PSU OMCs tumble as rupee slumps below 60-level

Key benchmark indices further extended intraday losses to hit fresh intraday low in late trade, with the S&P BSE Sensex hitting its lowest level in nearly three weeks after the Reserve Bank of India (RBI) kept its key lending rate viz. the repo rate steady after a monetary policy review, as the central bank focused on managing the currency volatility rather than pushing for growth. The 50-unit CNX Nifty hit its lowest level in almost five weeks. The Sensex was provisionally down 235.85 points or 1.2%, off close to 315 points from the day's high and up about 30 points from the day's low. The market breadth, indicating the overall health of the market, was weak.

Indian stocks fell for the fifth straight session today, 30 July 2013.

Reliance Infrastructure slumped after the company reported muted growth in net profit in Q1 June 2013. PSU OMCs tumbled as rupee once again fell below the psychological 60 mark against the dollar, raising concerns about increased costs of importing oil. Dr Reddy's Laboratories dropped in volatile trade after Q1 results. Metal and mining stocks declined. Sterlite Industries (India) extended recent losses triggered by the company reporting weak Q1 results. Hindalco Industries also extended recent steep losses. Tata Steel and Sail hit 52-week low. Sesa Goa declined on weak Q1 result. NTPC declined after the company reported a muted growth in bottomline in Q1 June 2013.

A bout of initial volatility was witnessed as key benchmark indices pared gains after moving into the positive terrain after opening lower. Volatility continued as key benchmark indices recovered after hitting fresh intraday low in morning trade. The S&P BSE Sensex and the 50- unit CNX Nifty, both, hit their lowest level in nearly three weeks. High volatility was witnessed as key benchmark indices slipped into the red after surging to hit fresh intraday high in mid-morning trade soon after the Reserve bank of India (RBI) held its key policy rates viz. the repo rate and cash reserve ratio unchanged after a monetary policy review. The market extended losses to hit fresh intraday low in early afternoon trade. Key benchmark indices extended intraday losses in mid-afternoon trade. The Sensex extended losses to hit fresh intraday low in late trade.

As per provisional figures, the S&P BSE Sensex was down 235.85 points or 1.2% to 19,357.43. The index declined 264.74 points at the day's low of 19,328.54 in late trade, its lowest level since 10 July 2013. The index rose 79.44 points at the day's high of 19,672.72 in mid-morning trade.

The CNX Nifty was down 70.75 points or 1.21% to 5,760.90, as per provisional figures. The index hit a high of 5,861.30 in intraday trade. The index hit a low of 5,747.60 in intraday trade, its lowest level since 27 June 2013.

The total turnover on BSE amounted to Rs 1747 crore, lower than Rs 1758.93 crore on Monday, 29 July 2013.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,542 shares fell and 724 shares rose. A total of 144 shares were unchanged.

Among the 30-share Sensex pack, 22 stocks fell and rest of them rose. ONGC (down 5.85%), Tata Motors (down 3.99%) and Bajaj Auto (down 3.3%), edged lower.

Dr Reddy's Laboratories fell 2.1% to Rs 2171.10 after Q1 result. The stock was volatile. The stock hit high of Rs 2261.70 and low of Rs 2151. The company's adjusted consolidated net profit rose 12% to Rs 320 crore on 12% rise in revenue to Rs 2840 crore in Q1 June 2013 over Q1 June 2012. The adjustments pertain to taxation. The tax rates for both the period i.e. for Q1 June 2013 and for Q1 June 2012 have been normalized to the annual effective tax rate for the concerned full year. The company announced Q1 result during market hours today, 30 July 2013.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 13% to Rs 568.90 crore in Q1 June 2013 over Q1 June 2012.

Research and development (R&D) expense rose 55% to Rs 243 crore in Q1 June 2013 over Q1 June 2012. The company said that the jump in R&D expense is in line with the increased focus on complex formulations, differentiated portfolios and biosimilars.

The company's selling, general & admistrative (SG&A) expenses rose by 6% to Rs 879.40 crore in Q1 June 2013 over Q1 June 2012.

The company launched 18 new products, filed 12 new product registrations and filed 5 Drug Master Files (DMFs) globally in Q1 June 2013.

