Post Session: Quick Review

Indian markets extended their uptrend for the third consecutive day, buying seemed returning with benchmarks posting decent gains. Though, the global cues were not that supportive and the rupee too showed sharp depreciation in early deals after the Industrial production contracted significantly by 2.2 percent in the month of June, but markets took heart from the modest decline in retail inflation and indication by the central bank governor that reserve rates should be lowered.

Earlier the market made a cautious start after the US markets ended mostly lower, though the regional peers showed upmove led by the surge in the Japanese market after the yen weakened as report showed country’s machinery orders beat estimates and on buzz of Prime Minister Shinzo Abe considering a corporate-tax cut. Later the positive start of the European markets further boosted the morale of the Indian investors.

Back home, barring the initial hiccups the domestic markets remained firm throughout the trade, though the rupee movement was volatile and in early deals it neared its all time low, however it strengthened later in the day on buzz of some relief from interest rate side, as the Central bank governor Duvvuri Subbarao said that “perhaps” there was a need to reduce the reserves that banks have to set aside via the cash reserve or the statutory liquidity ratios. There was a clamor for rate cut from the India Inc. with IIP contracting for the second month in June. Industry body FICCI said that IIP figures for June are indeed a matter of concern and clearly indicate that supply side bottlenecks and weak consumer demand are weighing down on industrial growth. Government announced last day that the industrial production contracted 2.2 per cent in June. Traders got some support with government stand on reduction of CAD as Finance Minister P Chidambaram said that he would come out with changes in the import duty of gold, silver and other non-essential items later in the day. Sectorally, the day was of rate sensitive realty, banking and auto, which rose from the slumber to post gains of 2-4 percent for the day. However, the consumer durables and metal pocket witnessed some profit taking and ended in red on BSE. IT and Technology sectors that were flying high in early deal on rupee weakness, pared some gains after the domestic currency strengthened. The broader indices too showed good fervor and ended with gain of over a percent. Overall huge short covering was witnessed during the day that led the rally in the markets and the major benchmarks ended around the crucial levels of 5700 (Nifty) and 19200 (Sensex).

The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1430:907, while 150 scrips remained unchanged. (Provisional)

The BSE Sensex gained 279.82 points or 1.48% to settle at 19226.80.The index touched a high and a low of 19243.10 and 18864.81 respectively.  The BSE Mid cap and Small cap indices ended higher by 1.14% and 1.03% respectively. (Provisional)

On the BSE Sectoral front, Realty up by 4.75%, Bankex up by 2.94%, Auto up by 2.59%, Teck up by 1.99% and IT up by 1.96% were the top gainers, while Consumer Durables down by 0.11% and Metal down by 0.07% were the only losers in the space. (Provisional)

Out of the 30 stocks on the Sensex, 25 settled higher, while 5 stocks settled lower. The top gainers on the Sensex were NTPC up by 4.34%, Tata Motors up by 3.99%, Bajaj Auto up by 3.20%, HDFC Bank up by 3.14% and HDFC up by 3.07%. On the flip side,  Hindalco Industries down by 2.83%, Coal India down by 2.19%, ONGC was down by 0.95%, Jindal Steel was down by 0.59% and ITC was down by 0.37% were the top losers on the Sensex. (Provisional)

Meanwhile, paving the way for clearance of held-up pharma proposals, Finance Minister P Chidambaram has said that the government will soon finalise the foreign direct investment (FDI) policy on brownfield pharmaceutical projects. Chidambaram said that the discussion between the Ministry of Commerce, Prime Minister and others regarding the FDI in brownfield pharmaceuticals is likely to take place soon and once the policy is approved, the pharmaceuticals proposals stalled by the Foreign Investment Promotion Board (FIPB) would move forward.

However, the government has expressed concern over the continuing acquisitions of Indian pharma firms by foreign companies, which would pose serious problems in availability of life-saving drugs to consumers in near future. Production of many critical drugs and medicines has been declining in India and the country is already import-dependent for intermediates and vital drugs like penicillin. Following fears that Indians will be denied cheap medicines if multinational continue to buy big companies, the government had made a distinction between greenfield and brownfield projects last year.

