Sensex trims losses as finance ministry says not worried about Fed taper

Key benchmark indices trimmed losses in early afternoon trade after the Finance Ministry said in a statement that India's economy is better prepared for the consequences, if any, of reduction in bond purchases by the US Federal Reserve and that the Government of India and the Reserve Bank of India will continue to remain vigilant and will take whatever steps are necessary to ensure that there is stability in the financial markets. The market breadth, indicating the overall health of the market, was weak. The barometer index, the S&P BSE Sensex, was down 201.35 points or 0.98%, up 46.71 points from the day's low and off 55.97 points from the day's high. The market sentiment was hit adversely by the US Federal Reserve's decision of a further reduction in its monthly bond purchases and Fed's indication that it is likely to keep reducing its purchases in the coming months, citing a pickup in US economic activity and improvement in the US labor market. The BSE Small-Cap and Mid-Cap indices were off more than 1% each.

Index heavyweight Reliance Industries edgd lower in volatile trade. GAIL (India) edged higher in volatile trade after company after trading hours on Wednesday, 29 January 2014, said that a meeting of the Board of Directors of the company will be held on 6 February 2014, inter alia, to consider proposal of interim dividend for the year ending 31 March 2014 (FY 2014). Index heavyweight and cigarette major ITC extended intraday fall. Tata Global Beverages rose in volatile trade after reporting strong Q3 result after trading hours on Wednesday, 29 January 2014. Other FMCG stocks declined.

Key benchmark indices edged lower in early trade on weak Asian stocks. Key benchmark indices extended initial losses and to hit fresh intraday low in morning trade. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in more than nine weeks. Key benchmark indices extended losses and hit fresh intraday low in mid-morning trade. Key benchmark indices trimmed losses in early afternoon trade after the Finance Ministry said in a statement that India's economy is better prepared for the consequences, if any, of reduction in bond purchases by the US Federal Reserve and that the Government of India and the Reserve Bank of India will continue to remain vigilant and will take whatever steps are necessary to ensure that there is stability in the financial markets.

The market may remain volatile today, 30 January 2014, as traders roll over positions in the futures & options (F&O) segment from the near month January 2014 series to February 2014 series. The January 2014 F&O contracts expire today, 30 January 2014.

Foreign institutional investors (FIIs) bought shares worth a net Rs 250.48 crore on Wednesday, 29 January 2014, as per provisional data from the stock exchanges.

Asian stocks dropped on Thursday, 30 January 2014, after the US Federal Reserve pressed on with cuts to US economic stimulus and as a report showed China's manufacturing industry contracted.

After a monetary policy review, the Federal Open Market Committee (FOMC) on Wednesday, 29 January 2014, announced it will reduce monthly bond purchases by another $10 billion to $65 billion. The Fed also signaled that it is likely to keep reducing its purchases in the coming months, citing a pickup in economic activity and improvement in the labor market. In emerging markets, the reduction in bond purchases by the Fed has triggered worries of slowdown in capital inflows and fears of capital outflows. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets in recent years.

Investors pulled out more than $7 billion from exchange-traded funds (ETFs) investing in developing-nation assets this month, according to reports.

The South Africa Reserve Bank unexpectedly raised the repurchase rate to 5.5% from 5% on Wednesday, 29 January 2014, following Turkey's decision early this week to more than double its benchmark rate amid a rout in its currency.

At 12:16 IST, the S&P BSE Sensex was down 201.35 points or 0.98% to 20,445.95. The index lost 248.06 points at the day's low of 20,399.24 in mid-morning trade, its lowest level since 27 November 2013. The index fell 145.38 points at the day's high of 20,501.92 in early trade.

The CNX Nifty was down 61.10 points or 1% to 6,059.15. The index hit a low of 6,044.40 in intraday trade, its lowest level since 27 November 2013. The index hit a high of 6,072.95 in intraday trade.

The BSE Mid-Cap was off 65.50 points or 1.04% to 6,217. The BSE Small-Cap index was off 77.98 points or 1.24% to 6,195.97. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,523 shares declined and 617 shares rose. A total of 113 shares were unchanged.

Among the 30-share Sensex pack, 24 stocks declined and the rest of them gained. Bharti Airtel (up 2.06%), Tata Motors (up 0.77%) and Mahindra & Mahindra (up 0.53%) edged higher from the Sensex pack.

