Market spurts on energy reforms, state election results

The government's announcement at the weekend of deregulation of diesel prices and increase in gas prices sent key benchmark indices surging. Investors also cheered a strong showing of the Bharatiya Janata Party (BJP) in assembly election in Maharashtra and Haryana. The barometer index, the S&P BSE Sensex, was provisionally up 316.51 points or 1.21% at 26,425.04. The market breadth indicating overall health of the market was positive. The BSE Mid-Cap index was up 1.12%. The deregulation of diesel prices will reduce the government's fuel subsidy burden. Meanwhile, as a result of the gas price hike, the government will get additional revenue of approximately Rs 3800 crore per annum on account of higher royalty, higher profit petroleum and higher taxes.

Meanwhile, the sharp cut in diesel price announced by oil marketing companies on Saturday, 18 October 2014, is expected to bring down freight rates. This could reduce consumer price inflation and provide room for the Reserve Bank of India (RBI) to cut interest rates. Diesel is the main fuel for transporters and directly affects the retail price of items ranging from foodstuffs to white goods that are transported across cities.

Shares of oil and gas firms rose after the government deregulated diesel and raised gas prices on Saturday, 18 October 2014. Banks stocks rose across the board as a sharp cut in diesel price is expected to bring down freight rates which in turn could reduce consumer price inflation. Jindal Steel & Power tumbled after the Central Bureau of Investigations (CBI) registered a fresh case against the company for alleged irregularities in coal block allocation.

On the political front, the Bharatiya Janata Party (BJP) on Sunday, 19 October 2014, created history in Haryana by securing a clear majority on its own for the first time and is set to form the government in state. For the first time, the BJP emerged with a clear mandate in Haryana, winning 47 seats in the 90-member assembly with a 33.2% vote share. The party emerged as the single largest party in Maharashtra and is set to form the government in state. In Maharashtra, the BJP won 122 seats in the 288-member assembly, falling well short of the 145 seats required for a simple majority. Its ally Rashtriya Samaj Paksha won one. The NCP, which won 41 seats, said it will offer BJP "outside support" to form a stable government in the state, leaving the former BJP ally and runner up Shiv Sena high and dry. The Shiv Sena won 63 seats. Shiv Sena Chief Uddhav Thackeray said after the election results that nobody from the BJP has approached his party for support, and his party would not approach it with any proposal.

BJP's strong showing in the two assembly polls will help it progress toward greater influence in the upper house of the parliament, where it is in a minority. State elections are important for control of the Rajya Sabha, or the upper house of parliament, where representation is based on seats in local assemblies. While the BJP controls the lower house, or Lok Sabha, after winning India's strongest mandate in 30 years, it is in a minority in Rajya Sabha.

The results of the assembly elections for Maharashtra and Haryana were announced yesterday, 19 October 2014. The polls for the assembly election in these two states were held on 15 October 2014.

Earlier, key indices had hit their highest level in almost a week at the onset of the trading session after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices.

In overseas markets, European stocks dropped on worse-than-estimated financial results. Asian stocks rose after solid US data and earnings calmed tumult in global financial markets and reassured investors worried about the health of the world economy.

Brent crude edged lower in volatile trade.

In the foreign exchange market, the rupee edged higher against the dollar after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices.

The S&P BSE Sensex was provisionally up 313.91 points or 1.2% to 26,422.44. The index jumped 409.37 points at the day's high of 26,517.90 in mid-morning trade, its highest level since 14 October 2014. The index rose 291.31 points at the day's low of 26,399.84 in early trade.

The CNX Nifty was provisionally up 99.70 points or 1.28% at 7,879.40. The index hit a high of 7,905.95 in intraday trade, its highest level since 14 October 2014. The index hit a low of 7,867.05 in intraday trade.

The BSE Mid-Cap index was up 103.90 points or 1.12% at 9,376.39. The BSE Small-Cap index was up 49.48 points or 0.48% at 10,363.45. Both theses indices underperformed the Sensex.

The market breadth indicating the overall health of the market was positive. On BSE, 1,627 shares rose while 1,211 shares declined. A total of 113 shares were unchanged.

The total turnover on BSE amounted to Rs 3390 crore, higher than turnover of Rs 3095.99 crore on Friday, 17 October 2014.

Among the 30 Sensex shares, 25 rose and the remaining shares fell.

Hindustan Zinc rose 3.02% to Rs 163.80 after net profit rose 33.12% to Rs 2183.52 crore on 17.59% increase in total income to Rs 4499.03 crore in Q2 September 2014 over Q2 September 2013. The result was announced during trading hours today, 20 October 2014.

Exide Industries fell 3%. The company's net profit rose 6.01% to Rs 125.76 crore on 23.29% growth in total income to Rs 1770.20 crore in Q2 September 2014 over Q2 September 2013. The result was announced at fag end of market hours. Exide Industries' MD & CEO, Mr P K Kataky said that though no significant improvement in demand for automotive and industrial battery was experienced during the quarter, encouraging growth in the company's automotive and motorcycle replacement battery sales as well as improved telecom business and UPS battery business resulted in improved performance during the quarter. The company continues to focus on cost control and technology upgradation to improve profit, he said.

