Thursday, September 26, 2013

Market hits fresh intraday high

Key benchmark indices extended gains and hit fresh intraday high in mid-afternoon trade as index heavyweight ITC reversed intraday losses. The barometer index, the S&P BSE Sensex, was up 103.21 points or 0.52%, off about 20 points from the day\'s high and up close to 130 points from the day\'s low. The market breadth, indicating the overall health of the market, was positive. Gains in rupee and bond prices underpinned sentiment on the bourses. Bond prices rose after the Reserve Bank of India on Wednesday, 25 September 2013, said it would ensure that adequate cash is available in the banking system to meet demand for loans, as liquidity conditions have become tight following last week\'s surprise interest-rate increase.

Capital goods pivotals extended recent gains. L&T rose after the company\'s construction division won new orders worth Rs 2683 crore during September 2013. IT stocks were mixed. Wipro rose ahead of its inclusion in 50-unit CNX Nifty index tomorrow, 27 September 2013. Coal India extended intraday gains.

A bout of initial volatility was witnessed as key benchmark indices alternately swung between gains and losses. Volatility continued as key benchmark indices regained positive terrain after slipping into the red after hitting fresh intraday high in morning trade. The Sensex hovered in green after hitting fresh intraday high in mid-morning trade. Key benchmark indices retained positive zone after hitting fresh intraday high in early afternoon trade. Key benchmark indices pared gains in afternoon trade as European stocks edged lower in early trade there. The market regained strength in mid-afternoon trade.

The market may remain volatile during the last one hour or so of trade as traders roll over positions in the futures & options (F&O) segment from the near month September 2013 series to October 2013 series. The September 2013 F&O contracts expire today, 26 September 2013.

At 14:20 IST, the S&P BSE Sensex was up 103.21 points or 0.52% to 19,959.45. The index jumped 124.08 points at the day\'s high of 19,980.32 in mid-afternoon trade, its highest level since 24 September 2013. The index declined 29.25 points at the day\'s low of 19,826.99 in early trade.

The CNX Nifty was up 34.05 points or 0.58% to 5,907.90. The index hit a high of 5,912.40 in intraday trade, its highest level since 24 September 2013. The index hit a low of 5,864.10 in intraday trade.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,147 shares rose and 1,031 shares dropped. A total of 152 shares were unchanged.

Among the 30-share Sensex pack, 17 stocks rose and rest of them fell. Sun Pharmaceutical Industries (up 2.46%), Sesa Sterlite (up 2.01%) and HDFC (up 1.56%), edged higher from the Sensex pack.

Index heavyweight and cigarette maker ITC rose 0.93% to Rs 348.25, with the stock reversing intraday losses. The stock came off the day\'s low of Rs 341.05.

Coal India rose 3.14%, with the stock extending intraday gains.

Capital goods pivotals extended recent gains. Bhel rose 3.68%, with the stock extending intraday gain.

L&T rose 0.65% after the company said its construction division has won new orders worth Rs 2683 crore during September 2013 across various business segments in the domestic and international markets.

IT stocks were mixed. HCL Technologies was off 0.96%. The company announced on Wednesday, 25 September 2013, that its wholly-owned subsidiary, HCL America Inc (HCLA), has won a multi-year, multi-million dollar deal with the WyCAN Consortium, a group of states including Arizona, Colorado, North Dakota and Wyoming. HCLA will enable WyCAN to significantly improve services for its Unemployment Insurance (UI) modernization program, which is one of the largest such programs in the US providing critical income to millions of unemployed Americans.

The deal will give the consortium states a configurable, intuitive Government-to-Citizen (G2C) system aimed at consolidating and replacing existing legacy systems to allow easier adaptation to changing legislation, HCL Technologies said in a statement.

Infosys gained 0.19%. TCS declined 0.18%.

Wipro rose ahead of its inclusion in 50-unit CNX Nifty index tomorrow, 27 September 2013. The stock was up 2.18%, with the stock extending intraday gain. The IT major replaces Reliance Infrastructure in Nifty.

State-run Oriental Bank of Commerce rose 0.16 %. The bank has raised the interest rate on term deposits in the maturity bucket 2 years to less than 3 years to 9% from 8.75% with effect from 25 September 2013.

Bank of India gained 1.93%. The bank said during market hours today, 26 September 2013, that it has completed the allotment of Rs 1000 crore BASEL-III compliant unsecured, Tier-II Bonds of 10 years at a coupon rate of 9.8% per annum on private placement basis to Life Insurance Corporation of India. The issue has been rated AAA by CRISlL.

Aarti Drugs slumped 6.25% after the company said it has recently received a warning letter from USFDA. The company said that its USFDA site at Tarapur was inspected by the US drug regulator in October 2012. Subsequently, the company submitted its response to USFDA. The company said that it has recently received a warning letter from USFDA pertaining to some of the company\'s responses to the USFDA inspection which need to be further corrected. The company further said that it has already submitted an initial response to USFDA in this regard. Aarti Drugs said that it has hired a US based FDA consultant to further review the company\'s responses and send another detailed response by 15 October 2013. The company said that it is putting efforts to further enhance the quality systems to avoid such things in future. Aarti Drugs continues to cooperate with FDA to resolve the issues at the earliest, it said.

Bond prices rose after the Reserve Bank of India on Wednesday, 25 September 2013, said that it is closely and continuously monitoring liquidity conditions in the banking system and will take actions as appropriate, including open market operations, to ensure that adequate liquidity is available to support the flow of credit to productive sectors of the economy. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.7078%, lower than its close of 8.7862% on Wednesday, 25 September 2013. Bond prices and bond yields are inversely related.

