Sensex undergoes wild swings in late trade

Intense volatility was seen in late trade as the key benchmark indices weakened again soon after staging a strong intraday rebound in mid-afternoon trade. Investor sentiment was hit adversely as European stocks declined and as trading in US index futures pointed to a lower opening of US stocks later in the global day as US lawmakers failed to come up with a longer-term solution for the country's finances after sealing a last-minute deal on Wednesday, 16 October 2013, to temporarily raise the nation's debt ceiling and reopen government after a 16-day shutdown. The barometer index, the S&P BSE Sensex, hit its lowest level in nearly a week. The 50-unit CNX Nifty hit one-week low. The market breadth, indicating the overall health of the market alternately swung between positive and negative zone during the last one hour or so of trade. The Sensex was provisionally down 136.81 points or 0.67%, off 218.99 points from the day's high and up 35.39 points from the day's low.

Index heavyweight and cigarette maker ITC edged higher. Another index heavyweight Reliance Industries (RIL) also moved higher. IT stocks dropped as the rupee edged higher against the dollar. Bajaj Auto rose in choppy trade after the company reported better-than-expected Q2 results on Wednesday, 16 October 2013. Bank stocks were mostly lower after the latest data showed slower loan as well deposit growth of the banking sector than the Reserve Bank of India's full-year projection. Axis Bank rose in volatile trade as the private sector bank reported strong Q2 results.

The market slipped into the red after a positive start triggered by higher Asian stocks. A bout of volatility was witnessed as key benchmark indices recouped entire initial losses in morning trade. Intraday volatility continued as key benchmark indices trimmed gains after hitting fresh intraday high in mid-morning trade. Key benchmark indices alternately swung between positive and negative zone near the flat line in early afternoon trade. Key benchmark indices extended intraday losses and hit fresh intraday low in mid-afternoon trade as European stocks declined and as trading in US index futures indicated a lower opening of US stocks later in the global day as US lawmakers failed to come up with a longer-term solution for the country's finances after sealing a last-minute deal on Wednesday, 16 October 2013, to temporarily raise the nation's debt ceiling and reopen government after a 16-day shutdown. Intense volatility was witnessed in late trade.

As per provisional closing, the S&P BSE Sensex was down 136.81 points or 0.67% to 20,410.81. The index declined 172.20 points at the day's low of 20,375.42 in late trade, its lowest level since 11 October 2013. The index gained 82.18 points at the day's high of 20,629.80 in mid-morning trade.

The CNX Nifty was down 49.85 points or 0.82% to 6,039.20. The index hit a low of 6,032.55 in intraday trade, its lowest level since 10 October 2013. The index hit a high of 6,110.75 in intraday trade.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,240 shares declined and 1,222 shares gained. A total of 146 shares were unchanged. The breadth alternately swung between positive and negative zone during the last one hour or so of trade.

The total turnover on BSE amounted to Rs 1929.03 crore, higher than Rs 1902.47 crore on Tuesday, 15 October 2013. Indian financial markets were closed on Wednesday, 16 October 2013, on account of Bakri Id.

Index heavyweight and cigarette maker ITC rose 1.94%.

Index heavyweight Reliance Industries (RIL) rose 1.42% to Rs 879. The stock hit high of Rs 887.70 and low of Rs 865.25. The company early this week reported 1.5% growth in net profit to Rs 5490 crore on 14.2% growth in turnover to a record Rs 106523 crore in Q2 September 2013 over Q2 September 2012. Net profit rose 2.6% on 17.6% growth in turnover in Q2 September 2013 over Q1 June 2013.

RIL's gross refining margin (GRM) declined to $7.7 per barrel in Q2 September 2013, from $8.4 a barrel in Q1 June 2013 and $9.5 a barrel in Q2 September 2012.

IT stocks dropped as the rupee edged higher against the dollar. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

Wipro fell 3.25% to Rs 493.80. The stock had hit 52-week high of Rs 519.50 in intraday trade on Tuesday, 15 October 2013.

Tech Mahindra declined 3.55% to Rs 1,527. The stock's intraday high matched 52-week high of Rs 1,594 hit on Tuesday, 15 October 2013.

