BSE Small-Cap, Mid-Cap indices outshine Sensex

Volatility continued as key benchmark indices once again trimmed gains in mid-morning trade. The barometer index, the S&P BSE Sensex, was up 162.21 points or 0.65%, off about 80 points from the day's high and up close to 30 points from the day's low. The market breadth indicating the overall health of the market was strong. The BSE Mid-Cap index rose nearly 1.3%. The BSE Small-Cap index rose more than 1.3%. Both these indices outperformed the Sensex. The market sentiment was boosted by data showing that foreign funds made substantial purchases of Indian stocks on Thursday, 5 June 2014.

Capital goods stocks extended recent gains with L&T scaling record high. Crompton Greaves rose after the company bagged a Rs 244-crore contract from Spanish multinational electric utility company Iberdrola to supply over 1 million ZIV single smart meters in a year.

The market edged higher in early trade after the European Central Bank on Thursday, 5 June 2014, cut its benchmark interest rates to unprecedented lows, spurring speculation the decision will accelerate capital inflows. A bout of volatility was witnessed as key benchmark indices pared gains after extending initial gains and hitting fresh intraday high in morning trade. The Sensex and the 50-unit CNX Nifty, both, hit three-week high. Volatility continued as key benchmark indices once again trimmed gains gains in mid-morning trade.

The market sentiment was boosted by data showing that foreign funds made substantial purchases of Indian stocks on Thursday, 5 June 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 1368.97 crore on Thursday, 5 June 2014, as per provisional data from the stock exchanges.

At 11:20 IST, the S&P BSE Sensex was up 162.21 points or 0.65% to 25,181.72. The index surged 239.47 points at the day's high of 25,258.98 in morning trade, its highest level since 16 May 2014. The index rose 134.41 points at the day's low of 25,153.92 in morning trade.

The CNX Nifty was up 37.30 points or 0.5% to 7,511.40. The index hit a high of 7,535.10 in intraday trade, its highest level since 16 May 2014. The index hit a low of 7,506.85 in intraday trade.

The BSE Mid-Cap index was up 113.77 points or 1.27% to 9,069.68. The BSE Small-Cap index was up 129.76 points or 1.35% to 9,753.68. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong, with more than two gainers for every loser on BSE. On BSE, 1,851 shares rose and 675 shares fell. A total of 103 shares were unchanged.

Reliance Industries (RIL) (up 2.01%), GAIL (India) (up 4.05%) and Hero MotoCorp (up 2.24%) edged higher from the Sensex pack.

Capital goods stocks extended recent gains. Bharat Heavy Electricals (Bhel) (up 0.06%), BEML (up 6.81%), ABB (India) (up 1.93%), and Thermax (up 0.44%) gained.

Crompton Greaves rose after the company bagged a Rs 244-crore contract from Spanish multinational electric utility company Iberdrola to supply over 1 million ZIV single smart meters in a year. The stock was up 0.89%. The order comprises single-phase and three-phase meters and reiterates CG's growing dominance in the global smart grid sector.

A significant advantage for CG in the Spanish market has been the regulatory framework in the country which makes it mandatory that 70 percent of the analog meters are replaced by 2016 and 100 percent by 2018. ZIV as the world's main PRIME meter supplier, is uniquely positioned to benefit from this regulation, by collaborating closely with the distribution utilities and assisting them in achieving the challenge on time.

The announcement was made after market hours on Thursday, 5 June 2014.

L&T rose 0.22% to Rs 1,683.15, with the stock extending recent gains triggered by the company's strong Q4 result. The stock hit record high of Rs 1,700 in intraday trade. The company's net profit surged 69% to Rs 2723.48 crore on 11% growth in gross revenue to Rs 20229 crore in Q4 March 2014 over Q4 March 2013. The strong growth in bottom-line can be explained by strong operating performance and higher extraordinary income. The result was announced after market hours on Friday, 30 May 2014.

L&T Finance Holdings dropped 0.97% to Rs 76.50.

Securities and Exchange Board of India (Sebi) on Thursday, 5 June 2014, issued an order restraining Factorial Master Fund, which is domiciled in Cayman Islands and operates as a hedge fund, from dealing in the securities in Indian securities market, including through Offshore Derivative Instruments and/or accessing the Indian securities market, directly or indirectly, in any manner whatsoever till further orders on allegations of insider trading in shares of L&T Finance Holdings.

Sebi said on 13 March 2014, abnormal movement was observed in the share price of L&T Finance Holdings (LTFH) and, therefore, Sebi undertook preliminary examination in the matter. Sebi said it observed that on 13 March 2014, i.e. the day on which the shares of LTFH were included in the futures & options (F&O) segment, the price of the March expiry futures contract of LTFH in the F&O segment opened at Rs 87.80, and dropped by more than 10% to close at Rs 75.55 on the same day. In cash segment, the scrip had opened at Rs 86, rose to Rs 88 and then dropped by more than 10% to close at Rs 79.20.

Sebi observed that just before 13 March 2014, Factorial was involved as potential investor in the market gauging exercise undertaken by Credit Suisse Securities (India) with regard to Offer for Sale (OFS) of LTFH shares by promoter L&T. Credit Suisse was appointed by L&T as Seller Broker in the OFS.