Shares of oil and gas firms rose after the government deregulated diesel and raised gas prices on Saturday, 18 October 2014. Shares of public sector oil marketing companies (PSU OMCs) surged after the government deregulated diesel prices. HPCL (up 7.71%), BPCL (up 4.67%) and Indian Oil Corporation (up 4.09%), surged.

Soon after the government on Saturday, 18 October 2014, announced deregulation of diesel prices, PSU OMCs cut diesel prices. Indian Oil Corporation (IOCL) on Saturday, 18 October 2014, said it has cut diesel price by Rs 3.37/litre (including VAT) in Delhi with corresponding decrease in other price in other states from the midnight of 18/19 October 2014. The movement of prices in international oil market and rupee dollar exchange rate shall continue to be closely monitored and developing trends of the market will be reflected in future price changes in diesel prices, IOCL said.

Shares of gas production and exploration firms rose after the government on Saturday, 18 October 2014, approved the new domestic gas pricing policy. ONGC (up 5.81%) and Oil India (up 1.61%). Shares of state-run gas transmission and distribution major GAIL (India) were up 2.3%.

As per the new formula, gas price will increase to $5.61 per million BTU (MMBTU) from exitisting $4.2 MMBTU with effect from 1 November 2014. Gas prices will be revised every six months. The next revision will be due on 1 April 2015.

Among private sector oil and gas companies, Cairn India was up 0.27%.

Reliance Industries (RIL) was down 0.28%. Since RIL's block KG-DWN-98-3 is under arbitration, the gas price revision will not be applicable for this block. Hence the operator would be paid the exiting price of $4.2/MMBTU till the shortfall quantity of gas is made good, a government statement said. It is proposed that the difference between the revised price and the present price ($4.2 per million BTU) would be credited to the gas pool account maintained by GAIL (India) and whether the amount so collected is payable or not, to the contractors of this block, would be dependent on the outcome of the award of pending arbitration and any attendant legal proceedings, the government said.

DLF edged higher after filing an appeal against a Securities and Exchange Board of India (Sebi) order banning the company and six top executives from capital markets. The stock rose 3.03%. Copies of the appeal were served on Securities and Exchange Board of India (Sebi) on Friday, 17 October 2014, and the Sebi Appellate Tribunal has fixed the hearing of the appeal on 22 October 2014, DLF said in a statement. Early last week, Sebi issued an order barring DLF and its chairman K.P. Singh along with five other company executives from accessing India's capital markets for three years. The order is related to lapses in disclosures made at time of the company's IPO in 2007.

JSW Energy rose 3%. Increase in local gas prices is expected to benefit coal-based power producers. Power plants based on imported coal charge tariffs that are around 20% cheaper than gas plants. JSW Energy is estimated to operate nearly half of its capacity on imported coal.

Banks stocks rose across the board as a sharp cut in diesel price is expected to bring down freight rates which in turn could reduce consumer price inflation. Lower consumer price inflation could provide room for the Reserve Bank of India (RBI) to cut interest rates.

Soon after the government on Saturday, 18 October 2014, announced deregulation of diesel prices, PSU OMCs cut diesel prices. Indian Oil Corporation (IOCL) on Saturday, 18 October 2014, said it has cut diesel price by Rs 3.37/litre (including VAT) in Delhi with corresponding decrease in other price in other states from the midnight of 18/19 October 2014. The movement of prices in international oil market and rupee dollar exchange rate shall continue to be closely monitored and developing trends of the market will be reflected in future price changes in diesel prices, IOCL said.

Among state-run banks, Punjab National Bank (up 3.95%), IDBI Bank (up 3.49%), Union Bank of India (up 2.44%), State Bank of India (up 1.77%), Bank of India (up 0.91%), Canara Bank (up 0.64%) and Bank of Baroda (up 0.02%) edged higher.

Among private sector banks, Yes Bank (up 2.68%), ICICI Bank (up 1.89%), Federal Bank (up 1.73%), HDFC Bank (up 0.83%), IndusInd Bank (up 0.70%) and Kotak Mahindra Bank (up 0.27%), edged higher.

Axis Bank rose 3.94%. The bank's net profit rose 18.23% to Rs 1610.71 crore on 12.53% growth in total income to Rs 10549.97 crore in Q2 September 2014 over Q2 September 2013. The result was announced after market hours on Friday, 17 October 2014. The bank's ratio of gross non-performing assets (NPAs) to gross advances stood at 1.34% as on 30 September 2014, unchanged from 30 June 2014, but higher than 1.19% as on 30 September 2013. The ratio of net NPAs to net advances stood at 0.44% as on 30 September 2014, unchanged from 30 June 2014, but higher than 0.37% as on 30 September 2013.

The Reserve Bank of India (RBI) is scheduled to undertake its fifth bi-monthly monetary policy review on 2 December 2014. The annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India eased to 6.46% in September 2014, from 7.73% in August 2014.

