A bout of volatility was witnessed as key benchmark indices slipped into the red after opening higher. Shares of IT major Infosys edged higher after the company issued a guidance of 7% to 9% growth in revenue in dollar terms for the year ending 31 March 2015 (FY2015) at the time of announcement of Q4 and year ended 31 March 2014 (FY 2014) results before trading hours. Shares of other IT companies also gained after Infosys' FY 2015 revenue growth guidance. The barometer index, the S&P BSE Sensex, was down 208.79 points or 0.92%, off close to 320 points from the day's high. The market breadth, indicating the overall health of the market was negative.
Zee Entertainment Enterprises (Zee) rose after the company on Friday, 11 April 2014, said that Zee Turner and Star Den Media Services (Star Den) have announced their intention to discontinue the distribution of their channels through the three year old distribution joint venture (JV) Media Pro Enterprises India (MediaPro). Sun Pharmaceutical Industries (Sun Pharma) gained after the company announced a mandatory open offer to the equity shareholders of Zenotech Laboratories (Zenotech).
At 9:31 IST, the S&P BSE Sensex was down 208.79 points or 0.92% to 22,420.17. The index declined 209.45 points at the day's low of 22,419.51 in early trade. The index rose 108.35 points at the day's high of 22,737.31 in early trade.
The CNX Nifty was down 28.15 points or 0.42% to 6,748.15. The index hit a low of 6,745.10 in intraday trade. The index hit a high of 6,813.40 in intraday trade.
The BSE Mid-Cap index was off 22.39 points or 0.31% at 7,316.07. The BSE Small-Cap index was off 9.01 points or 0.12% at 7,514.17. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market was negative. On BSE, 697 shares dropped and 642 shares rose. A total of 66 shares were unchanged.
Infosys gained 3.22% after the company before trading hours today, 15 April 2014, said its consolidated net profit rose 4.1% to Rs 2992 crore on 1.2% decline in revenue to Rs 12875 crore in Q4 March 2014 over Q3 December 2013. Non-operational income jumped 16.4% to Rs 851 crore in Q4 March 2014 over Q3 December 2013. The results are as per International Financial Reporting Standards.
Infosys has forecast revenue growth of 7% to 9% in dollar terms for the year ending 31 March 2015 (FY 2015). The company has forecast revenue growth of 5.6% to 7.6% in rupee terms for FY 2015. The guidance in rupee terms is based on rupee dollar conversion rate of 60.
Infosys had liquid assets including cash and cash equivalents, available-for-sale financial assets, certificates of deposits and government bonds at Rs 30251 crore as on 31 March 2014, higher than Rs 27440 crore as on 31 December 2013.
Infosys said that the company's current policy is to pay dividends up to 30% of post-tax profits. The board has decided to increase the dividend pay-out ratio to up to 40% of post-tax profits with effect from FY 2014. The board of directors recommended a final dividend of Rs 43 per share for FY 2014.
Infosys and its subsidiaries added 50 clients in Q4 March 2014 and 238 clients in FY 2014.
There was gross addition of 10,997 employees during the quarter and 39,985 during the year by Infosys and its subsidiaries.
Commenting on the company's financial performance, S. D. Shibulal, CEO and Managing Director, Infosys said: "I am pleased that we have been able to double our growth rate for the full year compared to last year, though performance in the last quarter of FY 2014 has been disappointing. We have guided for a revenue growth of 7%-9% next year and remain firmly focused on building the growth momentum by making all the necessary investments in our business".
Rajiv Bansal, Chief Financial Officer, Infosys said: "Our cash and cash equivalents crossed Rs 30000 crore during the quarter. We have increased the dividend payout ratio to up to 40% of post-tax profits effective FY 2014 to enhance returns for our shareholders".
Shares of other IT companies also gained after Infosys' FY 2015 revenue growth guidance. Wipro (up 1.46%), Tech Mahindra (up 0.74%) and HCL Technologies (up 1.29%) gained.
Tata Consultancy Services (TCS) rose 1.66%. The company announced on Monday, 14 April 2014, that it had launched iElect - a gamified app on the Android platform that generates social insights about India's General Elections in 2014.
