PSU OMCs slide on buzz Govt once again hikes excise duty on petrol and diesel

A bout of volatility was witnessed as key benchmark indices languished in red in mid-afternoon trade after media reports suggested that the government has once again raised excise duty on petrol and diesel. Shares of PSU OMCs dropped. The barometer index, the S&P BSE Sensex, was currently off 81.66 points or 0.29% at 28,477.96. BSE Small-Cap and Mid-Cap indices, were, both in green. The market breadth indicating the overall health of the market was negative.

The Reserve Bank of India (RBI) after a monetary policy review today, 2 December 2014, indicated that monetary policy easing is likely early next year, including outside the policy review cycle, provided the current inflation momentum and changes in inflationary expectations continue and if fiscal developments are encouraging. The RBI kept its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review and said that risks to the January 2016 target of 6% appear evenly balanced under the current policy stance.

Metal and mining stocks rose on speculation China's central bank will ease monetary policy.

Foreign portfolio investors (FPIs) sold shares worth a net Rs 12.36 crore yesterday, 1 December 2014, as per provisional data.

In overseas markets, European stocks edged amid an increase in mergers-and-acquisitions activity and as investors weighed stimulus prospects before the European Central Bank policy meeting on Thursday, 4 December 2014. Chinese stocks led gains in Asian stocks as investors bet China's central bank will ease monetary policy.

In the foreign exchange market, the rupee strengthened past 62 against the dollar.

Brent crude oil futures were currently unchanged for the day after staging a rebound from five-year low yesterday, 1 December 2014.

At 14:15 IST, the S&P BSE Sensex was down 81.66 points or 0.29% at 28,477.96. The index lost 173.16 points at the day's low of 28,386.46 in mid-morning trade, its lowest level since 27 November 2014. The index rose 16.77 points at the day's high of 28,576.39 in mid-morning trade.

The CNX Nifty was down 24.40 points or 0.29% at 8,531.50. The index hit a low of 8,504.65 in intraday trade, its lowest level since 27 November 2014. The index hit a high of 8,560.20 in intraday trade.

The market breadth indicating the overall health of the market was negative. On BSE, 1,402 shares declined and 1,373 shares gained. A total of 127 shares were unchanged.

The BSE Mid-Cap index was up 64.72 points or 0.63% at 10,327.62. The BSE Small-Cap index was up 23.53 points or 0.21% at 11,213.23. Both these indices outperformed the Sensex.

Many metal and mining stocks rose on speculation China's central bank will ease monetary policy. China is the world's largest consumer of steel, copper and aluminum. Sesa Sterlite (up 1.65%), Tata Steel (up 0.76%), NMDC (up 2.46%), Jindal Steel & Power (up 3.87%) and Hindalco Industries (up 1.61%) edged higher. Steel Authority of India (Sail) (down 0.68%), National Aluminium Company (down 0.94%), Hindustan Copper (down 0.13%) and Hindustan Zinc (down 0.25%) declined.

JSW Steel rose 0.59%. With respect to media reports titled "JSW Steel Charts Local Expansion Plan, Defers Investments in Italy," JSW Steel after market hours yesterday, 1 December 2014, said that as a long term strategy, the company plans to expand its steel capacity to 40 million tonne per annum (MTPA) by 2025 by means of brownfield and greenfield expansions and also through acquisitions. Accordingly, the company is currently implementing capacity expansion project from 14.3 mtpa to 16.3 mtpa. The company continues to scan forward and backward integration opportunities overseas including Italy for its steel making operations in India, JSW Steel said. The company has also been evaluating several options including slurry pipeline linking Vijayanagar to Jaigarh Port for sourcing of raw materials at optimal cost, JSW Steel said.

Bhushan Steel slipped 0.49%. With reference to the news item regarding "JSW Steel to acquire Bhushan Steel Odisha Steel unit", Bhushan Steel has clarified after market hours yesterday, 1 December 2014, that no negotiation with JSW or any other buyer has taken place and denied any such development.

Shares of public sector oil marketing companies (PSU OMCs) fell after media reports suggested that the government has once again raised excise duty on petrol and diesel. Indian Oil Corporation (IOCL) (down 2.55%), BPCL (down 2.87%) and HPCL (down 3.08%) declined.

The government has reportedly hiked excise duty on petrol by Rs 2.25 a litre and diesel by Re 1 a litre with immediate effect. It may be recalled that in mid-November 2014, the government had raised excise duty on petrol and diesel by Rs 1.50 a litre each.

National Buildings Construction Corporation rose 3.15% after the company said it secured Project Management Consultancy (PMC) work for construction/improvement/maintenance of roads at Miao-Vijaynagar (Arunachal Pradesh) costing Rs 1850 crore. The announcement was made during trading hours today, 2 December 2014.

Fulford (India) was locked at 20% lower circuit at Rs 1,417.25 after the company's promoter Dashtag decided not a make the public announcement of the delisting offer at this time. The announcement was made during market hours today, 2 December 2014.

In the foreign exchange market, the rupee strengthened past 62 against the dollar. The partially convertible rupee was hovering at 61.91, compared with its close of 62.025 during the previous trading session.

Brent crude oil futures were currently unchanged for the day after staging a rebound from five-year low yesterday, 1 December 2014. The contract had gained $2.39 a barrel to settle at $72.54 yesterday, 1 December 2014.

The Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 8% and also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL) after a monetary policy review today, 2 December 2014. RBI Governor Dr. Raghuram Rajan said in a statement that there is still some uncertainty about the evolution of base effects in inflation, the strength of the on-going disinflationary impulses, the pace of change of the public's inflationary expectations, as well as the success of the government's efforts to hit deficit targets. A change in the monetary policy stance at the current juncture is premature, Rajan said. The RBI Governor, however, indicated that monetary policy easing is likely early next year, including outside the policy review cycle, provided the current inflation momentum and changes in inflationary expectations continue and if fiscal developments are encouraging.

