Increase in global crude oil prices and weak dometic macoeconomic data weighed on Indian stocks on the first trading session of the week. The market breadth, indicating health of the market was negative. The barometer index, the S&P BSE Sensex, was provisionally down 155.69 points or 0.69%, off close to 265 points from the day's high and up about 55 points from the day's low. Data released by the government today, 15 April 2014, showed that the rate of inflation based on wholesale price index (WPI) accelerated in March 2014. Another data released by the government after trading hours on Friday, 11 April 2014, showed that India's industrial production witnessed a surprise contraction in February 2014 as manufacturing activity shrunk. That data came after another data released during trading hours on Friday, 11 April 2014, showed that India's merchandise exports declined for the second month in a row in March 2014.
Increase in crude oil prices triggered concerns about India's current account deficit and fiscal deficit. Brent and West Texas Intermediate crudes rose to five-week high on Monday, 14 April 2014, as tension escalated between Ukraine and Russia, the world's biggest energy exporter. Brent for May settlement increased $1.74 to $109.07 a barrel on the London-based ICE Futures Europe. It was the highest close since March 4. WTI for May delivery gained 31 cents to $104.05 a barrel on the New York Mercantile Exchange. It was the highest settlement since March 3. India imports majority of its crude oil requirements.
Indian stocks fell for the second day in a row today, 15 April 2014.
Metal and mining stocks edged lower as China's broadest measure of new credit fell 19% in March from a year earlier and money supply grew at the slowest pace since 2001. Shares of IT major Infosys edged higher in choppy trade after the company issued a guidance of 7% to 9% growth in revenue in dollar terms for the year ending 31 March 2015 (FY2015) at the time of announcement of Q4 and year ended 31 March 2014 (FY 2014) results before trading hours today, 15 April 2014. Shares of other IT companies also gained after Infosys' FY 2015 revenue growth guidance.
A bout of volatility was witnessed as key benchmark indices slipped into the red after opening higher. The Sensex languished in negative terrain in morning trade. Weakness continued on bourses in mid-morning trade. Key benchmark indices extended losses in early afternoon trade after the latest data showed the rate of inflation based on wholesale price index (WPI) accelerated in March 2014. Weakness continued on the bourses in afternoon trade as European stocks dropped in early trade there. Weakness continued on the bourses in mid-afternoon trade. High volatility was witnessed as the Sensex weakened once again after trimming losses in late trade.
The market sentiment was affected adversely by data showing that foreign funds turned net sellers of Indian stocks on Friday, 11 April 2014. Foreign Institutional Investors (FIIs) sold shares worth a net Rs 362.29 crore on Friday, 11 April 2014, as per provisional data from the stock exchanges. The stock market was closed on Monday, 14 April 2014, on account of Dr. Baba Saheb Ambedkar Jayanti.
As per provisional figures, the S&P BSE Sensex was down 155.69 points or 0.69% to 22,473.27. The index declined 212.72 points at the day's low of 22,416.24 in afternoon trade, its lowest level since 9 April 2014. The index jumped 108.35 points at the day's high of 22,737.31 in early trade, its highest level since 10 April 2014.
The CNX Nifty was down 45.90 points or 0.68% to 6,730.40, as per provisional figures. The index hit a low of 6,711.75 in intraday trade, its lowest level since 9 April 2014. The index hit a high of 6,813.40 in intraday trade, its highest level since 10 April 2014.
The BSE Mid-Cap index was off 26.47 points or 0.36% at 7,311.99. The BSE Small-Cap index was off 21.68 points or 0.29% at 7,501.50. Both these indices outperformed the Sensex.
The total turnover on BSE amounted to Rs 2841 crore, lower than Rs 2849.18 crore on Friday, 11 April 2014.
The market breadth, indicating the overall health of the market was negative. On BSE, 1,455 shares dropped and 1,326 shares rose. A total of 130 shares were unchanged.
HDFC (down 3.45%), Axis Bank (down 3.44%) and Bharat Heavy Electricals (Bhel) (down 2.59%) edged lower from the Sensex pack.
Metal and mining stocks edged lower as China's broadest measure of new credit fell 19% in March from a year earlier and money supply grew at the slowest pace since 2001. China is the world's largest consumer of copper and aluminum.
