Sensex hits fresh intraday high

Key benchmark indices strengthened in early afternoon trade, with the barometer index, the S&P BSE Sensex hitting fresh intraday high. At 12:23 IST, the Sensex was up 138.63 points or 0.53% at 26,534.34. The Nifty 50 index was currently up 34.60 points or 0.43% at 8,143.45. Positive Asian stocks boosted sentiment on domestic bourses.

The Sensex rose 142 points or 0.54% at the day's high of 26,537.71 in early afternoon trade, its highest level since 10 June 2016. The index rose 50.88 points or 0.19% at the day's low of 26,446.59 in early trade. The Nifty gained 38.75 points or 0.18% at the day's high of 8,147.60 at onset of the day's trading session, its highest level since 10 June 2016. The index rose 14.30 points or 0.18% at the day's high of 8,123.15 in early trade. In overseas markets, Chinese mainland markets rose, shrugging off a decision by stock index provider MSCI saying yesterday, 14 June 2016 to delay inclusion of mainland-traded Chinese A shares in its key emerging market index. In mainland China, the Shanghai Composite index was currently up 1.41%. In Hong Kong, the Hang Seng index was currently up 0.33%. In Japan, the Nikkei 225 index was currently up 0.38%. Most other Asian stocks were trading mixed as investors awaited outcome of the central bank meetings in the US and Japan. The US Federal Open Market Committee concludes its two-day meeting today, 15 June 2016 while the Bank of Japan will start its two-day meeting today, 15 June 2016. US stocks declined yesterday, 14 June 2016 as investors grappled with mixed signals from lower oil prices, stronger-than-expected retail sales and geopolitical uncertainty roiling European markets.

Closer home, the broad market depicted strength. There were almost two gainers for every loser on BSE. 1,559 shares gained and 796 shares declined. A total of 140 shares were unchanged. The BSE Mid-Cap index was currently up 0.56%. The BSE Small-Cap index was currently up 0.82%. Both these indices outperformed the Sensex.

Among bank stocks, stocks of PSU banks rose. Indian Bank (up 10.92%), United Bank of India (up 3.92%), Dena Bank (up 2.92%), Vijaya Bank (up 1.65%), Punjab National Bank (up 1.01%), Canara Bank (up 0.3%), IDBI Bank (up 1.51%) and Bank of India (up 0.17%) gained. Bank of Baroda (down 0.24%) and Union Bank of India (down 0.25%) fell.

Shares of State Bank of India (SBI) and its associate banks spurted on reports that the Union Cabinet may approve the proposed merger of associate banks with SBI today, 15 June 2016.

State Bank of Mysore (up 10.83%), State Bank of Travancore (up 9.91%), State Bank of Bikaner and Jaipur (up 8.87%) and State Bank of India (up 1.19%) edged higher.

Earlier on 17 May 2016, State Bank of India (SBI) announced that it is seeking in principle sanction of the Government of India (GoI) to enter into negotiation with its 5 subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore to acquire their businesses including assets and liabilities. The decision is purely exploratory at this stage and there is no certainty in relation to SBI completing the acquisitions, SBI said. SBI's board of directors will take a final call after evaluating all the relevant considerations. SBI also said that it is considering acquisition of the newly-created Bharatiya Mahila Bank.

In May 2016, government officials were quoted by the media as saying that no legislative changes will be required for SBI merger and that the process may get completed within this fiscal. SBI Chairman Arundhati Bhattacharya had told the media that the benefits of merger would be huge and one of them will be 100 basis points reduction in lending cost within a year post this merger.

Brokerages, which see merger a positive development, had reportedly said employee integration and their cost will be the key to watch out for when the merger will take place. According to brokerages, the merger is long term positive for SBI, but financially it may be negative in the near term due to higher retirement cost, reports said.

While explaining the importance of staff cost, a foreign brokerage reportedly highlighted earlier merger of SBI. In its note, the brokerage reportedly said that SBI had to make additional employee provisions in the case of merger with its subsidiaries historically. This was due to likely rationalization of pay scales, and higher retirement related benefits. Currently SBI subsidiaries get only two retirement related benefits versus three at SBI (pension, provident fund and gratuity), reports suggested.

Shares of private sector banks fell. ICICI Bank (down 0.71%), Axis Bank (down 1.19%), IndusInd Bank (down 0.32%) and Yes Bank (down 0.46%) declined. HDFC Bank (up 0.33%) and Kotak Mahindra Bank (up 0.98%) rose.

FMCG stocks were mostly lower. Nestle India (down 1.29%), GlaxoSmithkline Consumer Healthcare (down 0.29%), Colgate-Palmolive (India) (down 0.39%), Godrej Consumer Products (down 0.39%), Marico (down 0.63%), Procter & Gamble Hygiene and Health Care (down 0.07%) and Jyothy Laboratories (down 0.84%), rose. Bajaj Corp (up 1.72%), Tata Global Beverages (up 1.23%), Dabur India (up 1.11%), Hindustan Unilever (up 0.92%) and Britannia Industries (up 0.01%) rose.

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