Reliance Infrastructure slumped 7.13% after the company reported muted growth in net profit in Q1 result. The company's consolidated net profit rose 0.78% to Rs 415.20 crore on 1.28% rise in total operating income to Rs 5452.45 crore in Q1 June 2013 over Q1 June 2012. The company announced Q1 result during market hours today, 30 July 2013.

PSU OMCs tumbled as rupee once again fell below the psychological 60 mark against the dollar today, 30 July 2013, raising concerns about increased costs of importing oil. HPCL (down 11.16%), BPCL (down 8.95%) and Indian Oil Corporation (down 8.96%) slumped. The partially convertible rupee was trading at 60.28 against the dollar, sharply lower than Monday's close of 59.415/425. PSU OMCs import about 70-75% of their crude oil needs and rely heavily on foreign currency borrowings, which largely remain unhedged.

NTPC declined after the company reported a muted growth in bottomline in Q1 June 2013. The stock was down 3.28%. The company's net profit rose 1.13% to Rs 2527.02 crore on 2.9% fall in total income to Rs 16358.78 crore in Q1 June 2013 over Q1 June 2012. The company announced Q1 result during market hours today, 30 July 2013.

GAIL (India) lost 2.98% to Rs 307.70 after a foreign brokerage downgraded the stock to underweight from overweight after cutting its EPS forecast for fiscal years 2014 to 2016. According to the brokerage report, the domestic gas output has fallen faster than expected due to a drop in output from the KG-D6 block. The brokerage expects a recovery in gas output to be 12-18 months away. The fall in output from KG-D6 will also raise gas costs for GAIL (India).

Metal and mining stocks declined. Tata Steel dropped 2.76% to Rs 209.75. The stock hit 52-week low of Rs 207.95 in intraday trade today, 30 July 2013.

Sail shed 3.69% to Rs 41.75. The stock hit 52-week low of Rs 41.25 in intraday trade today, 30 July 2013.

Among other stocks, JSW Steel (down 3.84%), Hindustan Zinc (down 2.16%) and NMDC (down 4.02%), declined.

But, Jindal Steel & Power rose 2.08% ahead of its Q1 result today, 30 July 2013.

Sterlite Industries (India) fell 0.88%, with the stock extending recent losses triggered by the company reporting weak Q1 results. Sterlite Industries' consolidated net profit fell 22% to Rs 934 crore on 23% fall net sales/income from operations to Rs 8190 crore in Q1 June 2013 over Q1 June 2012. The Q1 result was announced on 25 July 2013.

Hindalco Industries dropped 4.3%, with the stock extending recent steep losses.

Sesa Goa declined 1.24% on weak Q1 result. The company after market hours on Monday, 29 July 2013, reported 57.05% fall in net profit to Rs 414 crore on 78.18% fall in net sales/income from operations to Rs 378 crore in Q1 June 2013 over Q1 June 2012. The results are on consolidated basis. The sharp decline in net profit was due to suspension of iron ore operations at the company's mines in Goa and Karnataka. The company said its Karnataka mine has received clearance from the Supreme Court, and the company is now awaiting final statutory clearances in order to restart mining at the unit. The company expects to resume mining at Karnataka in Q2 September 2013, it said.

Regarding the suspension of mining in Goa, the date for hearing is yet to be fixed by the Supreme Court. Earlier, the Goa state government and major miners, including Sesa Goa, had filed their responses to the report submitted by the Central Empowered Committee. Separately, Sesa has filed an application to the Supreme Court for a modification or vacation of the court's existing order on the suspension of mining and restrictions on ore transportation.

The company said that exploration activities are progressing well at its Liberia iron ore project, with 91,500 meters of drilling completed till 30 June 2013 across the three deposits viz. Bomi, Bea and Mano River. The company said that the first phase of 2 million tonnes per annum is likely to be completed by December 2014, and that the company remains on track to deliver the first shipment by March 2014.

The company said proposed merger of Sterlite Industries (India) and Sesa Goa and Vedanta Group consolidation has received the approval of the High Court of Madras on 25 July 2013 and the approval of the High Court of Bombay at Goa on 3 April 2013. One of the shareholders of Sesa Goa has filed an appeal against the order passed by the High Court of Bombay at Goa before the Division Bench of the same court. The hearings before the Division Bench have been completed and the order is awaited.