"The TCS iElect app is a completely new way to observe, analyze and participate in the social conversations around the world's largest general elections. The users of iElect app will have access to fascinating insights and trends on a real-time basis. The app harnesses the power of social media, big data, analytics and mobility to make sense of what seems to be a complex web of conversations. India has a large amount of smartphone users and almost 100 million first-time voters in general elections 2014. TCS iElect will be new and engaging for them to participate through the entire process with its gamified and interactive features," said Pradipta Bagchi, Vice President & Head corporate communication.
He also added we are excited to partner with Twitter India to make the entire election watching process fun and interactive.
Twitter India Market Director Rishi Jaitly said, We applaud TCS for their innovative iElect app that makes real time Twitter data and analytics around key political events & content accessible to every Indian. The app has opened up a unique engagement opportunity with Twitter content for our users.
TCS has put its expertise in big data, cloud computing, analytics and social media to help the Indian voter understand the General elections 2014 through its app TCS iElect (Beta version) - to cut through the clutter; drown out the noise and make sense of the world's largest democratic event.
On a consolidated basis, CMC's net profit rose 27% to Rs 89 crore on 11% increase in operating revenue to Rs 623 crore in Q4 March 2014 over Q3 December 2013. Earnings before interest, taxation, depreciation and amortization (EBITDA) jumped 46% to Rs 133 crore in Q4 March 2014 over Q3 December 2013. CMC said that the company received a favourable decision in a legal case with a customer in Q4 March 2014, which has resulted in increase in operating revenue by Rs 19 crore and increase in profit after tax by Rs 25 crore.
CMC is a subsidiary of TCS.
Index heavyweight Reliance Industries (RIL) dropped 0.63%. The company before market hours today, 15 April 2014, said it has commissioned its new polyester filament yarn (PFY) facility at Silvassa. The entire production from this facility has been successfully placed in the domestic and international markets, RIL said. With the commissioning of this ultra-modern polyester filament yarn facility, RIL's total PFY capacity, including the Malaysian facilities, is now in excess of 1.5 MMTPA, RIL said. This expansion further strengthens RIL's position as the world's largest producer of polyester fibre and yarn. The new PFY plant at Silvassa is the most automated and one of the most environment-friendly plants globally. It is co-located with RIL's existing texturizing facility at Silvassa, eliminating the packaging and logistics costs. This coupled with integration with PTA will make the Silvassa facility amongst the lowest cost polyester filament yarn producing sites globally, RIL said. The commissioning of this facility marks the beginning of the mega petrochemical expansion of RIL, the company said.
Asian Paints declined 0.34%. The company before market hours today, 15 April 2014, said Asian Paints (International), Mauritius, (APIL) a wholly owned subsidiary of the company, on 14 April 2014 has signed an agreement with the shareholders of Kadisco Chemical Industry PLC, Ethiopia (Kadisco) to acquire either directly or through its subsidiaries, 51% of the equity share capital of Kadisco. This acquisition is subject to applicable regulatory and other approvals. Kadisco is engaged in the manufacturing and selling of paints, other coatings and adhesives in Ethiopia.
State Bank of India (SBI) shed 1.34%. The state-run bank after market hours on Friday, 11 April 2014, said that it has priced on 10 April 2014 and will issue $1.25 billion unsecured fixed rate notes in two tranches of $750 million having a maturity of 5 years at a coupon of 3.622% payable semi-annually and $500 million having a maturity of 10 years at a coupon of 4.875% payable semi-annually, pursuant to a standalone issue under Rule 144A/Regulation S of the US Securities Act of 1933. The notes will be issued through the London branch of SBI and shall be listed on Singapore Stock Exchange Securities Trading, SBI said.
Tata Motors declined 0.95% after Tata Motors Group's global wholesales including Jaguar Land Rover declined 17.89% to 95,668 units in March 2014 over March 2013. Global wholesales of Jaguar Land Rover rose 1.47% to 43,311 units in March 2014 over March 2013.
Tata Group's global wholesales including Jaguar Land Rover declined 15.59% to 10.09 lakh units in the year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013). Global wholesales of Jaguar Land Rover rose 15.53% to 4.29 lakh units in FY 2014 over FY 2013.
