High volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday low in afternoon trade. The barometer index, the S&P BSE Sensex, was down 108.41 points or 0.51%, up about 60 points from the day's low and off close to 55 points from the day's high. The market breadth, indicating the overall health of the market, was negative. Except BSE FMCG index, all the other sectoral indices on BSE were in the red. The market sentiment hit adversely due to hawkish comments on inflation from Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan. In the foreign exchange market, the rupee edged lower against the dollar.
Oil & Natural Gas Corporation (ONGC) extended Tuesday's losses triggered by company's announcement that the Gujarat High Court has ruled late last month that the royalty on crude oil is to be paid on pre-discount price. Capital goods pivotals declined for the second day in a row.
The market edged lower in early trade on weak Asian stocks. A bout of volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday low in morning trade. Weakness continued on the bourses in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade after Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan said that the central bank's focus remains on controlling inflation. Key benchmark indices trimmed losses after hitting fresh intraday low in early afternoon trade. High volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday low in afternoon trade.
At 14:20 IST, the S&P BSE Sensex was down 108.41 points or 0.51% to 21,146.85. The index fell 167 points at the day's low of 21,088.26 in afternoon trade, its lowest level since 6 December 2013. The index declined 54.75 points at the day's high of 21,200.51 in early trade.
The CNX Nifty was down 32.45 points or 0.51% to 6,300.40. The index hit a low of 6,282.15 in intraday trade, its lowest level since 6 December 2013. The index hit a high of 6,313.25 in intraday trade.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,360 shares fell and 1,002 shares rose. A total of 157 shares were unchanged.
From the 30-share Sensex pack, 19 stocks fell and rest rose. Tata Motors (down 3.02%), SBI (down 2.29%) and Bharti Airtel (down 2.19%) edged lower from the Sensex pack.
Capital goods pivotals declined for the second day in a row. Bhel fell 2.54%.
Shares of engineering and construction major L&T lost 1.51%. The company on Tuesday, 10 December 2013, said its subsidiary -- L&T Shipbuilding -- has bagged orders valued at $154 million for six specialized commercial vessels in Q3 December 2013 so far.
Oil & Natural Gas Corporation (ONGC) dropped 3.12%, with the stock extending Tuesday's losses. ONGC on Tuesday said the Gujarat High Court vide its order dated 30 November 2013 has decided that royalty on crude oil is to be paid on pre-discount price. The court has directed ONGC to make payment towards shortfall royalty for the period from April 2008 till this date, within a period of two months. ONGC said that the company is in the process of filing an appeal in the Supreme Court of India against the order of the Gujarat High Court and making the Union Government as party. The company's management has already directed Corporate Legal to engage best possible advocate for the case, ONGC said.
Meanwhile, it has been conveyed to the Ministry of Petroleum and Natural Gas from CMD, ONGC to Secretary, Petroleum and Natural Gas that in case the decision goes against the company and if ONGC is directed to deposit the royalty on pre-discount price, ONGC should be compensated by the Government of India for the differential royalty. ONGC said that it will not be in a position of bearing such a huge burden, particularly when it is of recurring nature.
Giving a background about the issue, ONGC said that the company started making payment of royalty on crude oil from 1 April 2008 at post discount price to state governments in India, in line with royalty payment to the Central Government and taking into account the provisions of Oilfields (Regulation and Development) Act, 1948 (ORDA). ONGC further said that the company paid excess royalty to the tune of Rs 3419 crore to the Gujarat state government for the period 2003-04 to 2007-08.
ONGC said that the latest ruling of the Gujarat High Court to direct ONGC to pay royalty on onshore crude production at the pre-discount price instead of the post-discount price works out to about Rs 10000 crore for the period April 2008 to September 2013 in respect of crude oil production in Gujarat alone and hence will have significant adverse impact on ONGC's financials. Further, the payment of royalty on pre-discount price is of recurring nature. Similar implications would also arise in other states like Assam, Andhra Pradesh and Tamil Nadu, where ONGC is producing crude from onshore fields.
ONGC also said that in a separate but related issue, ONGC has been asked to pay VAT on pre-discount price from 2004-05 onwards by Gujarat VAT Tribunal, against which ONGC is in the process of filing appeal in Gujarat High Court. Assam VAT authorities have also raised demand for payment of VAT on pre-discount price, which is also being addressed by ONGC, the company said in a statement.
