Sensex reverses direction after lower start

A bout of volatility was witnessed as key benchmark indices reversed initial losses triggered by weak Asian stocks. Investors took solace from the Indian government keeping its borrowing target for the fiscal year through March 2014 unchanged at Rs 5.79 lakh crore on Monday, 23 September 2013. The barometer index, the S&P BSE Sensex, was up 13.41 points or 0.07%, up close to 130 points from the day's low. The market breadth, indicating the overall health of the market, was strong.

Lupin rose after the company signed a strategic co-promotion agreement with US-based Onset Dermatologics, LLC (Onset) that grants Lupin exclusive rights to promote Onset's Locoid Lotion (hydrocortisone butyrate 0.1%) to Pediatricians in the US. Bank stocks fell for the third straight day as the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on 20 September 2013 and as the central bank retained hawkish tone at the latest monetary policy review.

The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month September 2013 series to October 2013 series. The September 2013 F&O contracts expire on Thursday, 26 September 2013.

Foreign institutional investors (FIIs) sold shares worth a net Rs 80.57 crore on Monday, 23 September 2013, as per provisional data from the stock exchanges.

At 9:30 IST, the S&P BSE Sensex was up 13.41 points or 0.07% to 19,914.37. The index rose 14.63 points at the day's high of 19,915.59 in early trade. The index declined 118.18 points at the day's low of 19,782.78 in early trade, its lowest level since 18 September 2013.

The CNX Nifty was down 12.40 points or 0.21% to 5,877.35. The index hit a low of 5,854.55 in intraday trade, its lowest level since 18 September 2013. The index hit a high of 5,892.35 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 624 shares rose and 337 shares dropped. A total of 44 shares were unchanged.

Among the 30-share Sensex pack, 20 stocks fell and rest of them rose. Sun Pharmaceutical Industries (down 1.86%), Jindal Steel & Power (down 1.8%) and Coal India (down 1.69%), edged lower.

Bank stocks fell for the third straight day as the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on 20 September 2013 and as the central bank retained hawkish tone at the latest monetary policy review.

PSU banking major State Bank of India dropped 2.39%. The state-run bank on 18 September 2013 said it has raised the base rate by 10 basis points (bps) to 9.8% per annum (pa) from 9.7% and the benchmark prime lending rate by 10 bps to 14.55% from 14.45% with effect from 19 September 2013. The bank also raised interest rates for retail term deposits.

Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank dropped by 1.13% to 3.06%.

Among private bank stocks, HDFC Bank (down 1.03%), Yes Bank (down 1.59%), ICICI Bank (down 0.21%), Kotak Mahindra Bank (down 1.09%) Axis Bank (down 0.35%) and Federal Bank (down 0.63%), edged lower.

Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, said in a statement on 20 September 2013 that the calibrated withdrawal of the exceptional measures that the RBI had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market will provide a boost to growth, reduce the financing distortions that are emerging in the market and reduce the strain on corporate and bank balance sheets. In an attempt to tame high inflation, which is partly fueled by the currency's recent slump against the dollar, the RBI raised its policy rate viz. the repo rate after a monetary policy review on Friday, 20 September 2013. The central bank, however, eased some of the liquidity-tightening measures it had taken to prop up the rupee. The RBI reduced the rate at which it lends funds to banks through its marginal standing facility, by three quarters of a percentage point, to 9.5%. The marginal standing facility is an emergency funding facility for banks. On net, the RBI's latest measures will reduce the cost of bank financing substantially while allowing the RBI to take an appropriately precautionary stance on inflation, Dr. Rajan said on Friday, 20 September 2013.

The minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said after a monetary policy review. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.

"Over the next few weeks, together with the government, we will take a close look at corporate distress and bank NPAs to see how we can accelerate the process of resolution", Dr. Rajan said. The RBI Governor said that the RBI has implemented the full liberalization of bank branching, with some safeguards to encourage inclusion.

