Market snaps three-day winning streak

Key benchmark indices registered small losses after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged after a policy review. The barometer index, the S&P BSE Sensex, fell 97.41 points or 0.35% to settle at 28,085.16. The Nifty 50 index dropped 33.10 points or 0.38% to settle at 8,678.25. The Sensex managed to settle above the psychological 28,000 mark after alternately moving above and below that mark after falling below the mark in early afternoon trade. The RBI's decision to keep the repo rate unchanged was in line with market expectations. Key indices snapped three-day winning streak today, 9 August 2016. With the lone exception of the BSE Consumer Durables index, all the other sectoral indices on BSE registered losses.

The Sensex fell 97.41 points or 0.35% to settle at 28,085.16, its lowest closing level since 5 August 2016. The index lost 225.80 points or 0.8% at the day's low of 27,956.77. The index rose 107.39 points or 0.38% at the day's high of 28,289.96, its highest level since 10 August 2015.

The Nifty dropped 33.10 points or 0.38% to settle at 8,678.25, its lowest closing level since 4 August 2016. The index fell 73.15 points or 0.83% at the day's low of 8,638.20. The index rose 17 points or 0.2% at the day's high of 8,728.35, its highest level since 16 April 2015.

The market breadth indicating the overall health of the market was negative. On BSE, 1,572 shares fell and 1,182 shares rose. A total of 133 shares were unchanged. The BSE Mid-Cap index shed 0.35%. The fall in this index matched with the Sensex's decline in percentage terms. The BSE Small-Cap index lost 0.45%. The fall in this index was higher than the Sensex's decline in percentage terms.

The total turnover on BSE amounted to Rs 3522 crore, lower than turnover of Rs 3742.64 crore registered during the previous trading session.

With the lone exception of the BSE Consumer Durables index, all the other sectoral indices on BSE registered losses. The S&P BSE Telecom index (down 1.15%), the S&P BSE Basic Materials index (down 0.82%), the S&P BSE Capital Goods index (down 0.36%), the S&P BSE Finance index (down 0.38%), the S&P BSE FMCG index (down 0.58%), the S&P BSE Oil & Gas index (down 0.88%), the S&P BSE Metal index (down 0.69%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.44%), the S&P BSE Auto index (down 0.57%), and the S&P BSE Healthcare index (down 0.71%) underperformed the Sensex.

The S&P BSE Bankex (down 0.01%), the S&P BSE Teck index (down 0.09%), the S&P BSE IT index (down 0.02%), the S&P BSE Power index (down 0.2%), the S&P BSE Utilities index (down 0.22%), the S&P BSE Realty index (down 0.25%), the S&P BSE Consumer Durables index (up 0.45%), the S&P BSE Energy index (down 0.31%), outperformed the Sensex.

The S&P BSE Industrials index fell 0.35%, matching with Sensex's fall in percentage terms.

In overseas stock markets, European stocks edged higher and most Asian shares rose as US crude oil traded near its highest price in two weeks. US stocks closed lower yesterday, 8 August 2016, after touching record highs as Wall Street caught its breath in the wake of last week's upbeat jobs data.

Adani Ports and Special Economic Zone (APSEZ) edged lower after announcing Q1 June 2016 results. The stock shed 0.79%. The company's consolidated net profit rose 31% to Rs 836 crore on 11% growth in total income to Rs 2084 crore in Q1 June 2016 over Q1 June 2015. The result was announced during market hours today, 9 August 2016.

APSEZ's consolidated cargo volumes increased by 7% to 42.33 million metric tonne (MMT) in Q1 June 2016 over Q1 June 2015.

APSEZ's Chief Executive Officer Karan Adani said that a healthy growth in cargo volumes, operational efficiencies and the company's strategy to increase bulk cargo volumes, other than coal volumes have enabled APSEZ to report all round growth in Q1 June 2016. The growth in bottom line during the quarter was a result of immense focus on controlling borrowing costs along with maintaining high EBITDA (earnings before interest, taxation, depreciation and amortization) margin, Adani said. Going forward, coastal shipping, commissioning of CT4, further growth in volumes at Kattupalli will be the company's focus areas, Adani added.

Pharma stocks declined. Cipla (down 0.65%), Wockhardt (down 0.38%), Ipca Laboratories (down 0.8%), Divis Laboratories (down 1.26%), GlaxoSmithKline Pharmaceuticals (down 0.03%), Dr Reddy's Laboratories (down 0.12%), Aurobindo Pharma (down 1.51%) declined. Glenmark Pharmaceuticals (up 0.8%), Alkem Laboratories (up 1.6%) and Cadila Healthcare (up 1%) rose.