In a separate announcement, ONGC on Tuesday, 10 December 2013, said that a memorandum of understanding (MOU) was signed between the Co-ordinating Ministry for Strategic Sectors (MICSE) of the Republic of Ecuador and ONGC Videsh on 9 December 2013 in New Delhi. ONGC Videsh has been evaluating E&P opportunities in Ecuador for last one year. Latin America is a focus area of ONGC Videsh. The MOU provides that MICSE would make available to ONGC Videsh information regarding oil and gas projects in Ecuador, which ONGC Videsh would evaluate to identify the project/projects of its interests and could propose participation in such project/projects through specific definitive agreements.
ONGC Videsh is a wholly-owned subsidiary of ONGC.
In the foreign exchange market, the rupee edged lower against the dollar on speculation a US budget agreement will boost prospects of tapering the Federal Reserve's stimulus program. The partially convertible rupee was hovering at 61.3225, compared with its close of 61.04/05 on Tuesday, 10 December 2013.
India's trade deficit declined sharply to $9.219 billion in November 2013, from $17.203 billion in November 2012, data released by the government today, 11 December 2013, showed. Merchandise exports rose 5.86% year-on-year (YoY) at $24.613 billion in November 2013. Imports declined 16.37% YoY at $33.833 billion in November 2013. Oil imports declined 1.1% to $12.964 billion. Non-oil imports dropped 23.69% at $20.868 billion.
The government will unveil industrial production data for October 2013 after trading hours tomorrow, 12 December 2013. Industrial output is estimated to fall 1.5% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market. Industrial production rose 2% in September 2013, showing increase in growth from 0.4% growth recorded in August 2013.
Data on inflation based on the general consumer price index (CPI) for November 2013 will also be unveiled after trading hours tomorrow, 12 December 2013. CPI (combined) for November 2013 is estimated at 10% in November 2013, as per the median estimate of a poll of economists carried out by Capital Market. The CPI inflation (combined) for October 2013 stood at 10.09% (y-o-y), higher than 9.84% (y-o-y) seen in September 2013.
The government will unveil data on inflation based on the wholesale price index (WPI) for November 2013 on 16 December 2013. WPI is seen easing a bit at 6.9% in November 2013, from 7% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market.
The Reserve Bank of India (RBI) announces next Mid-Quarter Review of Monetary Policy for 2013-14 on 18 December 2013. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled 28 January 2014.
The focus of the Reserve Bank of India remains on inflation, Governor Raghuram Rajan said on Wednesday, 11 December 2013, adding growth seems to be stabilising, although it is too early to call a bottom. Rajan added the rupee had stabilised "somewhat", but said there is no room for complacency. He also called on the government to continue its efforts to contain the fiscal deficit and said raising subsidised diesel prices to market levels would help. "Our effort is firmly on controlling inflation," Rajan said during a speech to the Delhi Economic Conclave organised by India's Finance Ministry. "Growth is stabilising though it is too early to say it has bottomed at this point," he also said.
Rajan also reiterated the central bank would continue to focus on developing markets, adding the RBI is also keen to strengthen debt markets and introduce more products. Rajan also said the RBI would introduce measures to improve liquidity and depth in government bonds, known widely in India as G-secs. "We will roll out more measures to improve liquidity and depth of G-sec market," he said.
Rajan also said that the Reserve Bank of India will announce next weeks steps to recognise and resolve financial stresses, including making it more expensive for so-called wilful defaulters to borrow funds. The RBI defines a wilful defaulter as a borrower who is able but unwilling to pay, or one that has diverted loan proceeds for uses other than their initially stated intention. Wilful defaulters can also refer to borrowers that overstate profits in order to obtain a loan. "For wilful defaulters, or the category that we call un-cooperative defaulters, future borrowing will become more expensive," Rajan said.
Global rating agency Standard & Poor's (S&P) today, 11 December 2013, said that India's sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms. S&P has a "negative" outlook on India's sovereign ratings, meaning any downgrade from its current "BBB-minus" would place the country's debt in so-called "junk."