Index heavyweight Reliance Industries fell 1.22% to Rs 826.55 in volatile trade. The stock hit a high of Rs 834.20 and low of Rs 824.30 so far during the day.

GAIL (India) rose 1.79% to Rs 352.50, with the stock reversing initial decline in volatile trade. The stock hit a high of Rs 355 and low of Rs 340.10 so far during the day. The company after trading hours on Wednesday, 29 January 2014, said that a meeting of the Board of Directors of the company will be held on 6 February 2014, inter alia, to consider proposal of interim dividend for the year ending 31 March 2014 (FY 2014). The company has fixed 11 February 2014 as the record date for the purpose of payment of interim dividend, if so approved by the board.

Index heavyweight and cigarette major ITC lost 1.98% to Rs 318.55, with the stock extending intraday fall. The stock hit a high of Rs 322.50 and low of Rs 318.35 so far during the day.

FMCG stocks declined. Colgate-Palmolive (India) (down 1.4%), Britannia Industries (down 0.31%), Dabur India (down 1.13%), Godrej Consumer Products (down 3.15%), Hindustan Unilever (down 0.93%) and Nestle India (down 0.77%) declined.

Tata Global Beverages rose 1.06% to Rs 143.60 in volatile trade. The stock hit a high of Rs 144.85 and low of Rs 140.10 so far during the day. On a consolidated basis, Tata Global Beverages' net profit jumped 49% to Rs 120 crore on 9% increase in income from operations to Rs 2081 crore in Q3 December 2013 over Q3 December 2012. The result hit the market after trading hours on Wednesday, 29 January 2014.

The company said that the sharp increase in bottom line mainly reflects the impact of lower tax liability as well as improved performance of some key countries and associate companies. Tata Global Beverages said revenue rose on the back of good performance in some key markets coupled with favourable foreign exchange translation impact.

During the quarter, the holding company's overseas subsidiaries sold their stake in a US-based functional beverage company, which investment had been fully impaired in the previous quarter. The consideration for this sale is largely contingent on future performance and restructuring of the business, the company said.

Tata Starbucks - a joint venture between Tata Global Beverages and Starbucks- now has 34 Starbucks stores across the cities of Mumbai, Delhi, Bangalore and Pune. The stores continue to see excellent consumer response. The quarter also witnessed the successful launch of a fabulous new flagship store in Bangalore, the company added.

Mr. Harish Bhat, Managing Director and CEO of Tata Global Beverages, said - "This has been an exciting quarter for us at Tata Global Beverages. We have relaunched some of our key tea and coffee brands with new products and powerful marketing programs during the quarter, which have entailed significant marketing investments. In a few global markets, we have also faced and responded appropriately to some challenging marketplace conditions, particularly on account of commodity price trends in coffee and significant competitor activity. In our newest category, water, we continue to witness very good growth of our offerings such as Himalayan and Tata Water Plus, through Nourishco, our joint venture with Pepsico."

In a separate announcement before trading hours today, 30 January 2014, Tata Global Beverages said its board has decided that Ajoy Misra, presently the Executive Director of Tata Global Beverages (TGBL) be elevated and appointed as the Managing Director of TGBL effective 1 April 2014, in place of Mr. Harish Bhat, who will step down at close of business on 31 March 2014 and move into a senior advisory position in the Tata Group.

The appointment of Mr. Misra as the Managing Director will be subject to all statutory approvals as required and the approval of the members of the company.

Mr. Ajoy Misra will, with immediate effect, function as "Managing Director Designate", until he formally takes over as Managing Director on 1 April 2014. The board has also decided that Mr. Harish Bhat will be appointed as a non-Executive Director on the board of TGBL with effect from 1 April 2014, the company said.

Balaji Amines tumbled 15.88% after net profit declined 41.6% to Rs 4.20 crore on 27.6% growth in net sales to Rs 137.51 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Wednesday, 29 January 2014.

Usha Martin lost 5.83% after consolidated net profit declined 49.3% to Rs 15.43 crore on 8.6% growth in net sales to Rs 965.38 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Wednesday, 29 January 2014.

Usha Martin's consolidated EBITDA (earnings before interest, taxation, depreciation and amortization) rose 18.16% to Rs 230.82 crore in Q3 December 2013 over Q3 December 2012.

Mr. Prashant Jhawar, Chairman, Usha Martin said, "The commissioning of the 1.2 million tones beneficiation and pellet plants is a significant step of Usha Martin and would enable the company to get full benefit of mineral integration going forward".