Sesa Sterlite (down 3.68%), JSW Steel (down 4.99%), Steel Authority of India (Sail) (down 5.84%), NMDC (down 1.39%), Hindustan Copper (down 0.39%), National Aluminium Company (down 4.29%), Hindustan Zinc (down 1.89%), Jindal Steel & Power (down 4%) and Hindalco Industries (down 5.16%) edged lower.
Tata Steel fell 3.11% to Rs 407.05. The stock was volatile. The stock hit high of Rs 424.35 and low of Rs 407.
Tata Steel said on Monday, 14 April 2014, that the company has completed FY 2014 (year ended 31 March 2014) with an overall increase in production and sales volumes. The year registered its best ever performance in hot metal, crude steel, saleable steel production and total sales, the company said. Tata Steel said that its total sales rose 6% to 24.07 lakh tonnes in Q4 March 2014 over Q4 March 2013. Total sales rose 14% to 85.16 lakh tonnes in the year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013).
Lupin dropped 0.54%. The company's US unit -- Lupin Pharmaceuticals Inc. -- is recalling thousands of bottles of one of its Indian-made antibacterial drugs after finding that they failed to meet US standards for impurities. Lupin Pharmaceuticals Inc., based in Baltimore, recalled close to 10,000 bottles of the drug made by its Indian parent, Lupin, the US Food and Drug Administration said on its website. The recall was initiated on Jan. 27 but made public by the FDA this week. The latest recall is for Lupin's branded drug Suprax, the brand name for cefiximean antibiotic used to treat bacterial infections of the ear and upper respiratory tract.
Infosys gained 1.21% to Rs 3,275.10. The stock was volatile. The stock hit high of Rs 3,371.80 and low of Rs 3,245.35. Infosys before trading hours today, 15 April 2014, said its consolidated net profit rose 4.1% to Rs 2992 crore on 1.2% decline in revenue to Rs 12875 crore in Q4 March 2014 over Q3 December 2013. Infosys' non-operational income jumped 16.4% to Rs 851 crore in Q4 March 2014 over Q3 December 2013. The results are as per International Financial Reporting Standards.
Infosys has forecast revenue growth of 7% to 9% in dollar terms for the year ending 31 March 2015 (FY 2015). The company has forecast revenue growth of 5.6% to 7.6% in rupee terms for FY 2015. The guidance in rupee terms is based on rupee dollar conversion rate of 60.
Infosys had liquid assets including cash and cash equivalents, available-for-sale financial assets, certificates of deposits and government bonds at Rs 30251 crore as on 31 March 2014, higher than Rs 27440 crore as on 31 December 2013.
Infosys said that the company's current policy is to pay dividends up to 30% of post-tax profits. The board has decided to increase the dividend pay-out ratio to up to 40% of post-tax profits with effect from FY 2014. The board of directors recommended a final dividend of Rs 43 per share for FY 2014.
Infosys and its subsidiaries added 50 clients in Q4 March 2014 and 238 clients in FY 2014.
There was gross addition of 10,997 employees during the quarter and 39,985 during the year by Infosys and its subsidiaries.
Commenting on the company's financial performance, S. D. Shibulal, CEO and Managing Director, Infosys said: "I am pleased that we have been able to double our growth rate for the full year compared to last year, though performance in the last quarter of FY 2014 has been disappointing. We have guided for a revenue growth of 7%-9% next year and remain firmly focused on building the growth momentum by making all the necessary investments in our business".
Rajiv Bansal, Chief Financial Officer, Infosys said: "Our cash and cash equivalents crossed Rs 30000 crore during the quarter. We have increased the dividend payout ratio to up to 40% of post-tax profits effective FY 2014 to enhance returns for our shareholders".
Shares of other IT companies also gained after Infosys' FY 2015 revenue growth guidance. Wipro (up 3.92%), Tech Mahindra (up 1/53%) and HCL Technologies (up 1.79%) gained.
Tata Consultancy Services (TCS) rose 4.13%. The company announced on Monday, 14 April 2014, that it had launched iElect - a gamified app on the Android platform that generates social insights about India's General Elections in 2014.