HCL Technologies declined sharply after reporting strong Q1 results. The stock plunged 7.1% to Rs 1,078. The stock had witnessed a pre result rally. The stock had hit record high of Rs 1,177 in intraday trade on Tuesday, 15 October 2013, ahead of the Q1 results. The company before trading hours today, 17 October 2013, said its consolidated net profit as per US accounting standards jumped 18.7% to Rs 1416 crore on 14% growth in revenue to Rs 7961 crore in Q1 September 2013 over Q4 June 2013. Earnings before interest, taxation, depreciation and amortization (EBITDA) jumped 29.5% to Rs 2093 crore in Q1 September 2013 over Q4 June 2013. EBITDA margin rose to 26.3% in Q1 September 2013 from 23.1% in Q4 June 2013.

Commenting on the company's first quarter earnings, Shiv Nadar, Chairman & Chief Strategy Officer, HCL Technologies, said: "Against the backdrop of encouraging macro economic trends, these results cement HCL's position as a company with a strong and differentiated business model. HCL remains well positioned in both existing and emerging momentum markets with exceptionally strong customer relationships driving sustainable growth".

Anant Gupta, President and CEO, HCL Technologies, said: "YoY growth of 42.8% in net income and 14.1% in revenues continues the 8 successive quarter of HCL's story of profitable growth. Our focus on Generation 2 propositions like Enterprise of the Future in ITO and ALT ASM in Application Services continues to drive the company's quality of revenue. HCL continues to strengthen its position in the momentum markets of the industry with Europe crossing a milestone run rate of $1.5 billion, reflecting a very healthy 23.6% growth YoY".

Anil Chanana, CFO, HCL Technologies, said: "With our layered hedging policy in place, we have been successful in delivering a Net Margin of 17.8% for this quarter, this being the 8 straight quarter of Net Margin expansion. This was supported by healthy Free Cash Flow to EBITDA conversion of 75% (On LTM Basis). We maintain our focus on shareholder value creation, and our Return on Equity remained at a high of 34%".

TCS dropped after reporting strong Q2 results. The stock lost 5.37% to Rs 2,099. The stock had witnessed a pre result rally. The stock had hit record high of Rs 2,258.05 in intraday trade on Tuesday, 15 October 2013, ahead of the Q2 results. The company's consolidated net profit rose 20.7% to Rs 4633 crore on 16.6% growth in revenue to Rs 20977 crore in Q2 September 2013 over Q1 June 2013. Operating margin stood at 30.1% in Q2 September 2013. The result was announced after market hours on Tuesday, 15 October 2013.

TCS said that growth in Q2 was broad-based with all industries contributing to this holistic performance. Growth was led by Life Sciences, Media, Energy & Utilities and BFSI. All core markets grew smartly with Europe, North America and UK leading the pack, TCS said. There was balanced growth across IT and other service lines led by Asset Leverage Solutions, Assurance, Enterprise Solutions, Engineering Services and Infrastructure, TCS said.

Commenting on the Q2 performance, TCS Chief Executive Officer and Managing Director, N Chandrasekaran said: "It has been another great quarter. We have demonstrated all-round strong growth across markets and industries, highlighted by efficient and rigorous execution. Our ongoing investments in industry-led solutions and our efforts to provide insights and articulate the relevance of the digital revolution to business is helping us gain mindshare with customers and differentiate the TCS brand in the market. We continue to see a robust demand pipeline across markets and a unique opportunity to strategically partner and participate with clients as they reimagine their future in multiple dimensions".

TCS Chief Financial Officer Rajesh Gopinathan said: "Strong volumes, currency tailwinds and firm execution helped us post industry leading operating margins in this quarter. Our ability to manage operations with a degree of discipline has helped maintain the tempo of investments needed to sustain growth as well as provide superior shareholder returns".

Infosys lost 1.88% at Rs 3,285.30. The scrip had hit 52-week high of Rs 3,360 in intraday trade on 11 October 2013.

Tata Motors lost 3.97% to Rs 373.65. The stock had hit record high hit of Rs 393 in intraday trade on Tuesday, 15 October 2013.