After First Quarter Review of Monetary Policy 2013-14, the RBI today, 30 July 2013, kept the repo rate unchanged at 7.25%. The central bank also kept the cash reserve ratio (CRR) unchanged at 4%. RBI said that the macroeconomic outlook for 2013-14 is subject to a number of risks and it scaled down the GDP growth forecast for 2013-14 to 5.5%, from its earlier projection of 5.7% growth. The RBI said that it will endeavour to condition the evolution of inflation to a level of 5% by March 2014, using all instruments at its command.

The RBI said that keeping in view global and domestic macroeconomic conditions, outlook and risks, the policy stance in this review is guided by the need for continuous vigil and preparedness to pro-actively respond to risks to the economy from external developments, especially those stemming from global financial markets, while managing the trade-off posed by increased downside risks to growth and continuing risks to inflation and inflation expectations.

The RBI also noted that though inflation had eased to a level that it considered reasonable, some risks had emerged that could keep it from staying low. The RBI said that risks to inflation include high international oil prices, and the rupee's depreciation, which makes imports more expensive.

The current situation -- moderating wholesale price inflation, prospects of softening of food inflation consequent on a robust monsoon and decelerating growth -- would have provided a reasonable case for continuing on the easing stance, RBI said. "However, India is currently caught in a classic impossible trinity trilemma whereby we are having to forfeit some monetary policy discretion to address external sector concerns", the RBI said.

The central bank said that its recent liquidity tightening measures aimed at checking undue volatility in the foreign exchange market will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation. It should be emphasised that the time available now should be used with alacrity to institute structural measures to bring the current account deficit (CAD) down to sustainable levels, the RBI said. The RBI said it stands ready to use all available instruments and measures at its command to respond proactively and swiftly to any adverse development.

European stock markets edged higher on Tuesday, 30 July 2013, boosted by upbeat German consumer-confidence data. Key benchmark indices in UK, Germany and France were up 0.01% to 0.13%.

Economic confidence in the euro area improved for a third month in July, reaching the highest in 15 months and adding to indications the 17-nation currency bloc is emerging from a record-long recession. An index of executive and consumer sentiment rose to 92.5 from 91.3 in June, the European Commission in Brussels said today.

GfK's forward-looking German consumer-sentiment indicator rose for the seventh straight month, to 7 points in August from 6.8 points in July, hitting its highest level since September 2007.

The European Central Bank (ECB) and the Bank of England (BoE) will announce their policy decisions on Thursday, 1 August 2013.

Asian stocks rose on Tuesday, 30 July 2013, after China's central bank injected funds into money markets easing cash crunch worries. Key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea, Indonesia and Taiwan rose by 0.26% to 1.53%.

China's central bank injected funds into money markets via open market operations on Tuesday for the first time since February, easing fears of another cash crunch ahead of the month end after a severe cash squeeze in June caused market panic.

Meanwhile, the results of two separate surveys on Chinese manufacturing activity in July are due on Thursday, 1 August 2013.

In Japan, data released on Tuesday, 30 July 2013, showed that Japan's industrial production unexpectedly fell a seasonally adjusted 3.3% in June from the level in May. Japanese household spending also declined, though the monthly unemployment rate eased to 3.9% from 4.1%.

Trading in US index futures indicated a flat opening of US stocks on Tuesday, 30 July 2013. US stocks edged lower on Monday, 29 July 2013, slipping after a decline in June home sales as investors look ahead to key data later in the week and the Federal Reserve's upcoming policy meeting. The National Association of Realtors said pending home sales fell 0.4% in June, with rising rates blamed for undercutting sales momentum.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting today (30 July 2013) and tomorrow (31 July 2013), with expectations that it will offer further clues on how long it will maintain its bond purchases. In his two-day testimony to Congress, which concluded on 18 July 2013, Federal Reserve Chairman Ben Bernanke said plans to taper asset purchases were not on a preset path and stressed intentions to be very responsive to data. Additionally, Bernanke said recent data have been "mixed" and it was "way too early" to make a judgment on when the central bank will slow down the pace of its asset purchases. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth.

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