At present, India permits 100 per cent FDI in pharmaceutical sector through automatic approval route in the new projects but the foreign investment in the existing pharmaceutical companies are allowed only through FIPB's approval. As per the RBI data, during April 2012 and April 2013, $989 million FDI was received in brownfield investment, and a mere $87.3 million in greenfield projects. Presently, there are too many pharma proposals pending with the FIPB as several global pharma companies are looking to buy stake in existing Indian firms. Meanwhile, the Department of Industrial Policy and Promotion (DIPP) is in the process of finalising its FDI policy on brownfield pharma projects involving transfer of control.

India VIX, a gauge for markets short term expectation of volatility lost 9.49% at 19.26 from its previous close of 21.28 on Monday. (Provisional)

The CNX Nifty gained 86.90 points or 1.55% to settle at 5,699.30. The index touched high and low of 5,704.75 and 5,578.90 respectively. Out of the 50 stocks on the Nifty, 42 ended in the green, while 8 ended in the red.

The major gainers of the Nifty were DLF up 9.34%, Ranbaxy up by 8.86%, Axis Bank up by 7.77%, JP Associate up by 5.25% and IDFC up by 4.48%. The key losers were Hindalco Industries down by 3.24%, Coal India down by 2.15%, Ambuja Cements down by 1.99%, Cairn down by 1.08% and ONGC down by 0.95%.(Provisional)

Most of the European markets were trading in green with, France’s CAC 40 up by 0.31%, Germany’s DAX up by 0.75% and the United Kingdom’s FTSE 100 up by 0.54%.

All the Asian markets concluded Tuesday’s trade in green. Japanese stocks jumped on a weakened yen and a report that Prime Minister Shinzo Abe was reviewing a possible corporate tax rate cut in a bid to stoke growth and offset the impact of a national sales tax hike, while Hong Kong shares rose for a fourth straight day amid optimism over the Chinese economy. China shares gained for the third straight day, helped by strength in the financial sector. Chinese property shares added to their recent gains, following report that the eastern city of Wenzhou has become the first to ease restrictions on real-estate purchases. South Korea’s Seoul Composite ended at a one-week high, as large cap firms rallied on bargain hunting. Foreign investors have also bought 162.6 billion won ($146.05 million) worth of shares, snapping a five-session selling streak, to buttress the market.

Japan’s economic growth slowed more than expected in the second quarter, offering ammunition to those seeking to temper a planned sales-tax increase even as government debt has risen past 1,000 trillion yen ($10.4 trillion). But as the sharp slowdown was driven by an unexpected fall in corporate capital spending while personal spending remained hardy, the data may encourage Japanese Prime Minister Shinzo Abe to proceed with the tax hike and soften the pain by offering tax breaks to boost business investment. Separately, Japan’s core machinery orders, seen as a leading indicator of capital spending, fell 2.7% in June. The result beat expectations for a 7.1% drop. Core machinery orders, which exclude volatile purchases for power-generation equipment and ships, can nonetheless vary wildly from month to month: They rose 10.5% in May, fell 8.8% in April, and rose 14.2% in March.

Meanwhile, new home purchases fell to a 25-week low in Shanghai last week as a record heat wave, inadequate supply and continuously high prices jointly crimped buying sentiment. The sales of new homes, excluding government-subsidized affordable housing, dropped 22 percent from the previous seven-day period to 149,100 square meters, the lowest weekly volume registered since mid February. Indonesia Finance Minister Chatib Basri stated that the government is making efforts to boost consumption in order to keep the country’s economic growth above 6% this year. According to Chatib, expenditures related to household consumption dominate the GDP, and they grew by 55.44% in the first half of this year. Gross Capital Formation grew by 32.68%, government consumption by 8.63%, exports by 23.15% and import 25.72%.