Lupin dropped in volatile trading after announcing strong Q1 June 2016 result. The stock lost 5.48% to Rs 1,600. The stock hit high of Rs 1,729.50 and low of Rs 1,598 in intraday trade. Lupin's consolidated net profit rose 55.12% to Rs 881.95 crore on 39.92% growth in total income to Rs 4522.02 crore in Q1 June 2016 over Q1 June 2015. Nilesh Gupta, Managing Director, Lupin attributed the strong performance to robust growth across all key markets - the United States, India and Japan. The company remains committed to maintaining its growth trajectory given new product launches and approvals, Gupta said.

Sun Pharmaceutical Industries (Sun Pharma) fell 0.62%. The company announced the extension of its Imatinib Mesylate Savings Card Program beyond 31 July 2016. Sun Pharma launched this program as part of the Imatinib Mesylate launch in February 2016. The program is aimed at delivering greater access to the drug by patients who have commercial insurance, but whose out-of-pocket cost may exceed an affordable amount. The announcement was made after market hours yesterday, 8 August 2016.

Idea Cellular dropped after the company announced weak Q1 results. The stock lost 5.92% to Rs 97. The stock hit a low of Rs 96.55 in intraday trade, which is a 52-week low for the counter. The stock hit a high of Rs 99.50 in intraday trade. The company's consolidated net profit slumped 74.21% to Rs 220.41 crore on 7.22% rise in total income to Rs 9552.44 crore in Q1 June 2016 over Q1 June 2015. The result was announced after market hours yesterday, 8 August 2016.

Idea Cellular said it remains confident to tap all emerging opportunities in mobile voice and broadband businesses.

Metal and mining stocks declined as copper prices fell in global commodity markets. Bhushan Steel (down 1.07%), Jindal Steel & Power (down 2.32%), Vedanta (down 2.63%), Tata Steel (down 1.08%), NMDC (down 1.17%), Hindalco Industries (down 1.84%), Steel Authority of India (down 1.77%), JSW Steel (down 1.34%), Hindustan Zinc (down 0.09%) and National Aluminium Company (down 0.81%) edged lower.

High Grade Copper for September 2016 delivery was currently down 0.48% at $2.1545 per pound on the COMEX.

The BSE Metal index had outperformed the market over the past one month till 8 August 2016, rising 13.48% compared with 3.89% rise in the Sensex. The index had also outperformed the market in past one quarter, rising 27.93% as against Sensex's 11.71% rise.

Most PSU bank stocks gained and private bank stocks were mixed after the Reserve Bank of India (RBI) kept the policy repo rate unchanged at 6.5% after a monetary policy review. Among public sector banks, Syndicate Bank (up 0.13%), Punjab National Bank (up 0.98%), Allahabad Bank (up 0.84%), Bank of India (up 0.76%), State Bank of India (SBI) (up 0.67%), Union Bank of India (up 1.01%), Canara Bank (up 1.24%), and United Bank of India (up 1.01%) edged higher. UCO Bank (down 0.58%) and Corporation Bank (down 0.6%) declined.

Among private sector banks, Axis Bank (up 0.5%), ICICI Bank (up 0.04%), and Federal Bank (up 0.39%) gained. HDFC Bank (down 0.2%), Kotak Mahindra Bank (down 0.69%), Yes Bank (down 0.39%), and IndusInd Bank (down 0.58%) edged lower.

HDFC, Max India and Max Financial Services dropped after the boards of HDFC and Max Financial Services approved a scheme of amalgamation between HDFC Standard Life Insurance Company, Max Life Insurance Company and Max Financial Services. HDFC declined 1.81%. Max Financial Services shed 1.61%. Max India dropped 2.29%. The board of directors of HDFC and Max Financial at their board meetings held yesterday, 8 August 2016, approved entering into definitive agreements for amalgamation of businesses between HDFC Standard Life Insurance Company (HDFC Life), Max Life Insurance Company (Max Life) and Max Financial Services (Max Financial) through a composite scheme of arrangement. As a part of the proposed transaction, the life insurance business of Max Financial, currently held through Max Life, would be finally amalgamated with HDFC Life and all other business of Max Financial would be finally amalgamated into Max India. The shares of HDFC Life are proposed to be listed on BSE and the National Stock Exchange of India (NSE) as a consequence of the scheme. Pursuant to the scheme and subject to receipt of the requisite approvals, the shareholding of HDFC in HDFC Life post completion of the proposed transaction would be 42.5% and consequently HDFC Life would cease to be a subsidiary of HDFC.

For the merger of Max Life into Max Financial, shareholders of Max Life will get one share of Max Financial for approximately five shares of Max Life. For the demerger of the life insurance undertaking from Max Financial into HDFC Life, shareholders of Max Financial (post the amalgamation with Max Life), will get 2.33 shares of HDFC Life for each share of Max Financial.

