.
The IMD said that there is 66% probability of deficient rains, 27% probability of below normal rains and 7% probability of normal rains this year.
The season rainfall is likely to be 85% of LPA over North-West India, 90% of LPA over Central India, 92% of LPA over South Peninsula, and 90% of LPA over North-East India, all with a model error of plus/minus 8%, the IMD said. The monthly rainfall over the country as whole is likely to be 92% of its LPA during July and 90% of LPA during August both with a model error of plus/minus 9%.
The annual monsoon is critical for the country's agriculture. Scarce seasonal rains can adversely affect agriculture production and push prices up in India, because a considerable part of the country's farmland is dependent on the rains for irrigation.
The IMD's downgrade of the monsoon forecast came on a day when Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan said that the central bank will wait for more certainty on the monsoon outturn before further monetary policy action after cutting the benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review yesterday, 2 June 2015.
The onset of monsoon in Kerala has been delayed. The IMD in its daily monsoon report yesterday, 2 June 2015, said that conditions are becoming favourable for the onset of southwest monsoon over Kerala around 5 June, four days after the scheduled onset date of 1 June.
Meanwhile, India's services sector fell back into contraction in May 2015 after experiencing growth for six successive months, the outcome of a survey from Markit Economics today, 3 June 2015, showed. The seasonally adjusted HSBC India Services Business Activity Index declined to 49.6 in May 2015, from 52.4 in April 2015. Although indicative of falling output, the latest reading pointed to a marginal rate of contraction. Leading services activity to decline was a reduction in incoming new work, the first since April 2014. Competitive pressures and natural disasters were blamed for the decrease in new business inflows. Service providers' optimism was maintained during May, as improved marketing strategies and better economic conditions are expected to lead to business activity growth over the course of the next year.
Pollyanna De Lima, Economist at Markit said in a statement that India's services sector is expected to see a rebound in coming months. An upturn in employment combined with improved business confidence further add to the evidence that prospects may brighten, he said.
In global commodity markets, Brent crude oil futures edged lower today, 3 June 2015. Brent for July settlement was off $1.42 a barrel at $64.07 a barrel. The contract had risen 61 cents or 0.94% to settle at $65.49 a barrel during the previous trading session.
Oil cartel OPEC is expected to keep its production target of 30 million barrels of oil per day unchanged at a meeting scheduled in Vienna on Friday, 5 June 2015. The OPEC meeting is being closely watched for clues about the organization's next moves.
The decline in global crude oil prices and deregulation of diesel price announced by the Indian government in October 2014 will help reduce the government's fuel subsidy burden and help contain its fiscal deficit. The slide in global crude oil prices will also help India in containing its current account deficit and fuel price inflation. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports. India imports 80% of its crude oil requirement.
The partially convertible rupee was currently hovering at 63.91, compared with its close of 63.825 during the previous trading session.
In overseas markets, European stocks edged higher today, 3 June 2015. Key indices in UK, Germany and France were up 0.25% to 0.75%.
Eurozone services PMI for May fell to 53.8 in May from 54.1 in April. Eurozone services PMI for May fell to 53.8 from 54.1 in April. Eurozone May final composite PMI were at 53.6, vs. 53.4 flash estimate.
Greece's creditors reportedly reached a consensus on the terms of a proposed deal to put to the Greek government. However, Athens has yet to agree on the terms. The country has to repay 300 million euros ($329 million) to the International Monetary Fund (IMF) by Friday, 5 June 2015. Greece is scheduled to repay a total of euro 1.6 billion ($1.76 billion) to the International Monetary Fund (IMF) over the period between June 5-19.
Meanwhile, the European Central Bank (ECB) is widely expected to reaffirm its commitment to its quantitative easing scheme after a monetary policy meeting today, 3 June 2015.
Asian shares edged lower today, 3 June 2015, as global bond yields climbed to the highest levels this year. Key benchmark indices in China, South Korea, Taiwan, Japan and Indonesia were down by 0.01% to 1.6%. Key benchmark indices in Hong Kong and Singapore and were up by 0.3% to 0.69%.
The HSBC China Services Purchasing Managers' Index rose to an eight-month high of 53.5 in May, HSBC Holdings PLC said today, with both new orders and employment in the sector rising to multi-year highs. Activity outside the nation's factories during the month also came in above April's 52.9 reading. A reading above 50 indicates month-over-month expansion.
US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.
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