Sebi observed that Factorial built substantial short position in LTFH (84.15% of the market wide open interest) in the futures & options segment on 13 March 2014 at average price of Rs 80.94 ahead of announcement of the OFS of shares of LTFH at a floor price of Rs 70 on the same day in the late evening. Sebi also observed that Factorial had taken such an aggressive short position without any existing exposure in the shares or derivatives of LTFH. Sebi said five different and independent FIIs were used to build the short position in LTHF. Sebi also said nearly the same number of shares were covered in cash segment the next day by subscribing to the OFS at a price of Rs 71.50, locking a profit of approximately Rs 20 crore.

Sebi said that Factorial may file its reply, if any, to Sebi on this order within 21 days from the date of receipt of this order, if it so desires, avail an opportunity of personal hearing on a date, place and time fixed in that regard by Securities and Exchange Board of India.

In the foreign exchange market, the rupee edged higher against the dollar after the European Central Bank on Thursday, 5 June 2014, cut its benchmark interest rates to unprecedented lows, spurring speculation the decision will accelerate capital inflows. The partially convertible rupee was hovering at 59.21, compared with its close of 59.33/34 on Thursday, 5 June 2014.

Finance Minister Shri Arun Jaitley said on Thursday that social sector groups can play an important role in taking positive advantage of demographic dividend. Jaitley said that the government may have been implementing the various social sector programmes but there is need to upgrade them and their delivery mechanisms and also provide adequate interventions within the fiscal space available. He said that there is need to ensure that the benefits of these programmes reach the poor and marginalized and other weaker sections of the society. The Finance Minister was making the Opening Remarks while holding his second Pre-Budget Consultation with the representatives of the Social Sector related Groups.

Various suggestions were received during the meeting from the representatives of the different Social Sector Groups. Major suggestions include higher budgetary allocation in General Budget 2014-15 for 2.68 crore disabled people in the country, simplification of procedures for seeking grants and their timely release, helping in making NGOs especially welfare NGOs self-sustainable and financially viable by giving certain tax concessions and allowing creation of corpus fund among others.

Jaitley is expected to table Union Budget for 2014-15 in Lok Sabha by mid-July 2014. An interim budget was presented by P. Chidambaram in February this year. Essentially, in the nature of a vote on account, the interim budget was intended to get Parliament approval for expenditure to be incurred during the first few months of fiscal year 2014-15 due to Lok Sabha elections.

The Reserve Bank of India (RBI) next undertakes monetary policy review on 5 August 2014. The RBI kept its main lending rate -- repo rate -- unchanged at 8% after a monetary policy review on 3 June 2014. The central bank at that time signaled it would ease monetary policy if inflation slows faster than targeted.

Asian stocks edged lower in choppy trade on Friday, 6 June 2014, before US payrolls data due later in the global day. Key benchmark indices in Taiwan, Hong Kong and China were off 0.14% to 0.65%. Key benchmark indices in Indonesia and Singapore were up 0.34% to 0.49%.

Trading in US index futures indicated that the Dow could gain 31 points at the opening bell on Friday, 6 June 2014. US stocks rose to records on Thursday as European Central Bank stimulus boosted optimism in the global economy before US jobs report.

The Fed said in its Beige Book business survey that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. The survey, released two weeks before policy makers meet in Washington, supports Chair Janet Yellen's view that the economy is rebounding from a 1% contraction in the first quarter caused largely by harsh winter weather.

Claims for American unemployment benefits climbed by a more-than-estimated 312,000 in the week to May 31, data yesterday showed.

The influential US nonfarm payroll data for May 2014 is due for release today, 6 June 2014.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.

In Europe, the European Central Bank cut interest rates to record lows on Thursday, launched a series of measures to pump money into the sluggish euro zone economy, and pledged to do more if needed to fight off the risk of Japan-like deflation. The ECB lowered the deposit rate to sub zero -- negative 0.1%. It cut its main refinancing rate to 0.15%, and the marginal lending rate - or emergency borrowing rate - to 0.40%.

For the first time, the ECB will charge banks for parking funds at the central bank overnight in an attempt to force them to lend to small- and medium-sized businesses. The measures were also aimed at easing pressure on the strong euro, which is threatening economic recovery and importing disinflation.

ECB President Mario Draghi outlined a four-year 400 billion euro ($544.86 billion) scheme giving banks that have been holding back credit due to looming stress tests an incentive to increase lending to businesses in the euro zone. "Now we are in a completely different world," Draghi said, citing "low inflation, a weak recovery and weak monetary and credit dynamics". The package, adopted unanimously, was aimed at increasing lending to the "real economy", he said.

Other steps included extending the duration of unlimited cheap liquidity for euro zone banks, injecting about 170 billion euros by stopping tenders that withdrew funds spent on past government bond purchases, and preparing for possible future purchases of asset-backed securities to support small business. "If required, we will act swiftly with further monetary policy easing," he said, adding that the policy-setting Governing Council was unanimous in its commitment to use unconventional instruments if needed "to further address risks of too prolonged a period of low inflation".

UK interest rates have been held at the record low of 0.5% for another month by the Bank of England on Thursday. The size of the Bank's bond-buying economic stimulus programme was also kept unchanged at 375 billion. The decision was widely expected, despite continued signs of strength in the UK economy.

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