As a part of the proposed transaction, in consideration of the non-compete and non-solicitation obligations undertaken by the promoter group of Max Financial, and for the goodwill attached to the life insurance products and the business of Max Life, the merged insurance entity will be paying a non-compete fee to the promoter group of Max Financial. The term of non-compete would be 4 years since the payment of an upfront fee of Rs 501 crore which will be payable post completion of the proposed transaction. This will be followed by three equal annual installments totaling Rs 349 crore.

Max Financial will seek an upfront approval of its public shareholders (greater than 50% of the votes cast) for payment of the non-compete fee and Max Life will seek consent from its shareholders holding more than 75% stake for the proposed transaction. Separately, Max India will also seek an upfront approval of its public shareholders for the proposed transaction.

HDFC Life has also entered into a trademark license agreement to use the 'Max' brand as part of life products that will transition from Max Life, for seven years post completion of the proposed transaction.

HDFC and Standard Life (Mauritius Holdings) 2006 Ltd. will be the promoters of HDFC Life the merged entity, post completion of the proposed transaction. HDFC will cease to be the holding company of HDFC Life post completion of the proposed transaction and will hold about 42.5% of HDFC Life (based on shareholding as on 30 June 2016).

The proposed transaction brings together two large life insurance players with complementary capabilities. The merged insurance entity on pro-forma basis has a combined market share of 10.8%, in an extremely competitive life insurance market. The product mix of HDFC Life and Max Life complements each other.

The proposed transaction is expected to become effective in the next 12-15 months.

PSU OMCs fell after crude oil prices rose in the previous session. BPCL (down 1.67%), Indian Oil Corporation (IOCL) (down 2.88%) and HPCL (down 3%) edged lower. In the global commodities markets, Brent for October settlement was currently down 7 cents at $45.32 a barrel. The contract had risen $1.12 a barrel or 2.52% to settle at $45.39 a barrel during the previous trading session. Higher crude oil prices could increase under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices. The government has already freed pricing of petrol and diesel.

The Sensex and the Nifty snapped three-day winning streak today, 9 August 2016. The Sensex rose 485.06 points or 1.75% in three sessions to settle at 28,182.57 on 8 August 2016, from a closing of 27,697.51 on 3 August 2016. The Sensex has risen 33.30 points or 0.11% in August 2016 so far (till 9 August 2016). The Sensex has risen 1,967.62 points or 7.53% in calendar year 2016 so far (till 9 August 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 5,590.55 points or 24.85%. The Sensex is off 332.43 points or 1.16% from a 52-week high of 28,417.59 hit on 10 August 2015. The Sensex is off 1,939.58 points or 6.45% from a record high of 30,024.74 hit on 4 March 2015.

Meanwhile, the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 6.5% after a monetary policy review today, 9 August 2016. The RBI also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it will continue to provide liquidity as required and will progressively lower the average ex ante liquidity deficit in the system from 1% of NDTL to a position closer to neutrality. The RBI announced the outcome of the monetary policy review at around 11:00 IST.

The RBI said that the recent sharper-than-anticipated increase in food prices has pushed up the projected trajectory of inflation over the rest of the year. The central bank also said that the strong improvement in sowing on the back of the monsoon's steady progress, along with supply management measures, augers well for the food inflation outlook. According to the central bank, risks to the inflation target of 5% for March 2017 continue to be on the upside.

The RBI has retained the projected GVA growth projection for 2016-17 at 7.6%. According to the central bank, the risk to this projection is evenly balanced. The central bank expects the momentum of growth to be quickened by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the disbursement of pay, pension and arrears following the implementation of the 7th CPC's award. The passage of the Goods and Services Tax (GST) Bill augurs well for the growing political consensus for economic reforms. While timely implementation of GST will be challenging, its implementation will raise returns on investment across much of the economy and also strengthen government finances over the medium-term, according to the central bank.

The RBI said that the stance of monetary policy remains accommodative and will continue to emphasise the adequate provision of liquidity. According to the central bank, easy liquidity conditions are already prompting banks to modestly transmit past policy rate cuts through their MCLRs (Marginal Cost of Funds based Lending Rate) and pro-active liquidity management should facilitate more pass-through.

Meanwhile, the amended goods and services tax (GST) constitutional amendment bill was passed by the Lok Sabha yesterday, 8 August 2016. The bill was passed by the Rajya Sabha last week. Prime Minister Narendra Modi in Lok Sabha said that with GST, the government intends to bring uniformity in taxation. Most of the things that can impact consumer inflation have been kept out of the ambit of GST, Modi said. He was intervening during the debate in the Lok Sabha on the GST Bill yesterday, 8 August 2016. The government plans to implement the nationwide GST from 1 April 2017. The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.

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