The RBI said that liquidity conditions in the banking system have been tightening due to uncertainties around the government borrowing programme for the second half of 2013-14 as well as the prospective effects of banks\' half-yearly account closure, the seasonal pick-up in credit demand, festival-related demand for currency and sluggish deposit growth. The RBI last week began a calibrated unwinding of the exceptional measures undertaken since July so as to restore normalcy to financial flows. Currently, the RBI is injecting about Rs 1.5 lakh crore into the system on a daily basis through the liquidity adjustment facility (LAF), the export credit refinance facility (ECR) and the marginal standing facility (MSF) taken together, the RBI said.

In the foreign exchange market, the rupee edged higher against the dollar after the RBI eased norms for providing swaps to banks that are borrowing funds overseas. The partially convertible rupee was hovering at 62.18, compared with its close of 62.44/45 on Wednesday, 25 September 2013.

The Reserve Bank of India on Wednesday relaxed the minimum maturity tenure for banks\' foreign currency borrowings\' to one year from three years, in order to use the central bank\'s swap facility which was set up to support the ailing rupee. The RBI, however, said the relaxation is only applicable while the swap window remains open until November 30. After that, banks\' overseas borrowings above 50% of their Tier I capital will have to be of minimum maturity of three years, it said. The RBI set up the swap window for banks earlier this month saying they can borrow overseas up to 100% of their Tier 1 capital level, although any loan over 50% of that level must be for at least three years. Under the plan, the central bank will offer to exchange foreign currency for rupees at a rate below market rates for banks who raise these funds through overseas borrowings.

The report of the Dr. Raghuram Rajan Committee for Evolving a Composite Development Index of States has been submitted to the Union Finance Minister P. Chidambaram. The committee was asked to suggest methods for identifying backwardness of states using a variety of criteria and also to recommend how the criteria may be reflected in future planning and devolution of funds from the Central Government to the states. The Finance Minister said in a statement that the committee has proposed a general method for allocating funds from the Centre to the States based on both a state\'s development needs as well as its development performance. The committee has recommended that each state may get a fixed basic allocation of 0.3% of overall funds, to which will be added its share stemming from need and performance to get its overall share.

Chidamabaram further said that the committee has come-up with a Multi dimensional Index of backwardness based on per capita consumption as measured by the NSSO, the poverty ratio, and a number of other measures which correspond to the multi dimensional approach to defining poverty outlined in the Twelfth Plan. The committee has recommended that states that score 0.6 and above on the index may be classified as \"Least Developed\"; states that score below 0.6 and above 0.4 may be classified as \"Less Developed\"; and states that score below 0.4 may be classified as \"Relatively Developed\".

Chidamabaram also stated in his statement that the committee has observed that the demand for funds and special attention of different states will be more than adequately met by the twin recommendations of the basic allocation of 0.3% of overall funds to each state and the categorisation of states that score 0.6 and above as \"Least Developed\" states. According to the committee, these two recommendations, along with the allocation methodology, effectively subsume what is now \"Special Category\". Using the index, the committee has identified the \"Least Developed\" states as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar Pradesh.

Chidamabaram further informed that the Prime Minister has directed that the recommendations of the committee may be examined and necessary action in this behalf may be taken. The Ministry of Finance, Department of Economic Affairs has been asked to examine the report and take necessary action, the Finance Minister added.

European stocks edged lower on Thursday, 26 September 2013, as investors awaited US jobs and housing data, amid worries over budget wrangling and debt-ceiling negotiations in Washington. Key benchmark indices in UK, France and Germany were off 0.05% to 0.35%.

Asian stocks were mixed on Thursday. Key benchmark indices in China, Hong Kong and Taiwan were off 0.36% to 1.94%. Key benchmark indices in Indonesia, Japan, and South Korea rose 0.46% to 1.22%.

China\'s local markets will be shut from 1 to 7 October 2013 for National Day holidays.

Trading in US index futures indicated that the Dow could gain 31 points at the opening bell on Thursday, 26 September 2013. US stocks dropped on Wednesday, with the S&P 500 index recording its longest decline since December, as a possible government shutdown overrode better-than-forecast economic reports. The Senate voted 100-0 on Wednesday to pass a stopgap spending measure, with Democrats planning to get rid of language from the House version that would remove funding of the 2010 Affordable Care Act. Without an accord to hasten Senate consideration of the bill, a vote on its passage could come as late as Sunday, giving the House one day to move before spending authority lapses. Separately, Treasury Secretary Jacob Lew told legislators that he\'ll run out of options to avoid hitting or surpassing the debt limit by Oct. 17 or sooner.

A report from the Commerce Department showed that new-home sales rose last month after an unexpected drop in July. Another data showed that orders for US durable goods unexpectedly bounced back last month on the back of demand for autos.

Federal Reserve Bank of Richmond President Jeffrey Lacker, a critic of the Fed\'s third round of asset purchases, said on Thursday that the central bank will face several risks when it pursues its exit strategy from recent unconventional policies. Speaking at the Swedbank Economic Outlook Seminar in Stockholm, Lacker said that the \"combination of a very large balance sheet and forward guidance raises the potential of a timing error when it becomes appropriate to raise rates, as well as the consequences of such an error.\" As part of the third round of quantitative easing, the Fed buys $40 billion a month of mortgage-backed securities, but those purchases endangers the bank\'s independence Lacker said. \"By purchasing MBS, the Fed has targeted a specific private-sector asset and engaged in credit policy. Such actions could invite pleading from other sectors and entangle the Fed in distributional politics and threaten its independence,\" he said in the speech. Lacker isn\'t a voting member of the Fed\'s policy-making committee this year.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus amid concerns about the strength of the economic recovery.
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