"The TCS iElect app is a completely new way to observe, analyze and participate in the social conversations around the world's largest general elections. The users of iElect app will have access to fascinating insights and trends on a real-time basis. The app harnesses the power of social media, big data, analytics and mobility to make sense of what seems to be a complex web of conversations. India has a large amount of smartphone users and almost 100 million first-time voters in general elections 2014. TCS iElect will be new and engaging for them to participate through the entire process with its gamified and interactive features," said Pradipta Bagchi, Vice President & Head corporate communication.
He also added we are excited to partner with Twitter India to make the entire election watching process fun and interactive.
Twitter India Market Director Rishi Jaitly said, We applaud TCS for their innovative iElect app that makes real time Twitter data and analytics around key political events & content accessible to every Indian. The app has opened up a unique engagement opportunity with Twitter content for our users.
TCS has put its expertise in big data, cloud computing, analytics and social media to help the Indian voter understand the General elections 2014 through its app TCS iElect (Beta version) - to cut through the clutter; drown out the noise and make sense of the world's largest democratic event.
On a consolidated basis, CMC's net profit rose 27% to Rs 89 crore on 11% increase in operating revenue to Rs 623 crore in Q4 March 2014 over Q3 December 2013. Earnings before interest, taxation, depreciation and amortization (EBITDA) jumped 46% to Rs 133 crore in Q4 March 2014 over Q3 December 2013. CMC said that the company received a favourable decision in a legal case with a customer in Q4 March 2014, which has resulted in increase in operating revenue by Rs 19 crore and increase in profit after tax by Rs 25 crore.
CMC is a subsidiary of TCS.
MindTree gained 1.67% after the company said that its board of directors will consider a proposal for declaration of bonus shares tomorrow, 16 April 2014. MindTree on Monday, 14 April 2014, said that the company's board of directors will consider a proposal for declaration of bonus shares tomorrow, 16 April 2014 along with the audited financial results for the Q4 and year ended 31 March 2014 (FY 2014).
The rate of inflation based on the wholesale price index (WPI) accelerated to 5.7% in March 2014, from 4.68% in February 2014, data released by the government today, 15 April 2014, showed. The government revised upwards WPI inflation for January 2014 to 5.17%, from 5.05% reported on 14 February 2014. Build up inflation rate in the financial year so far was 5.7% compared to a build up rate of 5.65% in the corresponding period of the previous year.
Core inflation or non-food manufacturing inflation accelerated to a 12-month high of 3.5% in March 2014.
The rate of inflation based on the consumer price index (CPI) is seen inching up to 8.2% in March 2014, from 8.1% in February 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government is scheduled to announce CPI inflation data for March 2014 at 17:00 IST today, 15 April 2014.
India's index of industrial production (IIP) dipped 1.9% in February 2014, snapping 0.8% growth recorded in the previous month. IIP recorded decline for six out of 11 months in FY 2014 till February 2014. The sharp decline in the output of manufacturing sector at 3.7% in February 2014, mainly led to dip in IIP during February 2014. Meanwhile, the output of mining sector rose 1.4%, while the electricity generation surged 11.5% in February 2014. The data was announced after market hours on Friday, 11 April 2014.
Global rating agency Standard & Poor's (S&P) said today, 15 April 2014, the direction and pace of policy reforms in India, more than which political party takes control after elections, will have a bearing on the sovereign rating. "An important factor is how fragmented the government will be. The more parties involved in the next coalition government, the more likely policies will be incoherent and less supportive of credit attributes," said Kim Eng Tan, sovereign credit analyst at S&P, in a statement. S&P has a BBB- rating on India with a negative outlook and has warned of the risks of a ratings downgrade in the absence of structural reforms, fiscal consolidation and if economic growth decelerates further.
Global credit rating agency Fitch Ratings after trading hours on Friday, 11 April 2014, affirmed India's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB-'. The issue ratings on India's senior unsecured foreign and local currency bonds are also affirmed at 'BBB-', Fitch said. The outlooks on the Long-Term IDRs are stable, the rating agency said. The Country Ceiling is affirmed at 'BBB-' and the Short-Term Foreign Currency IDR at 'F3', it said.