Bajaj Auto rose in choppy trade after the company reported better-than-expected Q2 results on Wednesday, 16 October 2013. The stock rose 0.74% to Rs 2,139.80. Three block deals were executed on the counter at Rs 2,175 per share on BSE today, 17 October 2013. A block deal of 1.37 lakh shares was struck at 10:21 IST. Another block deal of 3.62 lakh shares was executed at 10:21 IST. Third block deal of 5 lakh shares was hit at 10:38 IST.

Bajaj Auto's net profit rose 13% to Rs 837 crore on 3% rise in turnover to Rs 5299 crore in Q2 September 2013 over Q2 September 2012. The company announced Q2 result on Wednesday, 16 October 2013. The net profit of Rs 837 crore is the highest ever quarterly profit recorded by the firm so far. The company recorded an all time high operating EBITDA (earnings before interest, taxation, depreciation and amortization) of Rs 1204 crore in Q2 September 2013. The EBITDA is calculated before taking into account mark-to-market foreign exchange loss, Bajaj Auto said. EBITDA margin edged up to 23.1% in Q2 September 2013 from 21.3% in Q1 June 2013 and 18.7% in Q2 September 2012.

After payment of dividend and cash thereon amounting to Rs 1518 crore during Q2 September 2013, as on 30 September 2013, surplus cash and cash and cash equivalents stood at Rs 6516 crore. As on 30 June 2013, surplus cash and cash and cash equivalents stood at Rs 6391 crore.

The company said that the outperformance in margins can be attributed to factors including transforming itself into an Indian multi national company with international business contributing 40% of total revenue. Over the last five years, strategic initiatives taken in order to enter into difficult markets like Africa is yielding rich dividends. The benefits are now further enhanced with rupee depreciation, it said. The company has focused on high margin products with 75% of Bajaj Auto's revenue generated by business verticles which operate on EBITDA margins in excess of 20%. The company also said that it operates on an essentially variable cost structure with fixed cost, including depreciation, interest and even employee cost was under 8%. This protects the company from any slowdown in demand as being witnessed in the domestic market over last few quarters.

Bank stocks were mostly lower after the latest data showed slower loan as well deposit growth of the banking sector than the Reserve Bank of India's full-year projection. Punjab National Bank (down 1.2%), Bank of Baroda (down 2.63%), Bank of India (down 3.53%) and Union Bank of India (down 2.64%) dropped. State Bank of India was unchanged at Rs 1,621.60.

ICICI Bank shed 0.97%.

Banks' loans grew about 11% to Rs 58.46 lakh crore, while deposits rose 12% to Rs 75.64 lakh crore during the period from 22 March 2013 to 4 October 2013. The RBI has projected loans to grow at 15% and deposits by 14% in the current fiscal year ending in March 2014. Banks' investments in government securities rose 12% to Rs 22.47 lakh crore during the period from 22 March 2013 to 4 October 2013.

HDFC Bank edged higher in choppy trade, with the stock recovering from Tuesday's slide triggered by the private sector bank reporting decline in net interest margin (NIM) in Q2 September 2013. The stock was up 0.36% at Rs 653.75. The scrip hit high of Rs 659.80 and low of Rs 643.40 so far during the day. HDFC Bank's net profit rose 27.07% to Rs 1982.32 crore on 17.65% rise in total income to Rs 11937.69 crore in Q2 September 2013 over Q2 September 2012. The bank's net interest margin (NIM) declining to 4.3% in Q2 September 2013 from 4.4% in Q2 September 2012. The bank announced Q2 result during market hours on Tuesday, 15 October 2013.

HDFC Bank's ratio of net non-performing assets to net advances stood at 0.3% as on 30 September 2013, compared with 0.3% as on 30 June 2013 and 0.2% as on 30 September 2012. The bank's ratio of gross non-performing assets (NPA) to gross advances stood at 1.1% as on 30 September 2013, compared with 1% as on 30 June 2013 and 0.9% as on 30 September 2012.