United Spirits (USL) jumped 11.95% after Diageo Plc, the world's largest distiller, announced a voluntary open offer to raise its stake in the company. Diageo has announced an open offer to acquire additional up to 3.77 crore equity shares of USL, constituting 26% of the total fully diluted voting equity share capital of USL, at Rs 3,030 per share. Diageo will shell Rs 11448.92 crore for acquiring additional 26% stake in USL. Diageo currently holds 28.78% stake in USL. Its stake will rise to 54.78% after the open offer.
Tata Steel gained 0.95% after the company said that its total sales rose 6% to 24.07 lakh tonnes in Q4 March 2014 over Q4 March 2013. The company's total sales rose 14% to 85.16 lakh tonnes in the year ended March 2014 over the year ended March 2013. The company made announced the data on Monday, 14 April 2014.
Sun Pharmaceutical Industries (Sun Pharma) gained 0.53% to Rs 631.10 after the company after market hours on Friday, 11 April 2014 announced a mandatory open offer to the equity shareholders of Zenotech Laboratories (Zenotech). The open offer is for acquisition of up to 96.93 lakh fully paid-up equity shares of face value of Rs 10 each of Zenotech, constituting 28.1% of the fully diluted voting share capital of Zenotech as of the tenth working day from the date of closure of the tendering period, at an offer price of Rs 19 per share aggregating to Rs 18.41 crore, subject to the terms and conditions mentioned in the open offer document.
The open offer is part of the scheme of arrangement (Scheme) entered into between Sun Pharma and Ranbaxy Laboratories (Ranbaxy) pursuant to their April 6, 2014 announcement of acquisition of Ranbaxy by Sun Pharma in an all-stock transaction.
As on 31 March 2014, Ranbaxy holds 1.61 crore equity shares, representing 46.79% of the fully diluted equity and voting capital of Zenotech. The primary acquisition and the consequential implementation of the Scheme are subject to customary closing conditions including the approval of the shareholders of Ranbaxy and Sun Pharma, High Court approvals, and other regulatory approvals, the offer document stated.
Bharti Airtel rose 1.54% after the company after market hours on Friday, 11 April 2014 said that the High Court of Judicature at Bombay, on Friday, 11 April 2014, approved the Scheme of the Amalgamation of Airtel Broadband Services (formerly known as Wireless Business Service) a wholly owned subsidiary with the company. The certified copy of this Order is yet to be received, Bharti Airtel said. The amalgamation will be effective upon completion of requisite statutory requirements, it added.
Aditya Birla Nuvo declined 0.9%. The company before trading hours today, 15 April 2014, said that the company has resumed production at its urea plant at Jagdishpur in Uttar Pradesh with effect from 8 April 2014. The plant was under maintenance shutdown.
Zee Entertainment Enterprises (Zee) rose 0.05%. The company after market hours on Friday, 11 April 2014, said that Zee Turner and Star Den Media Services (Star Den) announced their intention to discontinue the distribution of their channels through the three year old distribution joint venture (JV) Media Pro Enterprises India (MediaPro), pursuant to the change in regulation regarding aggregators. TRAI's Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television System) (ThirdAmendment) Regulation, 2014 dated 10 February 2014, does not allow aggregators to bundle channels of multiple broadcasters in one bouquet. In light of this new development, Star Den and Zee Turner have decided to discontinue the distribution of their respective channels through the 50:50 distribution JV, MediaPro.
Going forward, Zee and Star would set up their independent Affiliate Sales team for their respective channels. The latest tariff order dated 31 March 2014, which permitted the inflation-linked hike of 27.5% in Reference Interconnect Offer rates (in two stages), is likely to provide a positive fillip to the subscription revenues, Zee said in a statement.
Mr. Punit Goenka, MD & CEO, Zee Entertainment Enterprises said, We had created this joint venture to address various anomalies in the analog market, curb piracy and introduce transparency for the benefit of all stakeholders. I must say that we have been very satisfied with the outcome of the partnership. In the last three years, with DAS getting implemented, India is truly on the path to digitization. First two phases of DAS have already been implemented. Given the new regulation, Uday and I have taken a call to continue the business at an independent level. I wish our JV partners all the very best in their future endeavors.
