Market drifts lower amid initial volatility

High volatility was witnessed as key benchmark indices edged lower after swinging wildly between the positive and negative terrain in early trade. Weakness in Asian stocks and rupee hitting fresh record low below 65 against dollar dampened sentiment. The S&P BSE Sensex was down 39.26 points or 0.22%, up about 105 points from the day's low and off close to 95 points from the day's high. The market breadth, indicating the overall health of the market, was positive. Asian stocks dropped after minutes of the Federal Reserve's last meeting signaled the US central bank was on course to pare bond purchases this year.

Sesa Goa and Sterlite Industries, both, gained as Sesa Goa will replace Sterlite Industries in the 30-share benchmark S&P BSE Sensex from 27 August 2013 as Sterlite will be merged into Sesa Goa. Asian Paints rose after its wholly owned subsidiary, Asian Paints (International) (APIL), on 21 August 2013 acquired additional 25.72% stake in Berger International, Singapore (BIL), an indirect subsidiary of Asian Paints, through an off-market transaction. NMDC gained after a wholly owned subsidiary of NMDC signed a Memorandum of Understanding (MoU) with IL&FS Energy Development Company (IEDCL), a subsidiary of IL&FS, to set up a 500 megawatts (2x250 MW) thermal power plant under joint venture at Gonda in Uttar Pradesh.

The rupee hit record low below 65 against the dollar after minutes of the Federal Reserve's last meeting signaled the US central bank was on course to pare bond purchases this year. The rupee was hovering at 64.94, sharply lower than its close of 64.11/12 on Wednesday, 20 August 2013.

The rupee has slumped in the past few days on worries that India would struggle to fund its current-account deficit when the US central bank pulls back stimulus to the US economy.

Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit.

Foreign institutional investors (FIIs) sold shares worth a net Rs 792.11 crore on Wednesday, 21 August 2013, as per provisional data from the stock exchanges.

At 9:30 IST, the S&P BSE Sensex was down 39.26 points or 0.22% to 17,866.55. The index rose 45.67 points at the day's high of 17,951.58 in early trade. The index fell 146.32 points at the day's low of 17,759.59 in early trade, its lowest level since 11 September 2012.

The CNX Nifty was down 1.45 points or 0.03% to 5,301.10. The index hit a high of 5,310.80 in intraday trade. The index hit a low of 5,254.05 in intraday trade, its lowest level since 5 October 2012.

The market breadth, indicating the overall health of the market, was positive. On BSE, 377 shares rose and 328 shares fell. A total of 25 shares were unchanged.

Among the 30-share Sensex pack, 19 stocks rose and rest of them fell. Tata Steel (up 3.79%), Hindalco Industries (up 2.84%) and Bhel (up 2.77%), edged higher.

Sesa Goa rose 3.71%. Sterlite Industries gained 2.71%. Sesa Goa will replace Sterlite Industries in the 30-share benchmark S&P BSE Sensex from 27 August 2013. The move comes in the wake of the scheme of amalgamation between the two Vedanta group firms whereby Sterlite Industries has been merged with Sesa Goa. Trading in Sterlite will stop from 27 August 2013.

Sesa Goa on 19 August 2013 said that the merger of Sterlite Energy (SEL) with Sesa Goa and the demerger of the aluminium business undertaking of Vedanta Aluminium (VAL) into Sesa Goa pursuant to the Scheme of Amalgamation and Arrangement have become effective. The company's wholly owned subsidiary, Bloom Fountain, would acquire 38.68% stake in Cairn India together with the associated debt, effective 26 August 2013. Further, the company has also approved the acquisition of 1,215 MW thermal power plants situated at Jharsuguda and 90 MW co-generation facility at Lanjigarh, from its wholly owned subsidiary, VAL, on a going concern basis.

Sesa Goa (Sesa Goa) and Sterlite Industries (India) (Sterlite) in a joint statement issued on 17 August 2013, said that the merger of Sterlite and The Madras Aluminium Company (MALCO) with Sesa Goa and transfer of MALCO power plant to Vedanta Aluminium (VAL) pursuant to the Scheme of amalgamation and arrangement amongst Sterlite, MALCO, Sterlite Energy (SEL), VAL and Sesa Goa and their respective Shareholders and Creditors (Composite Scheme) and the Scheme of Amalgamation of Ekaterina (Ekaterina) with Sesa Goa and their respective Shareholders and Creditors (Ekaterina Scheme) has become effective. The companies have fixed 28 August 2013 as the record date for determining the list of the shareholders of Sterlite, MALCO and Ekaterina to whom the equity shares of the Sesa Goa will be allotted as per terms of the scheme as already announced on 25 February 2012.

As per the swap ratio, every equity shareholder of Sterlite holding 5 equity shares of the company will be entitled to be issued 3 shares of the Sesa Goa.

Asian Paints rose 0.49% after the company said after market hours on Wednesday, 21 August 2013, that Asian Paints (International) (APIL), a wholly owned subsidiary of the company has on 21 August 2013 acquired additional 25.72% stake in Berger International, Singapore (BIL), an indirect subsidiary of Asian Paints, through an off-market transaction. As a result, the shareholding of APIL has increased to 75.82% in BIL. Further, APIL has also announced its intention to come out with a voluntary unconditional cash offer to acquire the balance 24.18% shares of BIL with an intention to make BIL a wholly owned subsidiary of APIL and delist from Singapore Exchange Securities Trading (SGX-ST).

NMDC rose 1.46% after the company after market hours on Wednesday, 21 August 2013, said a wholly owned subsidiary of NMDC namely NMDC Power (NPL) has signed a Memorandum of Understanding (MoU) with IL&FS Energy Development Company (IEDCL), a subsidiary of IL&FS, to set up a 500 megawatts (2x250 MW) thermal power plant under joint venture at Gonda in Uttar Pradesh. The project is estimated to be completed within three years at an approximate cost of around Rs 3000 crore.

Asian stocks dropped on Thursday, 22 August 2013, after minutes of the Federal Reserve's last meeting signaled the US central bank was on course to pare bond purchases this year. Key benchmark indices in Singapore, Hong Kong, Japan, Taiwan, Indonesia and South Korea were down by 0.46% to 1.73%.

China's Shanghai Composite rose 0.09% after a report showed China's manufacturing unexpectedly expanded this month. A Chinese manufacturing index rose in August from the lowest level in 11 months, adding to signs the world's second-biggest economy is strengthening after a two-quarter slowdown. The preliminary reading of 50.1 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July.

US stocks dropped on Wednesday, 21 August 2013, as investors weighed the Federal Reserve's signaling that it remained on course to curb its monthly bond purchases by the end of the year.

Federal Reserve policy makers were broadly comfortable with Chairman Ben S. Bernanke's plan to start reducing bond buying later this year if the economy improves, with a few saying tapering might be needed soon, minutes of their last meeting showed on Wednesday. Almost all committee members agreed that a change in the purchase program was not yet appropriate, and a few said it might soon be time to slow somewhat the pace of purchases as outlined in that plan, according to the record of the Federal Open Market Committee's July 30-31 gathering released Wednesday in Washington. A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases, the minutes show. Almost all participants confirmed that they were broadly comfortable with the committee moderating the pace of its securities purchases later this year.

The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.

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