The RBI has revised downwards the central forecast for CPI inflation to 6% for March 2015. The central bank said that the risks to the January 2016 target of 6% CPI inflation appear evenly balanced under the current policy stance.

Retail inflation, as measured by the consumer price index (CPI), has decelerated sharply since the RBI's fourth bi-monthly statement of September this year. This reflects, to some extent, transitory factors such as favourable base effects and the usual softening of fruits and vegetable prices that occurs at this time of the year, the RBI said. On the other hand, protein-rich items such as milk and pulses continue to experience upside pressures, reflecting structural mismatches in supply and demand. The absence of adequate administered price revisions in inputs like electricity has contributed to the easing of inflation in the fuel group. In the non-food non-fuel category, inflation eased broadly in September. Further softening of international crude prices in October eased price pressures in transport and communication. However, upside pressures persist in respect of prices of clothing and bedding, housing and other miscellaneous services, resulting in non-food non-fuel inflation for October remaining flat at its level in the previous month, and above headline inflation, the RBI said.

The RBI said survey-based inflationary expectations have been coming down with the fall in prices of commonly-bought items such as vegetables, but are still in the low double digits. Administered price corrections, as and when they are effected, weaker-than-anticipated agricultural production, and a possible rise in energy prices on the back of geo-political risks could alter the currently benign inflation outlook significantly, the central bank said. According to RBI, the inflation reading for November 2014 is expected to show a further softening. Thereafter, however, the favourable base effect that is driving down headline inflation will likely dissipate and inflation for December 2014 may well rise above current levels, the RBI said. The key uncertainty is the durability of this upturn. Rajan said that the full outcome of the north-east monsoon will determine the intensity of price pressures relating to cereals, oilseeds and pulses, but it is reasonable to expect some firming up of these prices in view of the monsoon's performance so far and the shortfall estimated for kharif production. Risks from imported inflation appear to be retreating, given the softening of international commodity prices, especially crude, and reasonable stability in the foreign exchange market. According to RBI, over the next 12-month period, inflation is expected to retain some momentum and hover around 6%, except for seasonal movements, as the disinflation momentum works through.

Weak domestic demand and the rapid pace of recent disinflation are factors supporting monetary accommodation, the RBI said. However, the weak transmission by commercial banks of the recent fall in money market rates into lending rates suggests monetary policy shifts will primarily have signaling effects for a while. Nevertheless, these signaling effects are likely to be large because the Reserve Bank of India has repeatedly indicated that once the monetary policy stance shifts, subsequent policy actions will be consistent with the changed stance, the Rajan said in a statement.

A rise in investment is critical for a sustained pick-up in overall economic activity, the RBI said. A durable revival of investment demand continues to be held back by infrastructural constraints and lack of assured supply of key inputs, in particular coal, power, land and minerals. The success of ongoing government actions in these areas will be key to reviving growth and offsetting downside risks emanating from agriculture - in view of weaker-than-expected rabi sowing - and exports - given the sluggishness in external demand. The RBI has kept unchanged its central estimate of projected GDP growth for 2014-15 at 5.5% and it expects a gradual pick-up in momentum in GDP growth in 2015-16 on the assumption of a normal monsoon and no adverse supply/financial shocks.

The fiscal outlook should brighten because of the fall in crude prices, but weak tax revenue growth and the slow pace of disinvestment suggest some uncertainty about the likely achievement of fiscal targets, and the quality of eventual fiscal adjustment. The government, however, appears determined to stay on course, Rajan said.

The HSBC India Services PMI for November 2014 is due tomorrow, 3 December 2014. Adjusted for seasonal factors, the headline HSBC India Services PMI Business Activity Index -- a single question tracking changes in activity at Indian services companies on a month-by-month basis -- fell to 50 in October, from 51.6 in September.

European stocks edged higher today, 2 December 2014, amid an increase in mergers-and-acquisitions activity, and as investors weighed stimulus prospects before the European Central Bank policy meeting on Thursday, 4 December 2014. Key benchmark indices in UK, France and Germany were up 0.06% to 0.86%.

Chinese stocks led gains in Asian stocks today, 2 December 2014, as investors bet China's central bank will ease monetary policy. Key benchmark indices in China, South Korea, Hong Kong, Japan, Indonesia and Singapore were up 0.03% to 3.11%. In Taiwan, the Taiwan Weighted index was off 0.91%.

Data yesterday, 1 December 2014, showing slower-than-forecast growth in China's manufacturing sector last month increased speculation the Chinese central bank will follow up on last month's cut in interest rates with a reduction in lenders' reserve-requirement ratios. Reserve ratios have remained unchanged at 20% for major banks and 18% for smaller banks since May 2012.

Trading in US index futures indicated that the Dow could advance 43 points at the opening bell today, 2 December 2014. US stocks fell on Monday, 1 December 2014 with the S&P 500 suffering its biggest one-day drop in more than a month, as economic data indicated weakness across the globe.

In economic data, the Institute for Supply Management said its US manufacturing index edged down to 58.7% in November from 59% in October. A number above 50% signals expansion and the latest reading kept the ISM index near a three-year high. A separate report on Monday, 1 December 2014 by the research firm Markit said that purchasing managers index for November showed a reading of 54.8, down from 55.9 in October. That marks the lowest reading in ten months. US retailers reported sluggish Black Friday spending, with sales falling 11% from the same period last year, according to the National Retail Federation (NRF). US consumers spent on average $380.95 per person, down 6.4% from a year ago. Overall, total holiday weekend sales were estimated to be $50.9 billion.

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