A bout of volatility was witnessed as key benchmark indices recovered after trimming gains in mid-afternoon trade. At 14:19 IST, the barometer index, the S&P BSE Sensex, was up 98.03 points or 0.35% at 28,176.38. The Nifty 50 index was currently up 29.40 points or 0.34% at 8,712.55. Positive cues from global stocks aided the upmove on the domestic bourses. Global 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 53.29 points or 0.19% at the day's low of 28,131.64 in mid-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, 1,538 shares rose and 1,110 shares fell. A total of 144 shares were unchanged. The BSE Mid-Cap index was currently up 0.87%. The BSE Small-Cap index was currently up 0.73%. Both these indices outperformed the Sensex.
In overseas stock markets, Asian and European stocks rose 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 settled 0.9% higher. In Hong Kong, the Hang Seng index settled with gains of 1.57%. 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.
Hero MotoCorp gained 2% after net profit rose 18.13% to Rs 883.10 crore on 7.84% rise in total income to Rs 8131.04 crore in Q1 June 2016 over Q1 June 2105. The result was announced during market hours today, 8 August 2016. Hero MotoCorp said that the company reported its highest ever quarterly net profit in Q1 June 2016. EBIDTA (earnings before interest, depreciation, tax & amortization) margin rose to 16.63% in Q1 June 2016 from 15.09% in Q1 June 2015.
The company's chairman, managing director and chief executive officer, Pawan Munjal, said that the first quarter of this fiscal carried forward the growth trajectory from the previous quarter. With above-average monsoon so far and the implementation of the 7th Pay Commission recommendations, the management remains cautiously optimistic about the remaining months of the current financial year.
Private bank stocks rose. HDFC Bank (up 0.08%), Kotak Mahindra Bank (up 0.19%), Axis Bank (up 0.25%), IndusInd Bank (up 1.22%) and Yes Bank (up 0.61%) rose.
ICICI Bank fell 0.51%. S&P Global Ratings on 5 August 2016 said that it had affirmed its 'BBB-' long-term and 'A-3' short-term foreign currency issuer credit ratings on ICICI Bank. The outlook on the long-term rating is stable. S&P Global Ratings also affirmed its issue ratings on the bank's outstanding senior unsecured notes and Basel II compliant tier 2 hybrid notes. The ratings were affirmed because S&P expects ICICI Bank to maintain its strong business position supported by its good business diversity, and its satisfactory capitalization and funding, despite weakening asset quality, S&P Global Ratings said.
S&P Global Ratings has lowered ICICI Bank's stand-alone credit profile (SACP) to 'bbb-' from 'bbb'. This reflects S&P's view that the bank's asset quality will remain under pressure over the next 12 months. S&P has revised its assessment of ICICI Bank's risk position to moderate from adequate.
PSU bank stocks fell. Andhra Bank (down 4.49%), Allahabad Bank (down 2.02%), Punjab National Bank (down 0.49%), Bank of Baroda (down 0.06%), Canara Bank (down 0.69%), IDBI Bank (down 1.22%), Bank of India (down 0.67%) and Vijaya Bank (down 1.65%) dropped. State Bank of India (SBI) rose 0.32%.
Union Bank of India lost 5.91% after net profit fell 67.9% to Rs 166.32 crore on 1.4% decline in total income to Rs 8916.51 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Saturday, 6 August 2016. Union Bank of India's domestic net interest margin (NIM) stood at 2.36% in Q1 June 2016 compared with 2.46% in Q1 June 2015. Global NIM stood at 2.28% in Q1 June 2016 as against 2.39% in Q1 June 2015.
The bank's average current and savings account (CASA) ratio improved to 29.5% in Q1 June 2016 from 27% in Q1 June 2015 and 29.2% in Q4 March 2016. Union Bank of India's gross non-performing assets (NPA) stood at Rs 27280.90 crore as on 30 June 2016 compared with Rs 24170.89 crore as on 31 March 2016 and Rs 14143.62 crore as on 30 June 2015. The ratio of gross NPA to gross advances stood at 10.16% as on 30 June 2016 as against 8.7% as on 31 March 2016 and 5.53% as on 30 June 2015. The ratio of net NPA to net advances stood at 6.16% as on 30 June 2016 compared with 5.25% as on 31 March 2016 and 3.08% as on 30 June 2015.
The bank's provisions and contingencies jumped 110.6% to Rs 1352.96 crore in Q1 June 2016 over Q1 June 2015. Provision coverage ratio stood at 50% as on 30 June 2016 as against 51% as on 31 March 2016 and 58% as on 30 June 2015.
Pharma stocks saw mixed trend. Cipla (up 0.86%), Dr Reddy's Laboratories (up 0.83%), Lupin (up 1.51%), Alkem Laboratories (up 2.6%), rose. Sun Pharmaceutical Industries (down 1.11%), Cadila Healthcare (down 1.02%), GlaxoSmithKline Pharmaceuticals (down 0.54%)
Aurobindo Pharma rose 0.36% 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.
Glenmark Pharmaceuticals rose 1.8% after the company said it received final approval for Triamcinolone Acetonide cream. Glenmark Pharmaceuticals said that its US-based subsidiary, Glenmark Pharmaceuticals Inc., USA, has been granted final approval by the United States Food & Drug Administration (USFDA) for Triamcinolone Acetonide cream USP, 0.1%, the generic version of Kenalog cream, 0.1% of Delcor Asset Corporation (which is no longer being marketed in the US). The announcement was made before trading hours today, 8 August 2016.
Triamcinolone cream is indicated for the relief of the inflammatory and pruritic manifestations of corticosteroid-responsive dermatoses. According to IMS Health sales data for the 12-month period ended June 2016, Kenalog Cream, 0.1% market achieved annual sales of approximately $43.6 million in the US market.
Caplin Point Laboratories rose 2.52% after consolidated net profit rose 27.2% to Rs 16.13 crore on 21.32% growth in income from operations to Rs 85.07 crore in Q1 June 2016 over Q1 June 2015. The result was announced after market hours on Friday, 5 August 2016. Meanwhile, the company's board of directors approved for 5-for-1 stock split proposal.
Wockhardt fell 9.37% after the US Food and Drug Administration issued import alert on the company's active pharmaceutical ingredients unit located in Ankleshwar, Gujarat. The company has already initiated required steps to address the concerns raised by USFDA and is putting all efforts to resolve the matter, Wockhardt said in a statement.
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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