ITC tumbles on reports Maharashtra government bans sale of loose cigarettes

Intraday recovery witnessed in afternoon trade proved short-lived, with key benchmark indices once again losing ground in mid-afternoon trade. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty were currently trading with losses of more than 1.4% each. The Sensex was currently trading below the psychological 27,000 mark, having alternately moved above and below that level in intraday trade so far. Earlier during the day, the Sensex fell below the 27,000 mark when it extended initial slide. The broad market depicted weakness. There were more than four losers against every gainer on BSE.

Increase in global bond yields and forecast of deficient rains this year from the India Meteorological Department hit sentiment adversely on the domestic bourses. The market sentiment was also hit adversely after a survey showed contraction in India's services sector in May 2015. The Sensex was currently off 403.36 points or 1.48% at 26,785.02. The BSE Small-Cap index was off 2.75%. The BSE Mid-Cap index was off 2.15%. The decline in both these indices was higher than the Sensex's decline in percentage terms. A number of stocks which are the constituents of the BSE Small-Cap index were off 2% to 20%.

Index heavyweight and cigarette major ITC slumped on reports of Maharashtra government's decision to ban sale of loose cigarettes in the state. Power generation stocks slumped. Capital goods shares also edged lower.

A decline in global sovereign bonds has fuelled concerns about profit-taking in other asset classes. Higher debt yields also make equities more expensive relative to bonds. Bond yields in Australia, New Zealand and Japan edged higher today, 3 June 2015, after as a spike in US debt yields overnight. German government bond yields edged higher today, 3 June 2015, extending their sharp rise during the previous trading session. Yields rise as bond prices fall. Increase in bond yields weighed on Asian stocks.

Foreign portfolio investors sold shares worth a net Rs 594.14 crore yesterday, 2 June 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 271.64 crore yesterday, 2 June 2015, as per provisional data released by the stock exchanges.

Earlier, the Sensex hit its lowest levels in almost four weeks and the 50-unit CNX Nifty hit 3-week low in early afternoon trade as these two indices extended their intraday slide.

In overseas markets, European stocks edged higher. Asian shares edged lower as global bond yields climbed to the highest levels this year. US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.

At 14:15 IST, the S&P BSE Sensex was down 403.36 points or 1.48% at 26,785.02. The index fell 490.12 points at the day's low of 26,698.26 in early afternoon trade, its lowest level since 7 May 2015. The index rose 87.84 points at the day's high of 27,276.22 in early trade.

The 50-unit CNX Nifty was down 119.05 points or 1.45% at 8,117.40. The index hit a low of 8,094.15 in intraday trade, its lowest level since 13 May 2015. The index hit a high of 8,236.70 in intraday trade.

The BSE Mid-Cap index was down 225.65 points or 2.15% at 10,248.86. The BSE Small-Cap index was down 303.94 points or 2.75% at 10,743.24. The decline in both these indices was higher than the Sensex's decline in percentage terms.

The market breadth indicating the overall health of the market was quite weak, with more than four losers against every gainer on BSE. 2,170 shares fell and 456 shares rose. A total of 72 shares were unchanged.

Index heavyweight and cigarette major ITC was off 4.52% to Rs 304.50 on reports of Maharashtra government's decision to ban sale of loose cigarettes. The state government has also banned chewing tobacco in public places, say reports. The public notification on the same is expected to be issued in couple of days.

According to reports, cigarette makers may reportedly introduce smaller pack sizes to cushion impact of the policy change. About 70% of sales from cigarette business for ITC come from lose cigarettes.

Meanwhile, shares of ITC turned ex-dividend today, 3 June 2015, for dividend of Rs 6.25 per share for the year ended 31 March 2015.

Maruti Suzuki India fell 1.44% to Rs 3,774.95. The company announced during trading hours today that its production rose 4.58% to 1.27 lakh units in May 2015 over May 2014. In a separate announcement during trading hours, the company said that it has introduced the diesel variant of its popular model Celerio. Celerio Diesel offers 27.62 kilometer per litre, making it India's most fuel efficient car. This also marks the global launch of DDiS 125, the first diesel engine designed and developed by Suzuki Motor Corporation. It carries forward the DDiS attributes of swiftness, driveability and compactness, offered in the highly successful diesel vehicles of Maruti Suzuki.

Maruti Suzuki said its share in the lower hatchback has shot up to 71% from 61% within a year of Celerio's launch.

Power generation stocks slumped. Adani Power (down 14.76%), Reliance Power (down 13.39%), Jaiprakash Power Ventures (down 12.31%), Reliance Infrastructure (down 8.55%), GMR Infrastructure (down 7.49%), JSW Energy (down 4.79%), NHPC (down 3.81%), CESC (down 3.16%), Tata Power (down 2.6%) and Torrent Power (down 1.54%), edged lower. NTPC was up 0.62%.