Mr. Rajeev Jhawar, MD, Usha Martin said, "The pellet plant should stabilize in the next 4-5 months as prevalent in such plants and the quality of the pellet produced is good and meets the specification".

VIP Industries rose 2.13% after net profit jumped 188.6% to Rs 10.10 crore on 15.3% growth in net sales to Rs 235.10 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Wednesday, 29 January 2014.

Meanwhile, VIP Industries' board of directors will meet on 10 February 2014, to consider interim dividend for the year ending 31 March 2014. The record date for the purpose of payment of interim dividend is fixed as 17 February 2014.

In the foreign exchange market, the rupee edged lower against the dollar, tracking weakness in emerging markets after the Federal Reserve further pruned its monetary stimulus. The partially convertible rupee was hovering at 62.665, compared with its close of 62.41/42 on Wednesday, 29 January 2014.

India has no target for the rupee's exchange rate and the currency will remain rangebound, the economic affairs secretary said, despite recent global market volatility. "We are vigilant...we believe that we are capable of withstanding (the impact of the Fed tapering)," Arvind Mayaram said.

Indian government bond prices dropped after the Federal Reserve further pruned its monetary stimulus. The yield on 10-year benchmark federal paper, 8.83% GS 2023, was hovering at 8.805%, higher than its close of 8.7743% on Wednesday, 29 January 2014. Bond yield and bond price move in opposite direction.

The Finance Ministry said in a statement today, 30 January 2014, that India's economy is better prepared for the consequences, if any, of reduction in bond purchases by the US Federal Reserve. "We have added to our foreign exchange reserves which stand at $295 billion. FDI and FII inflows continue to be robust, liquidity is comfortable, stronger regulations have been put in place in the capital markets, the investment cycle appears to have turned positive, credit demand from key sectors is strong, and WPI inflation has moderated. The Current Account Deficit which was earlier estimated at $70 billion is now expected to be below $50 billion in 2013-14. Therefore, there should be no undue concern over external factors", the Finance Ministry said.

Fed's decision on Wednesday, 29 January 2014, to reduce bond purchases by $10 billion a month to $65 billion was expected and should not in any way surprise or affect the Indian markets, the Finance Ministry said. "However, both the Government of India and the Reserve Bank of India will continue to remain vigilant and will take whatever steps are necessary to ensure that there is stability in the financial markets", the Finance Ministry said in a statement.

Asian stocks dropped on Thursday, 30 January 2014, after the US Federal Reserve pressed on with cuts to US economic stimulus and as a report showed China's manufacturing industry contracted. Key benchmark indices in Hong Kong, China, Singapore, Japan and Indonesia fell by 0.48% to 2.45%. Stock markets in South Korea and Taiwan are closed today, 30 January 2014, and Hong Kong and Singapore will shut early for the Chinese New Year holidays. Stock markets in Taiwan are closed until 4 February 2014 for the Lunar New Year holiday.

The final reading on HSBC Holdings Plc and Markit Economics Ltd.'s January purchasing managers' index for Chinese manufacturing was 49.5, the first contraction in six months, from 50.5 in December. Readings above 50 indicate expansion.

China's markets close from tomorrow until Feb. 7 for the Lunar New Year holiday, while Hong Kong is shut until Feb. 4.

Trading in US index futures indicated that the Dow could advance 13 points at the opening bell on Thursday, 30 January 2014. US stocks sank on Wednesday, 29 January 2014, as earnings forecasts from Yahoo! Inc. and AT&T Inc. disappointed investors. The Federal Reserve on Wednesday, 29 January 2014, took another gradual step toward exiting its controversial bond-buying program, remaining stoic in the face of market turmoil. As expected, the Fed decided to reduce the pace of monthly asset purchases to $65 billion, from January's $75 billion. The Fed will purchase mortgage-backed securities at a pace of $30 billion per month and add to its holdings of Treasurys at a pace of $35 billion per month beginning in February.

The Fed also signaled that it is likely to keep reducing its purchases in the coming months, citing a pickup in economic activity and improvement in the labor market.

In addition to proceeding with plans to scale back its bond buying, the Fed made no changes to its other main policy plank: its pledge to keep interest rates low for some time to come. It has pledged to hold rates steady "well past" the point that the unemployment rate falls below 6.5% as long as inflation remains low.

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