Jindal Steel & Power (JSPL) slumped 8.91% at Rs 134.90. The stock hit a 52-week low of Rs 128 in intraday trade today, 20 October 2014. The Central Bureau of Investigation (CBI) on Sunday, 19 October 2014, registered a case under sections 120-B r/w 409 & 420 of IPC and 13 (1) (c) & 13 (1) (d) of PC Act against JSPL and some public servants. The instant case is the outcome of PE registered on 26 September 2012 looking into allocations of coal blocks during the period 1993-2005. It was alleged that 'Gare Palma IV/1' coal block was allocated to JSPL for its sponge iron plant (SIP). It is alleged that the company proposed and entered into irregular mining lease covering area much beyond the coordinates stipulated by Ministry of Coal, resorted to excess coal mining, irregular regularization of area beyond coordinates and excess coal mined, sale of raw coal, sale of coal fines and middling to other than specified end users, irregular permission for consumption of coal in expansion of kilns and other related allegations. CBI said that searches were conducted yesterday, 19 October 2014, at four locations in Raigarh District, Chhattisgarh which led a recovery of incriminating documents. Further investigation is in progress.

Meanwhile, provisional data released by the stock exchanges after trading hours on Friday, 17 October 2014, showed that foreign portfolio investors (FPIs) sold shares worth a net Rs 1430.03 crore on that day.

In the foreign exchange market, the rupee edged higher against the dollar after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices. The partially convertible rupee was hovering at 61.29, compared with its close of 61.44 during the previous trading session.

Brent crude edged lower in volatile trade. Brent for December settlement was off 5 cents at $86.21 a barrel. The contract had risen 34 cents to end at $86.16 a barrel on Friday, 17 October 2014.

European stocks dropped today, 20 October 2014, on worse-than-estimated financial results. Key indices in Germany, France and UK were off 0.57% to 0.85%.

Italian industrial orders rose, for the first time in four months, in August, on the back of both foreign and domestic demand. Industrial orders gained 1.5% on the month, reversing an equal drop in July, national statistics institute Istat said Monday, using seasonally adjusted data. Orders were down 3.2% on the year in unadjusted terms, Istat added.

The August monthly climb was led by a 2.5% increase in foreign orders while domestic bookings added 0.7%. Orders are a proxy for future industrial output, a key metric for Italy, which has Europe's second-largest manufacturing sector.

Germany's producer prices index continued its fall on an annual basis in September 2014, as energy costs kept it under downward pressure, while it remained steady in on the month earlier, official data showed today, 20 October 2014. Producer prices were unchanged on the month and fell 1% on the year, data from the country's statistics office Destatis showed today, 20 October 2014. In August 2014, producer prices fell 0.1% on the month and declined 0.8% on the year.

Japanese stocks led rally in Asian stocks today, 20 October 2014, after solid US data and earnings reassured investors worried about the health of the world economy. Key benchmark indices in Japan, China, Taiwan, South Korea Hong Kong, Singapore and Indonesia were up 0.20% to 3.98%.

Japanese stocks surged after a weekend media report that Japan's $1.2 trillion Government Pension Investment Fund, the world's largest public pension fund, is working out plans to increase its portfolio allocation devoted to domestic stocks to around 25%.

Meanwhile, in China, the country's central bank -- the People's Bank of China -- is reportedly planning the injection of about 200 billion yuan ($32.7 billion) into some national and regional lenders. The National Bureau of Statistics is due to announce data on third-quarter economic growth and September industrial production, retail sales and fixed-asset investment tomorrow, 21 October 2014. The Communist Party starts its plenary session today, 20 October 2014.

In Hong Kong, protest leaders and government officials pledged to move ahead with talks aimed at ending more than three weeks of pro-democracy demonstrations, even after a weekend of violent clashes that injured dozens. Talks between the two sides are set to begin tomorrow afternoon and will go ahead amid rising tensions in the streets. The clashes this weekend were concentrated in Mong Kok, one of the three sites occupied by demonstrators, after police cleared protesters from a key intersection on Friday, 17 October 2014, prompting thousands to pour back into the neighborhood to take back the streets.

Trading in US index futures indicated that the Dow could gain 38 points at the opening bell today, 20 October 2014. US stocks rallied on Friday, 17 October 2014, as earnings beat estimates, consumer confidence reached a seven-year high and investors speculated that central banks will add more economic stimulus.

US consumer confidence unexpectedly rose in October to the highest level in seven years, showing a brightening in Americans' moods as gas prices drop and the labor market gains traction. The Thomson Reuters/University of Michigan preliminary sentiment index for this month increased to 86.4, the strongest since July 2007.

The Federal Reserve may want to extend its bond-buying program beyond October to keep its policy options open given falling US inflation expectations, Federal Reserve Bank of St. Louis President James Bullard said on 16 October 2014.

The Federal Open Market Committee (FOMC) next undertakes a monetary policy review at a two-day meeting on 28-29 October 2014.

Powered by Capital Market - Live News