Provisions and contingencies fell 1.02% to Rs 385.93 crore in Q2 September 2013 over Q2 September 2012. Provisions and contingencies dropped 26.78% in Q2 September 2013 over Q1 June 2013.

Axis Bank rose 1.26% to Rs 1094.95, with the stock turning volatile after declaring Q2 result during market hours today, 17 October 2013. The stock hit a high of Rs 1,108 and low of Rs 1,067. The bank's net profit rose 21.25% to Rs 1362.31 crore on 13.22% growth in total income to Rs 9375.08 crore in Q2 September 2013 over Q2 September 2012.

Axis Bank's other income which includes fee income and other related sources of revenue, rose 10.86% to Rs 1766.09 crore in Q2 September 2013 over Q2 September 2012. Axis Bank said that other income for Q2 September 2013 includes gain of Rs 281.62 crore on repatriation of accumulated profits of overseas operations and a loss of Rs 114.25 crore on transfer of government securities with book value of Rs 7566.36 crore from Available for Sale category to Held to Maturity category at a value of Rs 7452.11 crore in according with the Reserve Bank of India (RBI) guidelines.

Axis Bank's provisions and contingencies jumped 34.95% to Rs 687.49 crore in Q2 September 2013 over Q2 September 2012. Provisions and contingencies dropped 3.47% in Q2 September 2013 over Q1 June 2013.

Axis Bank's gross non-performing assets (NPA) stood at Rs 2734.47 crore as on 30 September 2013, higher than Rs 2489.68 crore as on 30 June 2013 and Rs 2191.01 crore as on 30 September 2012. The ratio of gross NPA to gross advances stood at 1.19% as on 30 September 2013, higher than 1.1% each as on 30 June 2013 and as on 30 September 2012. The ratio of net NPA to net advances stood at 0.37% as on 30 September 2013, higher than 0.35% as on 30 June 2013 and 0.33% as on 30 September 2012.

The bank's Capital Adequacy Ratio (CAR) as per Basel III norms stood at 15.85% as on 30 September 2013, compared with 15.87% as on 30 June 2013.

Hindalco Industries lost 0.89% to Rs 111.20 after media reports said that details of the 14th FIR in the coal blocks allocation scam which names former coal secretary PC Parakh and Aditya Birla Group Chairman Kumar Mangalam Birla reveals that Parakh changed the decision of the screening panel committee that was held in 2005 after a personal meeting with Birla. The stock was volatile. The scrip high of Rs 113.65 and low of Rs 109.65. Parakh allegedly abused his position to show undue favours to the Birla-owned Hindalco. The FIR states that Hindalco got a better deal at the cost of PSU Neyveli Lignite Corporation, reports said. The CBI FIR also says a screening committee in 2005, chaired by Parakh, had earlier rejected Hindalco's bid and allocated the coal block to Neyveli Lignite Corporation, reports said. The FIR goes on to allege there was a criminal conspiracy between Parakh, Birla and others to show undue favour to Hindalco

Hindalco on Tuesday, 15 October 2013, said that the company has followed every process required for allocation of coal completely as stipulated by the government. In a separate statement Hindalco's Managing Director D. Bhattacharya had said: "On the unfounded allegations, reported by the media, on the CBI FIR against Hindalco and Chairman Mr. Kumar Mangalam Birla, the reality of the matter is very different from what has been projected. In fact, the application for the Talabira II mine was made in 1996 by Indal, the Indian subsidiary of Alcan, the Canadian aluminium major. Indal was acquired by Hindalco in the year 2000, after which Hindalco pursued the matter further. The actual allocation of the mine was done in November 2005, which is nine years after the first application was made. In the interim, Hindalco made several representations to the Government as any corporation would normally make in such circumstances, and only through formal channels. To imply that our Chairman, Mr. Kumar Mangalam Birla, managed to overturn the decision of the Screening Committee, is preposterous. The truth of the matter is that the Talabira II and III mines together have been finally allotted jointly to Mahanadi Coal Fields and Neyveli Lignite, both public sector undertakings, with Hindalco having only a 15% stake in the joint venture. The project for which this mine was allocated is ready to commission later this month, whereas the clearances to permit mining have not been received so far. Consequently, no mining has been carried out. This will mean delayed returns from our project, which has been set up on a capex of over Rs 11000 crore. We hope this puts in perspective the struggle Hindalco has had to undergo for securing the coal and the irrecoverable economic loss that Hindalco has had to suffer. In the light of these facts, the allegations made are paradoxical".