Mr. Uday Shankar, CEO, Star India said, MediaPro has been a truly delightful and path breaking partnership. Punit and I created MediaPro with the objective of accelerating digitization, promoting transparency and introducing best practices in distribution. Thanks to the commitment of both parties the JV has delivered exceptionally well on each of these. I am proud to say that MediaPro also led the industry consensus for the most efficient way of moving to a digital domain. This in turn allowed us to offer better content to our viewers. In the light of new regulation, both partners have decided to build independent affiliate sales. I take this opportunity to compliment the entire MediaPro team lead by Arun Kapoor for creating a best-in-class organization that helped pioneer digital transformation of cable.
On the macro front, India's index of industrial production (IIP) dipped 1.9% in February 2014, snapping 0.8% growth recorded in the previous month. IIP recorded decline for six out of 11 months in FY2014 till February 2014. The sharp decline in the output of manufacturing sector at 3.7% in February 2014, mainly led to dip in IIP during February 2014. Meanwhile, the output of mining sector rose 1.4%, while the electricity generation surged 11.5% in February 2014. The data was announced after market hours on Friday, 11 April 2014.
The rate of inflation based on the wholesale price index (WPI) is seen edging up to 5.3% in March 2014, from 4.7% in February 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government is scheduled to announce WPI inflation data for March 2014 at 12 noon today, 15 April 2014.
The rate of inflation based on the consumer price index (CPI) is seen inching up to 8.2% in March 2014, from 8.1% in February 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government is scheduled to announce CPI inflation data for March 2014 at 17:00 IST today, 15 April 2014.
Global credit rating agency Fitch Ratings after trading hours on Friday, 11 April 2014, affirmed India's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB-'. The issue ratings on India's senior unsecured foreign and local currency bonds are also affirmed at 'BBB-', Fitch said. The outlooks on the Long-Term IDRs are stable, the rating agency said. The Country Ceiling is affirmed at 'BBB-' and the Short-Term Foreign Currency IDR at 'F3', it said.
India's sovereign ratings benefit from relatively high real GDP growth: the five-year average is 6.7%, compared with the median of 3.2% for peers in the 'BBB' rating category (sovereigns rated 'BBB-', 'BBB' and 'BBB+'). However, the Indian economy has lost much of its dynamism in recent years and the average is coming down, the rating agency said. Fitch forecasts real GDP growth to rise to 5.5% in the year ended 31 March 2015 (FY 2015) and 6% in the year ended 31 March 2016 (FY 2016), from 4.7% in the year ended on 31 March 2014 (FY 2014).
The course of the Indian economy is uncertain in light of the on-going parliamentary elections, with the results due to be announced on 16 May 2014, the rating agency said. Once the next coalition starts implementing its economic policies, it will become clearer whether the economy can return to a higher sustainable growth path or whether it remains stuck at current levels, it said. A policy push that includes structural and governance reforms, fiscal consolidation and efforts to rein in inflationary pressures would likely require a coherent coalition with a strong electoral mandate, the rating agency said.
Fiscal consolidation remains critical to the rating, as both the general government budget deficit of the Centre and the States combined (7.3% of GDP) and the gross general government debt (64.7%) are much higher than 'BBB' category medians (respectively -2.5% of GDP and 40% of GDP), Fitch said. The central government seems to have met its budget deficit target of 4.8% of GDP (including privatization receipts) for FY 2014, despite the looming elections. But this was only achieved through substantial one-off measures, such as special dividends by state companies, and deferral of bill payments and capital expenditure, which raise questions about the feasibility of a fiscal consolidation process over the long run, Fitch said. Credibility of the government's fiscal policy would be strengthened through the implementation of a clear strategy to reach the Fiscal Responsibility and Budget Management Act's consolidation path towards a general government deficit of 3% of GDP by FY 2017, Fitch said.
India's standards of governance and business environment are relatively weak and constrain its investment potential. Fitch expects a gradual pick-up in investment in its baseline scenario once the election uncertainty dissipates. The clearance of close to 300 investment projects by the Cabinet Committee on Investment should facilitate investment activity. However, some of these projects may no longer be viable or may still face difficulties at the state level, Fitch said. More structural measures could cause investment to take off decisively, as illustrated by India's low score for World Bank indicators related to the ease of doing business (28.3 percentile compared with 70.7% for 'BBB' peers) and governance (48.3 percentile compared with 54.6).