Finance Minister P. Chidambaram today, 11 December 2013, said that the government will not compromise on fiscal prudence and will contain its fiscal deficit and narrow it to 3% of gross domestic product by the fiscal year ending in March 2017. The comments come a day after Fitch Ratings had warned the setback for the Congress party in recent state elections could imperil the fiscal deficit target by tempting the government to have less restraint on spending. The fiscal deficit target for the current fiscal year ending in March 2014 is set at 4.8% of GDP and Chidambaram has repeatedly pledged the country would meet the target. "There will be no compromise on the decision to walk on the path of fiscal prudence and contain the fiscal deficit step by step, year by year, until we the reach the goal of 3% of GDP in 2016/17," Chidambaram said. The finance minister also highlighted the government would do all it can to moderate inflation, given the RBI only has monetary policy as a "blunt tool" to contain rising food prices.
The Asian Development Bank (ADB) on Wednesday kept its growth forecast for India at 4.7% for this year, and sees the country growing at 5.7% in 2014. The Manila-based bank slightly raised its forecast for China this year and the next, aided by the impact of government reforms and better prospects for key trading partners. The bank lifted its 2013 forecast for China to 7.7%, from 7.6% in October. It now sees 2014 growth at 7.5% rather than 7.4%. However, the ADB lowered estimates for Southeast Asia this year and in 2014, in the wake of a strong typhoon in the Philippines and political uncertainties in Thailand. The bank kept its growth forecast for developing Asia at 6% this year and 6.2% next year.
On the domestic political front, the Congress party has decided to suspend from the party the six rebel Seemandhra MPs who moved a no-confidence motion against the UPA government. The party is hoping that the motion will fizzle out if action is taken against the rebel MPs. The government has also ruled out the possibility of early polls if the no-confidence motion gets the support of 50 MPs to be admitted. Six party MPs from Seemandhra region of Andhra Pradesh had pushed a no-confidence motion in Parliament on Tuesday, 10 December 2013, which is backed by the TDP and YSR Congress. However, it was not taken up in Parliament on Tuesday due to the uproar over the issue. In the no-confidence motion, they have mentioned that the UPA government has lost the faith of Seemandhra MPs. The MPs behind the move are L Rajagopal, SPY Reddy, Sabbam Hari, R Sambasivarao, Harshakumar and V Arunkumar.
Earlier, Union Tourism Minister Chiranjeevi had sent his resignation letter to Congress President Sonia Gandhi. The Centre had cleared the Telangana Bill last week. It will be sent to the Andhra Pradesh Assembly seeking its views. The views of the state assembly are not binding on the Centre. It can go ahead with the formation irrespective of what Andhra Pradesh Assembly says.
The Biju Janata Dal (BJD) and Shiv Sena amongst other parties had already said that they will support the motion while Trinamool Congress had said that the government had already lost confidence of the people and there is no need now of any such notice. On the other hand BJP is playing a waiting game and hasn't cleared its stand on the issue. The motion needs the support of 50 MPs to be admitted.
European stocks edged higher on Wednesday, 11 December 2013, as investors weighed the outlook for US monetary stimulus after US lawmakers agreed on a budget deal. Key benchmark indices in UK and France were up 0.02% to 0.25%. Germany's DAX was off 0.08%.
Asian stocks edged lower on Wednesday, 11 December 2013, on speculation a US budget agreement will boost prospects of tapering the Federal Reserve's stimulus program. Key benchmark indices in Taiwan, South Korea, Indoensia, Singapore, China, Japan and Hong Kong were off 0.11% to 1.71%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
Trading in US index futures indicated that the Dow could fall 16 points at the opening bell on Wednesday, 11 December 2013. US stocks fell on Tuesday as investors weighed federal budget negotiations and better-than-estimated economic data to gauge the timing of any Federal Reserve stimulus cuts. The US budget deal, worked out between chief negotiators Senator Patty Murray and Representative Paul Ryan, would set spending at about $1.01 trillion in 2014, higher than the $967 billion required in a 2011 budget accord. A partial shutdown in October lasted for 16 days because lawmakers couldn't agree on how to fund the government.
Meanwhile, the latest data showed job openings in the US climbed to a five-year high in October, indicating employers were confident about demand even as Washington's budget impasse shuttered parts of the federal government. Another report showed wholesale trade sales and inventories increased more than economists forecast.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
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