India's sovereign ratings benefit from relatively high real GDP growth: the five-year average is 6.7%, compared with the median of 3.2% for peers in the 'BBB' rating category (sovereigns rated 'BBB-', 'BBB' and 'BBB+'). However, the Indian economy has lost much of its dynamism in recent years and the average is coming down, the rating agency said. Fitch forecasts real GDP growth to rise to 5.5% in the year ended 31 March 2015 (FY 2015) and 6% in the year ended 31 March 2016 (FY 2016), from 4.7% in the year ended on 31 March 2014 (FY 2014).
The course of the Indian economy is uncertain in light of the on-going parliamentary elections, with the results due to be announced on 16 May 2014, the rating agency said. Once the next coalition starts implementing its economic policies, it will become clearer whether the economy can return to a higher sustainable growth path or whether it remains stuck at current levels, it said. A policy push that includes structural and governance reforms, fiscal consolidation and efforts to rein in inflationary pressures would likely require a coherent coalition with a strong electoral mandate, the rating agency said.
Fiscal consolidation remains critical to the rating, as both the general government budget deficit of the Centre and the States combined (7.3% of GDP) and the gross general government debt (64.7%) are much higher than 'BBB' category medians (respectively -2.5% of GDP and 40% of GDP), Fitch said. The central government seems to have met its budget deficit target of 4.8% of GDP (including privatization receipts) for FY 2014, despite the looming elections. But this was only achieved through substantial one-off measures, such as special dividends by state companies, and deferral of bill payments and capital expenditure, which raise questions about the feasibility of a fiscal consolidation process over the long run, Fitch said. Credibility of the government's fiscal policy would be strengthened through the implementation of a clear strategy to reach the Fiscal Responsibility and Budget Management Act's consolidation path towards a general government deficit of 3% of GDP by FY 2017, Fitch said.
India's standards of governance and business environment are relatively weak and constrain its investment potential. Fitch expects a gradual pick-up in investment in its baseline scenario once the election uncertainty dissipates. The clearance of close to 300 investment projects by the Cabinet Committee on Investment should facilitate investment activity. However, some of these projects may no longer be viable or may still face difficulties at the state level, Fitch said. More structural measures could cause investment to take off decisively, as illustrated by India's low score for World Bank indicators related to the ease of doing business (28.3 percentile compared with 70.7 percentile for 'BBB' peers) and governance (48.3 percentile compared with 54.6).
India's inflation is high at a five-year average of 10.2% compared with the 'BBB' peer median of 4.2%. However, the Reserve Bank of India (RBI) seems more determined than in the past to bring down inflation, as evidenced by recent policy rate hikes. Clarity on potentially a new monetary policy framework would likely contribute to lower inflation expectations, subsequently feeding through to lower actual inflation levels. Nonetheless, some structural factors driving inflation, including inefficiencies in food distribution, are in the realm of the government rather than the RBI, Fitch said.
The rating agency said that India's external position continues to be strong, given the high level of foreign exchange reserves of $304 billion or 6.1 months of current account receipts cover (compared with the 'BBB' peer median of 4.8 months) and low net external debt of 4.4% of GDP (compared with a 9.2% 'BBB' peer median). This provides a thick cushion in case of renewed pressures on the rupee and other asset markets. The authorities reacted effectively to the market jitters in 2013 related to the expectations surrounding the US Federal Reserve tapering its stimulus, helping lower the current account deficit from 4.8% of GDP in FY 2013 to an expected 1.9% of GDP in FY 2014, Fitch said.
In a number of respects the Indian economy is less developed than investment grade peers, Fitch said. India's average per capita income remains low at $1,543 in 2013 compared with the 'BBB' range median of $10,778. The UN Human Development Index indicates relatively low basic human development.
The profitability and capital position of the banking sector will likely remain under pressure, especially for public sector banks, as asset quality continues to deteriorate in the context of a weak macro environment, Fitch said. Non-performing loans increased to 4.2% of total assets in September 2013. Nonetheless, Fitch does not view banks' balance sheets as a material risk to the public finances at this stage, the rating agency said.
