A bout of volatility was witnessed as key benchmark indices trimmed losses soon after hitting fresh intraday low in afternoon trade. The barometer index, the S&P BSE Sensex, was down 71.58 points or 0.34%, up close to 80 points from the day's low and off about 75 points from the day's high. The market breadth, indicating the overall health of the market, was weak. Weakness in European and Asian stocks dampened sentiment on the domestic bourses. In the foreign exchange market, the rupee edged lower against the dollar.
Auto stocks edged lower. Shares of two wheeler makers also rose.
European and Asian stocks edged lower on Tuesday, 10 December 2013, on heightened speculation that the Federal Reserve may be about to start cutting back on its stimulus program. 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. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
The market edged lower in early trade. Key benchmark indices hovered in negative terrain in morning trade. The Sensex extended losses and hit fresh intraday low in mid-morning trade. Weakness continued on the bourses in early afternoon trade. A bout of volatility was witnessed as key benchmark indices trimmed losses soon after hitting fresh intraday low in afternoon trade.
Foreign institutional investors (FIIs) bought shares worth a net Rs 2473.17 crore on Monday, 9 December 2013, as per provisional data from the stock exchanges.
At 14:20 IST, the S&P BSE Sensex was down 71.58 points or 0.34% to 21,254.84. The index fell 151.34 points at the day's low of 21,175.08 in afternoon trade, its lowest level since 6 December 2013. The index rose 1.33 points at the day's high of 21,327.75 in early trade.
The CNX Nifty was down 33.30 points or 0.52% to 6,330.60. The index hit a low of 6,307.55 in intraday trade, its lowest level since 6 December 2013. The index hit a high of 6,362.25 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,477 shares dropped and 862 shares rose. A total of 159 shares were unchanged.
From the 30-share Sensex pack, 21 stocks fell and rest rose. NTPC (down 11.26%), Bhel (down 3.79%) and L&T (down 3.41%) edged lower.
Auto stocks edged lower. Tata Motors (down 0.32%), M&M (down 0.91%), and Maruti Suzuki India (down 0.75%) edged lower.
Shares of two wheeler makers rose. Bajaj Auto (up 0.5%) and Hero MotoCorp (up 1%) gained.
Oil & Natural Gas Corporation (ONGC) dropped 2.74% with the stock extending intraday losses. The stock turned ex-dividend today, 10 December 2013, for interim dividend of Rs 5 per share for the year ending 31 March 2014 (FY 2013-14).
ONGC today, 10 December 2013, said that 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 today, 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.
Global credit rating agency Fitch Ratings today, 10 December 2013, said that the setback faced by the Congress Party in state elections could potentially raise political pressure on the government's near-term fiscal goals. The government has articulated a strong commitment to fiscal consolidation. But this commitment may be tested further as the deficit-reduction goals are stretched, and a steeper political struggle to pull in more votes may hinder the full scope of expenditure restraint, the rating agency said. The state of public finances forms an important driver of India's sovereign ratings. Amidst the monetary authorities' anti-inflation policy bias, appropriate fiscal policies have a greater chance of shoring up the country's savings-investment imbalance, Fitch said. This could lower the current account deficit, and help alleviate another key pressure point for the credit profile, the rating agency said.
The central government has stressed its strong commitment to lowering its fiscal deficit to 4.8% of GDP by the end of the fiscal year (ending in March 2014). Moreover, in the last fiscal year it also demonstrated its ability to take difficult measures to trim expenditure towards the end of the fiscal year, and to meet its headline deficit target, Fitch said. But the state election results might be read as increasing the risk of policy slippage, the rating agency said. An evident anti-incumbency trend against the Congress could mean an increasing likelihood of political pressure to limit expenditure cut-backs, Fitch said. This would help support economic recovery in the run-up to the national elections which must be held by May 2014. But it may raise some doubt about the government's ability to meet its stated near-term fiscal goals, the rating agency said.
The government's fiscal deficit has already reached 84% of its stated target in the first seven months of the fiscal year, versus 72% over the same period a year ago. This implies a weaker headline - and operating - fiscal position, Fitch said. Unless revenues surprise significantly on the upside in the remaining months of the fiscal year, it also implies the need for greater expenditure restraint than last year, to meet the deficit target.
