Market edges higher amid initial volatility

Key benchmark indices edged higher amid initial volatility. At 9:30 IST, the barometer index, the S&P BSE Sensex was up 35.18 points or 0.13% at 26,878.21. The Nifty 50 index was currently up 7.20 points or 0.09% at 8,228. Realty and capital goods stocks gained.

In overseas markets, Asian stocks were mixed. US stocks fell on Friday, 3 June 2016 after data showed US employers last month added the fewest jobs in more than five years. Federal Reserve Governor Lael Brainard on Friday, 3 June 2016 called for the central bank to wait for more data before lifting interest rates as she said the jobs report shows the labor market has slowed.

Closer home, the market breadth indicating the overall health of the market was strong. On BSE, 811 shares rose and 449 shares declined. A total of 73 shares were unchanged. The BSE Mid-Cap index was currently up 0.09%, underperforming the Sensex. The BSE Small-Cap index was currently up 0.31%, outperforming the Sensex.

Car maker, Maruti Suzuki India (MSIL) dropped 0.07%. The company after market hours on Friday, 3 June 2016 reported a 1.57% growth in its total production at 1.29 lakh units in May 2016 over May 2015.

Housing Development Finance Corporation gained after the company announced that the board of directors of HDFC ERGO General Insurance Company (HDFC ERGO), a non listed subsidiary of the company, has approved the acquisition of a 100% stake in L&T General Insurance Company for an aggregate consideration of Rs 551 crore. The announcement was made after market hours on Friday, 3 June 2016.

The board of HDFC ERGO also approved the plan to merge the two companies subject to all regulatory approvals. The acquisition would help HDFC ERGO improve its market position. HDFC ERGO expects significant cost synergies arising out of business, technology optimization and rationalization of offices.

HDFC ERGO, a 51:49 joint venture between housing major HDFC and ERGO International, Germany (part of Munich Re Group), is the 4th largest private sector general insurer in India and offers all lines of general insurance products including motor, health, personal accident, home, fire, marine, aviation, liability, crop insurance etc.

In a separate announcement after market hours on Friday, 3 June 2016, L&T said that it entered into a share and purchase agreement with HDFC ERGO General Insurance Company (HDFC ERGO) for sale of its entire stake in L&T General Insurance Company (LTGI), a wholly owned subsidiary of L&T, for a total consideration of Rs 551 crore.

The transaction envisages share sale by the company to HDFC ERGO and subsequent merger of HDFC ERGO and LTGI. The transaction is subject to various approvals, including approval of Insurance Regulatory and Development Authority of India and the Bombay High Court.

Upon closing, the L&T Group would exit from the general insurance and health insurance business. LTGI gross earned premium income during the year 2015-2016 was Rs 483 crore, constituting around 0.5% of the company's consolidated revenue for the year 2015-2016 and reported a net worth of Rs 142 crore as on 31 March 2016. The share sale is part of the company's strategy of exiting from its non-core activity.

Shares of L&T rose 0.58%.

Index heavyweight Reliance Industries (RIL) rose after the company after market hours on Friday, 3 June 2016, announced that it has restarted its purified terephthalic acid (PTA) plants, and is ramping up production to full capacity at Dahej. The stock gained 0.37%. The PTA plants had been shut for a brief period owing to increased water salinity. RIL said it ensured PTA supplies to downstream customers from its Hazira and Patalganga plants during the brief shutdown at Dahej. Now, the customers will be getting PTA from all three locations, RIL said.

Sun Pharmaceutical Industries gained after the company announced that as a part of its manufacturing consolidation in the US, one of its wholly owned subsidiaries has entered into an agreement with Frontida BioPharm, Inc (Frontida) for divestment of its two oral solid dosage manufacturing facilities located at Philadelphia, PA, and Aurora, IL both in the US, along with 15 related pharmaceutical products. The stock rose 0.47%.

In connection with the transaction, Frontida has agreed to continue manufacturing certain products for Sun Pharma at these facilities on a contract basis for a predetermined period. It has also agreed to offer employment to all production, quality and administrative personnel at the sites. During the divestment process, Sun Pharma was cognizant about ensuring the continued supply of quality products to patients and protecting the interests of its employees working in these units, the company said. The impact of this development on Sun Pharma's consolidated financials and operations is not material, the company said. Sun Pharma did not disclose other details of the transaction. The announcement was made on Saturday, 4 June 2016.

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