Key benchmark indices continued to hover in positive zone in early afternoon trade. At 12:15 IST, the barometer index, the S&P BSE Sensex, was up 76.43 points or 0.27% at 28,154.78. The Nifty 50 index was currently up 19.45 points or 0.22% at 8,702.60. Gains in Asian stocks aided the upmove on the domestic bourses. Asian stocks rose after upbeat US job data for July 2016.
The Sensex rose 148.03 points or 0.53% at the day's high of 28,226.38 in early trade, its highest level since 1 August 2016. The barometer index rose 56.64 points or 0.2% at the day's low of 28,134.99 in early afternoon trade. The Nifty rose 40.35 points or 0.46% at the day's high of 8,723.50 in early trade, its highest level since 16 April 2015. The index rose 14.45 points or 0.17% at the day's low of 8,697.60 in early afternoon trade.
The market breadth indicating the overall health of the market was positive. On BSE, 1,476 shares rose and 1,001 shares fell. A total of 128 shares were unchanged. The BSE Mid-Cap index was currently up 0.74%. The BSE Small-Cap index was currently up 0.65%. Both these indices outperformed the Sensex.
In overseas stock markets, Asia markets were trading higher with sentiment underpinned by a stronger-than-expected US jobs report released on Friday, 5 August 2016. The US economy is the world's largest economy. Japanese stocks edged higher as the yen weakened against the dollar amid the dollar's broad strength driven up upbeat job data. The Nikkei 225 index closed 2.44% higher. Chinese shares shrugged off weak trade data. In mainland China, the Shanghai Composite was currently up 0.6%. In Hong Kong, the Hang Seng index was currently up 1.2%. China's exports continued to fall in dollar terms in July 2016 from a year earlier, as global demand for goods from the world's second-largest economy remained sluggish. Exports slid 4.4% in July 2016 from a year earlier, following a decline of 4.8% in June 2016. Imports fell 12.5% in July 2016, compared with an 8.4% decrease in June 2016.
US stocks edged higher during the previous trading session on Friday, 5 August 2016, with the S&P 500 index and the Nasdaq Composite index settling at all-time closing highs, after a stronger-than-expected jobs report. The US economy added 255,000 jobs in July 2016, which follows a stellar gain in June, demonstrating that the economy is still healthy, despite relatively muted gross domestic product. The unemployment rate was unchanged at 4.9% even as the labor-force participation rate edged up to 62.8%, suggesting the labor market is tightening.
IT stocks gained after upbeat US job data for July 2016. US is the biggest outsourcing market for the Indian IT firms. Wipro (up 1.08%), MindTree (up 0.61%), TCS (up 0.06%), Oracle Financial Services Software (up 0.29%), Tech Mahindra (up 1.54%), and MphasiS (up 1.5%) rose. HCL Technologies (down 0.27%) and Hexaware Technologies (down 0.25%) fell.
Infosys rose 0.56% to Rs 1,073.40 after a bulk deal of 8.99 lakh shares was executed on the scrip at Rs 1,067.35 per share at IST on BSE. On BSE, so far 9.59 lakh shares were traded in the counter as against average daily volume of 2.43 lakh shares in the past one quarter.
Cement stocks fell. Ambuja Cements (down 1.02%) and UltraTech Cement (down 0.81%) fell. Shree Cement rose 0.38%.
ACC shed 0.04% to Rs 1,720. The stock hit a high of Rs 1,738 in intraday trade so far, which is record high for the counter. The stock hit a low of Rs 1,716 so far during the day.
Grasim Industries was up 0.31% at Rs 5,285. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Max Financial Services and HDFC edged higher after Max Financial Services (MFSL) announced its board will consider the proposed scheme of arrangement amongst Max Financial Services, Max Life Insurance Company (MLIC) and HDFC Life Insurance Company and consequently, including Max India Limited (formerly Taurus Ventures Limited) as a party to such scheme for certain commercial reasons. Max Financial Services gained 1.96% HDFC rose 1.03%. The board will discuss it along with Q1 June 2016 results. It may be recalled that MFSL's board in its meeting held on 17 June 2016 approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of MLIC and MFSL into HDFC Life by way of a scheme of arrangement.
HDFC Life is a partnership between HDFC, India's leading housing finance institution and Standard Life, a global long term investment savings player. Currently HDFC holds 62% and Standard Life (Mauritius Holdings) 2006 holds 35% of equity in HDFC Life, while the rest is held by others.
MLIC is a joint venture between MFSL and Mitsui Sumitomo Insurance (MSI), a Japan headquartered global leader in insurance. MFSL holds 68% equity in MLIC, while MSI holds 26%.
Aurobindo Pharma rose 0.38% after the company announced that it has received final approval from the US Food & Drug Administration (USFDA) to manufacture and market Linezolid Injection, 600 mg/300 mL (2 mg/mL). The drug is bioequivalent and therapeutically equivalent to the reference listed drug product (RLD) Zyvox Injection, 600 mg/300 mL (2 mg/mL), of Pharmacia & Upjohn Company (Pharmacia). Linezolid Injection is an anti-infective used to treat infections caused by susceptible Gram-positive bacteria in some specific conditions. The approved product had an estimated market size of $87 million in the US for the twelve months ended June 2016 according to IMS data. The product is expected to be launched by Q2 September 2016, Aurobindo Pharma said.
Meanwhile, the amendments made by Rajya Sabha in the constitutional amendment bill on Goods and Services Tax (GST) will be taken up for its passage by the Lok Sabha this week. The amended GST constitutional amendment bill was passed by the Rajya Sabha last week. The passage of the constitutional amendment bill in the Rajya Sabha kicks off a legislative marathon in which the Parliament and state assemblies will need to pass further laws setting the rate and scope of the GST. The government plans to implement the nationwide GST from 1 April 2017.
The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.
On the macro front, the government in consultation with the Reserve Bank of India (RBI) has notified consumer price inflation target of 4% with upper tolerance level of 6% and lower tolerance level of 2% to be achieved by the Reserve Bank of India (RBI). The government notified the inflation target range of 2% to 6% in the Official Gazette on Friday, 5 August 2016 and it will be valid until 31 March 2021. The inflation target is to be fixed by the central government in consultation with the RBI once in every five years. According a statement from to the finance ministry, the key advantage of a range around a target is that it allows the Monetary Policy Committee (MPC) to recognise the short run trade-offs between inflation and growth but enables it to pursue the inflation target in long run over the course of business cycle. The range also accommodates data limitations, projection errors, short-run supply gaps and instability in the agriculture production, an important factor for CPI inflation, as food articles have a major weight in the CPI indices. It also allows to accommodate unanticipated short-term shocks even while nudging public inflation expectations on the centre of the range, to which the monetary policy will return the economy over the medium term, leading to transparency and predictability.
If the average inflation is more than the upper tolerance level of 4% + 2%, that is, 6%, or less than the lower tolerance level of 4% - 2%, that is 2%, for any three consecutive quarters, it would mean a failure to achieve the inflation target. Where RBI fails to meet the inflation target, in terms of the provisions of RBI Act, it shall set out a report to the Central Government stating the reasons for failure to achieve the inflation target, remedial actions proposed to be taken by RBI and an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.
The government has initiated the process of shifting to a framework of Monetary Policy Committee (MPC) for deciding interest rates. RBI currently sets the rates. The RBI is set to announce monetary policy decision at 11:00 IST tomorrow, 9 August 2016, after a policy review.
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