At the same time, significant fiscal policy slippage is not a certainty. There is not much time before general elections for a shift in policies to gain more traction with voters. "We will assess the campaign pledges, and the implications for the post-election fiscal outlook", the rating agency said in a statement. A more definitive medium-term fiscal framework will only emerge once the next government is formed, Fitch said.
In the foreign exchange market, the rupee edged lower against the dollar on heightened speculation that the Federal Reserve may be about to start cutting back on its stimulus program. The partially convertible rupee was hovering at 61.19, compared with its close of 61.13/14 on Monday, 9 December 2013.
Bond prices rose after Brent oil futures slumped on Monday, 9 December 2013, following news of weaker German industrial output. The yield on the most traded and new 10-year federal paper -- 8.83% GS 2023 -- was hovering at 8.8441%, lower than its close of 8.9041% on Monday, 9 December 2013. Bond yield and bond prices are inversely related.
On the political front, the Congress has retained power in Mizoram with a landslide victory in the Assembly elections held on 25 November 2013, the results of which were declared on Monday, 9 December 2013. In the elections to the 40-member Assembly, the Congress has won 33 of the 39 seats declared so far. Chief Electoral Officer of Mizoram Ashwani Kumar told to media reporters that the results of Lawngtlai East constituency would be announced only on December 12 as re-polling would be held on December 11 in one polling booth where the Electronic Voting Machine failed.
Earlier, the Congress had performed poorly with the Bharatiya Janata Party (BJP) securing emphatic victory in assembly elections in Madhya Pradesh and Rajasthan, a narrower one in Chhattisgarh and emerged as the single largest party in a hung Delhi assembly, giving the party and its leader Narendra Modi confidence and momentum going into next year's general elections. Counting of votes for assembly elections in Rajasthan, Delhi, Madhya Pradesh and Chattisgarh took place on Sunday, 8 December 2013.
On macro front, 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.
European stocks edged lower on Tuesday, 10 December 2013, after China's industrial production trailed estimates. Key benchmark indices in France, Germany and UK shed 0.04% to 0.09%.
Asian stocks edged lower on Tuesday, 10 December 2013, on heightened speculation that the Federal Reserve may be about to start cutting back on its stimulus program. Key benchmark indices in Taiwan, South Korea, Singapore, China, Japan and Hong Kong were off 0.01% to 0.88%. Indonesia's Jakarta Composite rose 1.34%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
A series of Chinese data released on Tuesday, 10 December 2013, painted a mixed picture of the economy, with industry moderating its strong growth but retail sales picking up their already robust pace. Industrial output for November rose 10% from a year earlier, slowing from the previous month's 10.3% increase. Retail sales rose 13.7% in November, accelerating from October's 13.3% rise. Tuesday's data also included urban fixed-asset investment, which was up an annualized 19.9% in the January-November period, slowing from a 20.1% gain for January-October. Fixed-asset investment, which is reported on a year-to-date basis, is seen as an indicator of construction activity in China.
Trading in US index futures indicated that the Dow could rise 6 points at the opening bell on Tuesday, 10 December 2013. US stocks eked out small gains on Monday, 9 December 2013, as investors weighed the timing of any cuts to Federal Reserve monetary support amid budget negotiations in Washington.
Fed Bank of St. Louis President James Bullard on Monday, 9 December 2013, said that the odds of a reduction to Fed's bond purchases have risen along with gains in the labor market. Any cut should be small because inflation is slow, he said. "A small taper might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014. Should inflation not return toward target, the committee could pause tapering at subsequent meetings," said Bullard, who votes on policy this year but not next.
Dallas Fed President Richard Fisher said that tapering needs to begin "as soon as possible" in an economy that doesn't need any more monetary stimulus. Fisher votes on policy next year.
Investors are keeping a close watch on economic data in the United States as the Federal Reserve monitors the pace of recovery to gauge when it will begin to reduce monetary stimulus for the US economy, which has been aimed at encouraging growth. 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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