In the foreign exchange market, the rupee surged against the dollar on speculation the budget debate that threatened a US default will prompt the US Federal Reserve to postpone slowing stimulus. The partially convertible rupee was hovering at 61.29, stronger than its close of 61.835/845 on Tuesday, 15 October 2013. Indian financial markets were closed on Wednesday, 16 October 2013, on account of Bakri Id.

Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.

Reserve Bank of India Governor Raghuram Rajan on Tuesday, 15 October 2013, said that the economy will pick up by the year-end thanks to the start-up of billions of dollars worth of stalled resource projects and a good monsoon season that will bolster agricultural production. He said about half of the $115 billion worth of stalled projects had been cleared. Rajan also said that the question of using interest rates to address inflation is more complicated in India than in the United States. "In the US you know there is a large interest rate-sensitive sector that is going to be affected when you raise interest rates ... But what if you have a large part of the country that is not connected directly to the financial system?" he said, referring to India's massive rural population.

The World Bank on Wednesday, 16 October 2013, sharply lowered its forecast for India's economic growth to 4.7% from 6.1% for the current fiscal year, citing a sharp slowdown in manufacturing and investment as well as negative business confidence. In a report released on Wednesday, the World Bank said that high headline inflation, an elevated current account deficit and rising pressure on fiscal balances from the depreciation of the rupee could impede the country's growth. Economic activity is expected to pick up in the second half of FY 2014, although the speed of economic recovery could be impacted by the country's present vulnerabilities, the World Bank said in its India Development Update report. The latest report forecasts economic growth to pick up to 6.2% in the 2014/15 fiscal year that begins next April.

European stocks edged lower on Thursday, 17 October 2013, as US lawmakers failed to come up with a longer-term solution for the country's finances after sealing a last-minute deal on Wednesday, 16 October 2013, to temporarily raise the nation's debt ceiling and reopen government after a 16-day shutdown. Key benchmark indices in UK, France and Germany were down 0.3% to 0.68%.

Most Asian stocks rose on Thursday, 17 October 2013, as investors heaved a sigh of relief after the US lawmakers on Wednesday, 16 October 2013, voted to reopen the US government and raise the nation's debt ceiling, avoiding a default. Key benchmark indices in Indonesia, South Korea, Japan and Taiwan rose 0.29% to 0.83%. Key benchmark indices in China and Hong Kong fell 0.21% to 0.57%.

Trading in US index futures indicated that the Dow could fall 63 points at the opening bell on Thursday, 17 October 2013. US stocks rose on Wednesday after US lawmakers agreed on a deal to end the 16-day political impasse and fund the government until Jan. 15, while raising the borrowing limit until Feb. 7.

The US House of Representatives and the US Senate on Wednesday, 16 October 2013, voted to restore federal operations, funding the government through Jan. 15, and to raise the debt ceiling until Feb. 7. The House passed the Senate-crafted bill by a 285-to-144 margin. US President Barack Obama said he will sign the legislation immediately, and federal workers are expected to return to work Thursday. Investors worldwide had been concerned that the US could default on its debt obligations, resulting in a disruption of business activity and long-running efforts to encourage global economic growth.

Chinese rating agency Dagong today, 17 October 2013, downgraded the United States to A- from A, citing the political conflict over the country's debt ceiling, according to media reports. The agency maintained a negative outlook on the sovereign rating and said the US government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future, according to reports. The downgrade came after US lawmakers on Wednesday, 16 October 2013, hammered out a last-minute deal to temporarily raise the debt ceiling and reopen government after a 16-day shutdown. On Tuesday, 15 October 2013, Fitch Ratings put the AAA credit rating on the US on negative watch.

The widely watched monthly US jobs report for September 2013 is among the data that weren't released during the 16-day government shutdown.

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 amid concerns about the strength of the economic recovery.

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