Capital goods shares also edged lower. Suzlon Energy (down 8.71%), Praj Industries (down 7%), Punj Lloyd (down 6.68%), Bharat Electronics (down 5.83%), Jindal Saw (down 5.18%), ABB India (down 3.58%), Lakshmi Machine Works (down 2.93%), AIA Engineering (down 2.79%), Bharat Heavy Electricals (down 2.07%), Siemens (down 1.83%), Alstom T&D India (down 1.6%), Pipavav Defence and Offshore Engineering Company (down 1.49%), BEML (down 1.23%), Crompton Greaves (down 1.23%), Thermax (down 0.55%) and Havells India (down 0.15%), edged lower. ALSTOM India (up 0.63%) and SKF India (up 2.24%), edged higher.

L&T was off 0.74% at Rs 1,660. The stock hit a high of Rs 1,686.65 and a low of Rs 1,649.35 so far during the day. L&T during market hours today, 3 June 2015, said that it has bagged a contract valued at Rs 468 crore from the Ministry of Defence for the design and construction of a floating dock for the Indian Navy (FDN). The floating dock is expected to significantly enhance the support infrastructure of the navy for docking of warships and submarines for repairs and refits, L&T said in a statement.

Meanwhile, the India Meteorological Department (IMD) said in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. Quantitatively, the season rainfall for the country as a whole is likely to be 88% of the long period average (LPA) with a model error of plus/minus 4%. In April 2015, the IMD had forecast this year's monsoon rainfall to be 93% of the long period average with a model error of plus/minus 5%.

The latest forecast from IMD-IITM coupled model indicates El Nino conditions are likely to strengthen further and reach to moderate strength during the monsoon season. There is about 90% probability of El Nino conditions to continue during the southwest monsoon season, the IMD said.

The IMD said that there is 66% probability of deficient rains, 27% probability of below normal rains and 7% probability of normal rains this year.

The season rainfall is likely to be 85% of LPA over North-West India, 90% of LPA over Central India, 92% of LPA over South Peninsula, and 90% of LPA over North-East India, all with a model error of plus/minus 8%, the IMD said. The monthly rainfall over the country as whole is likely to be 92% of its LPA during July and 90% of LPA during August both with a model error of plus/minus 9%.

The annual monsoon is critical for the country's agriculture. Scarce seasonal rains can adversely affect agriculture production and push prices up in India, because a considerable part of the country's farmland is dependent on the rains for irrigation.

The IMD's downgrade of the monsoon forecast came on a day when Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan said that the central bank will wait for more certainty on the monsoon outturn before further monetary policy action after cutting the benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review yesterday, 2 June 2015.

The onset of monsoon in Kerala has been delayed. The IMD in its daily monsoon report yesterday, 2 June 2015, said that conditions are becoming favourable for the onset of southwest monsoon over Kerala around 5 June, four days after the scheduled onset date of 1 June.

Meanwhile, India's services sector fell back into contraction in May 2015 after experiencing growth for six successive months, the outcome of a survey from Markit Economics today, 3 June 2015, showed. The seasonally adjusted HSBC India Services Business Activity Index declined to 49.6 in May 2015, from 52.4 in April 2015. Although indicative of falling output, the latest reading pointed to a marginal rate of contraction. Leading services activity to decline was a reduction in incoming new work, the first since April 2014. Competitive pressures and natural disasters were blamed for the decrease in new business inflows. Service providers' optimism was maintained during May, as improved marketing strategies and better economic conditions are expected to lead to business activity growth over the course of the next year.

Pollyanna De Lima, Economist at Markit said in a statement that India's services sector is expected to see a rebound in coming months. An upturn in employment combined with improved business confidence further add to the evidence that prospects may brighten, he said.

In global commodity markets, Brent crude oil futures edged lower today, 3 June 2015. Brent for July settlement was off 35 cents at $65.14 a barrel. The contract had risen 61 cents or 0.94% to settle at $65.49 a barrel during the previous trading session.

Oil cartel OPEC is expected to keep its production target of 30 million barrels of oil per day unchanged at a meeting scheduled in Vienna on Friday, 5 June 2015. The OPEC meeting is being closely watched for clues about the organization's next moves.

In overseas markets, European stocks edged higher today, 3 June 2015. Key indices in Germany and France were up 0.11% to 0.41%. UK's FTSE 100 was down 0.03%.

Greece's creditors reportedly reached a consensus on the terms of a proposed deal to put to the Greek government. However, Athens has yet to agree on the terms. The country has to repay 300 million euros ($329 million) to the International Monetary Fund (IMF) by Friday, 5 June 2015. Greece is scheduled to repay a total of euro 1.6 billion ($1.76 billion) to the International Monetary Fund (IMF) over the period between June 5-19.

Meanwhile, the European Central Bank (ECB) is widely expected to reaffirm its commitment to its quantitative easing scheme after a monetary policy meeting today, 3 June 2015.

Asian shares edged lower today, 3 June 2015, as global bond yields climbed to the highest levels this year. Key benchmark indices in China, South Korea, Taiwan, Japan and Indonesia were down by 0.01% to 1.50%. Key benchmark indices in Hong Kong and Singapore and were up by 0.27% to 0.69%.

The HSBC China Services Purchasing Managers' Index rose to an eight-month high of 53.5 in May, HSBC Holdings PLC said today, with both new orders and employment in the sector rising to multi-year highs. Activity outside the nation's factories during the month also came in above April's 52.9 reading. A reading above 50 indicates month-over-month expansion.

US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.

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