Lupin rose 1.32% after the company announced after market hours on Monday, 23 September 2013, that it has signed a strategic co-promotion agreement with US-based Onset Dermatologics, LLC (Onset) that grants Lupin exclusive rights to promote Onset's Locoid Lotion (hydrocortisone butyrate 0.1%) to Pediatricians in the US. Locoid is the most highly prescribed mid-potency steroid brand in the US. Locoid Lotion is a corticosteroid indicated for the topical treatment of mild to moderate Atopic Dermatitis in patients 3 months of age and older, Lupin said in a statement.

The addition of Locoid Lotion will enable Lupin to strengthen its US Brand business and expand its product portfolio for the US Pediatrics segment. "We are very pleased with the addition of Locoid Lotion to our brand portfolio and are committed to bring meaningful products to the US Pediatric community," said Vinita Gupta, CEO, Lupin Pharmaceuticals Inc. and Lupin. Bob Moccia, President of Onset Dermatologics said: "This partnership will give pediatricians greater opportunity to utilize Locoid lotion in their patients while Onset maintains its focus on promoting Locoid to the dermatology community. We are confident that Locoid will continue to be the most prescribed mid-potency steroid brand in the US".

Videocon Industries declined 0.76% to Rs 175.65. Shree Dhoot Trading And Agencies -- a constituent of the promoter group of the company - is selling 18 lakh equity shares, representing 0.6149% of the equity share capital of the company, via Offer for Sale (OFS) today, 24 September 2013. The floor price for the OFS has been fixed at Rs 177 per share. Ahead of the OFS, shares of Videocon Industries declined slightly on Monday, 23 September 2013, to settle at Rs 177.

Prism Cement rose 2.61% to Rs 29.50 after the company said that its wholly-owned foreign subsidiary viz. Lifestyle Investments (LIPL) has declared a dividend on equity shares. Prism Cement will receive an amount of GBP 12.5 million as dividend on the equity shares held in LIPL.

Bond prices rose after the government kept the borrowing target for the fiscal year through March 2014 unchanged at Rs 5.79 lakh crore ($92.49 billion). The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.8374%, slightly lower than its close of 8.8505% on Monday, 23 September 2013. Bond prices and bond yields are inversely related.

Economic Affairs Secretary Arvind Mayaram said on Monday, 23 September 2013, that the government will raise Rs 3.44 lakh crore by the end of September. That will be Rs 5000-crore short of the target it had initially set for the first half of the fiscal year, Mr. Mayaram said. The shortfall will be made up in the October-March period, taking the total borrowing during the second half to Rs 2.35 lakh crore, he said.

Mr. Mayaram said that the government would cut spending if revenue falls short of the budget projections, but won't breach the full-year fiscal-deficit target4.8% of gross domestic product for this year. The gap was 4.9% last fiscal year. Last week, the government announced austerity measures to slash nonessential spending, as it sought to reinforce its commitment to meeting the deficit target

There had been concerns off late that the heavy spending on social-development programs at a time when the government's revenue growth has been hit by a slowdown in the economy would mean that the government may have to increase its borrowing this year. Data late August showed the government's fiscal deficit between April and July reached about 63% of the target it had set for the full fiscal year.

In the foreign exchange market, the rupee dropped against the dollar. The partially convertible rupee was hovering at 62.74, weaker than its close of 62.60/61 on Monday, 23 September 2013. Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit.

Asian stocks dropped on Tuesday, 24 September 2013, following overnight decline in the US stocks. Key benchmark indices in China, Indonesia, Japan, Hong Kong, Singapore, Taiwan and South Korea were off 0.14% to 0.99%.

US stocks fell on Monday after notching three weeks of gains, as investors heard from Federal Reserve officials and worried about another standoff in Washington. Addressing business leaders in New York Monday morning, Fed Bank of Atlanta President Dennis Lockhart said the economy is losing some steam. Fed Bank of New York President William Dudley told an audience at the Fordham University Graduate School of Business that an accommodative monetary policy is still needed. In a speech about US banking in San Antonio, Federal Reserve Bank of Dallas President Richard Fisher said he advocated slowing down the pace of central-bank asset purchases at last week's policy session.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus.

In Europe, German Chancellor Angela Merkel on Sunday, 22 September 2013, won re-election by the largest amount in more than 20 years.

Powered by Capital Market - Live News