India's inflation is high at a five-year average of 10.2% compared with the 'BBB' peer median of 4.2%. However, the Reserve Bank of India (RBI) seems more determined than in the past to bring down inflation, as evidenced by recent policy rate hikes. Clarity on potentially a new monetary policy framework would likely contribute to lower inflation expectations, subsequently feeding through to lower actual inflation levels. Nonetheless, some structural factors driving inflation, including inefficiencies in food distribution, are in the realm of the government rather than the RBI, Fitch said.
The rating agency said that India's external position continues to be strong, given the high level of foreign exchange reserves of $304 billion or 6.1 months of current account receipts cover (compared with the 'BBB' peer median of 4.8 months) and low net external debt of 4.4% of GDP (compared with a 9.2% 'BBB' peer median). This provides a thick cushion in case of renewed pressures on the rupee and other asset markets. The authorities reacted effectively to the market jitters in 2013 related to the expectations surrounding the US Federal Reserve tapering its stimulus, helping lower the current account deficit from 4.8% of GDP in FY 2013 to an expected 1.9% of GDP in FY 2014, Fitch said.
In a number of respects the Indian economy is less developed than investment grade peers, Fitch said. India's average per capita income remains low at $1,543 in 2013 compared with the 'BBB' range median of $10,778. The UN Human Development Index indicates relatively low basic human development.
The profitability and capital position of the banking sector will likely remain under pressure, especially for public sector banks, as asset quality continues to deteriorate in the context of a weak macro environment, Fitch said. Non-performing loans increased to 4.2% of total assets in September 2013. Nonetheless, Fitch does not view banks' balance sheets as a material risk to the public finances at this stage, the rating agency said.
Since the rating outlook is stable, Fitch does not currently anticipate developments with a high likelihood of leading to a rating change. However, future developments that could individually or collectively, result in negative rating action include deviation from the fiscal consolidation path in such a way that it results in continuation of large general government budget deficits, a prolonged period of disappointing real GDP growth, a loose macro policy setting that would cause inflationary pressures to persist and/or the current account to widen to such an extent that it would lead to external funding stress, greater-than-expected deterioration in the banking sector's asset quality that would prompt large-scale financial support from the sovereign, Fitch said.
Future developments that could individually or collectively result in positive rating action include sustained fiscal consolidation or fiscal reforms which lead to a sharp decline in the ratio of gross general government debt to GDP, new reform momentum with the implementation of far-reaching reforms that raise the potential growth rate, establishing a credible low inflation environment, Fitch said.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.
A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. The 36 days long voting process began on 7 April 2014 and will conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.
Most Asian stocks rose for the first time in three days on Tuesday after the largest jump in US retail sales since 2012 added to optimism that the recovery in the world's biggest economy is intact. Key benchmark indices in Japan, Singapore, Indonesia, and Taiwan were up 0.3% to 0.9%. Key benchmark indices in South Korea, Hong Kong and China fell 0.09% to 0.78%.
China's broadest measure of credit fell 19% from a year earlier in March and money supply grew at the slowest pace since 2001, data from the People's Bank of China showed today. Aggregate financing was 2.07 trillion yuan ($333 billion) from 2.55 trillion yuan a year earlier. New yuan loans were 1.05 trillion yuan. M2, China's broadest measure of money supply, rose 12.1% in March from a year earlier.
US stocks rebounded from the worst weekly losses in two years on Monday, weathering a selloff at the start of the final hour, after data showed retail sales increased the most since 2012 and Citigroup Inc. earnings unexpectedly rose.
American retailers warmed up in March as the winter chill faded -- and it wasn't just car dealers who benefited. Sales jumped a greater-than-forecast 1.1%, the biggest gain since September 2012, following a 0.7% advance in February that was more than twice as large as previously reported, Commerce Department figures showed.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 decided after the conclusion of a monetary policy review to trim its monthly bond purchases by $10 billion to $55 billion.
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