Since the rating outlook is stable, Fitch does not currently anticipate developments with a high likelihood of leading to a rating change. However, future developments that could individually or collectively, result in negative rating action include deviation from the fiscal consolidation path in such a way that it results in continuation of large general government budget deficits, a prolonged period of disappointing real GDP growth, a loose macro policy setting that would cause inflationary pressures to persist and/or the current account to widen to such an extent that it would lead to external funding stress, greater-than-expected deterioration in the banking sector's asset quality that would prompt large-scale financial support from the sovereign, Fitch said.
Future developments that could individually or collectively result in positive rating action include sustained fiscal consolidation or fiscal reforms which lead to a sharp decline in the ratio of gross general government debt to GDP, new reform momentum with the implementation of far-reaching reforms that raise the potential growth rate, establishing a credible low inflation environment, Fitch said.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.
A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. The 36 days long voting process began on 7 April 2014 and will conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.
European stocks edged lower on Tuesday, 15 April 2014, as investors weighed violence in eastern Ukraine and the slowest Chinese money supply growth in almost 13 years. Key benchmark indices in UK, Germany and France were off 0.42% to 1.03%.
Britain's inflation rate fell to the lowest in 4-1/2 years in March on petrol and clothes prices, moving further below the Bank of England's 2% target. Consumer prices rose an annual 1.6%, compared with 1.7% in February, the Office for National Statistics said today in London. That's the lowest rate since October 2009. Core inflation also slowed to 1.6%.
Ukraine remained in focus Tuesday as a military operation to win back control of eastern Ukrainian cities from pro-Russian activists was launched. Interim President Oleksandr Turchynov told Ukraine's parliament that overnight "an antiterrorist operation" began in the north of Donetsk, according to a Russian news agency Interfax.
US President Barack Obama and Russian President Vladimir Putin discussed the Ukrainian crisis by telephone on Monday, 14 April 2014, without any substantial breakthrough, according to statements from their offices, as fighting between pro-Russian separatists and government forces highlighted instability in east Ukraine.
Asian stocks edged higher on Tuesday, 15 April 2014, after the largest jump in US retail sales since 2012 added to optimism that the recovery in the world's biggest economy is intact. Key benchmark indices in Japan, Singapore, Indonesia and Taiwan were up 0.11% to 0.98%. Key benchmark indices in South Korea, Hong Kong and China were off 0.24% to 1.6%.
China's broadest measure of credit fell 19% from a year earlier in March and money supply grew at the slowest pace since 2001, data from the People's Bank of China showed today, 15 April 2014. Aggregate financing was 2.07 trillion yuan ($333 billion) from 2.55 trillion yuan a year earlier. New yuan loans were 1.05 trillion yuan. M2, China's broadest measure of money supply, rose 12.1% in March from a year earlier.
Among economic data, China will announce its first-quarter gross domestic product tomorrow, 16 April 2014.
Trading in US index futures indicated that the Dow could drop 26 points at the opening bell on Tuesday, 15 April 2014. US stocks edged higher in choppy trade on Monday, 14 April 2014, weathering a selloff at the start of the final hour, after data showed retail sales increased the most since 2012 and as Citigroup Inc. earnings unexpectedly rose.
American retailers warmed up in March as the winter chill faded -- and it wasn't just car dealers who benefited. Sales jumped a greater-than-forecast 1.1%, the biggest gain since September 2012, following a 0.7% advance in February that was more than twice as large as previously reported, Commerce Department figures showed.
The US government's deficit will fall to $492 billion this year, according to the Congressional Budget Office, a steeper drop than originally predicted from $680 billion in fiscal year 2013. The 2014 deficit will be 2.8% of the economy, according to CBO, almost 32% below fiscal year 2013, when it was 4.1%. The deficit will shrink again in fiscal 2015 to $469 billion, before rising to about $1 trillion in fiscal years 2022 to 2024, CBO said.
Federal Reserve Chair Janet Yellen will speak today, 15 April 2014, as manufacturing and inflation reports are released after better-than-estimated retail sales and Citigroup Inc. earnings buoyed US stocks on Monday, 14 April 2014.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 decided after the conclusion of a monetary policy review to trim its monthly bond purchases by $10 billion to $55 billion.
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