An upward revision in monsoon forecast for the June-September 2016 south west monsoon season from private weather forecaster Skymet and gains in European stocks aided the upmove on the domestic bourses, with the barometer index, the S&P BSE Sensex, and the Nifty 50 index snapping a four-day losing streak. The Sensex gained 95.53 points or 0.38% at 25,325.89, as per the provisional closing data. The Nifty 50 index rose 28.85 points or 0.37% at 7,759.90, as per the provisional closing data. Skymet revised higher forecast for the 2016 southwest monsoon to 109% of the long period average (LPA) from 105% of LPA predicted earlier. The announcement from Skymet hit the market towards the close of the trading session.
The Sensex rose 110.11 points, or 0.43% at the day's high of 25,340.47 in late trade. The barometer index index fell 48.89 points, or 0.19% at the day's low of 25,181.47 in early trade, its lowest level since 6 May 2016. The Nifty rose 30.50 points, or 0.39% at the day's high of 7,761.55 in late trade. The index shed 15.25 points, or 0.19% at the day's low of 7,715.80 in early trade, its lowest level since 6 May 2016.
Private weather forecaster Skymet said that conditions are favorable for the timely onset of the southwest monsoon in Kerala. This is in contrast with state-run weather office the India Meteorological Department (IMD) predicting a delay of about 6 days for the onset of the monsoon rains in Kerala from the normal onset date which is 1 June this year. The IMD also, last month, forecast good rains during the 2016 southwest monsoon season.
Skymet has cut its forecast of the quantum of rains in June 2016 to 87% of LPA from its earlier prediction of 90% of LPA. It has raised its forecast of the quantum of rains in July 2016 to 108% of LPA from earlier 105%. For August 2016, Skymet has raised its forecast to 113% of LPA from earlier 108%. For September 2016, Skymet has raised its forecast to 123% of LPA from earlier 115%.
Skymet expects the second half of the southwest monsoon season to be better than the first half. It also expects that the spell of good rainfall activities will spill over to October this year. Skymet expects good amount of rainfall in Central India and the West coast, excess rainfall in some pockets of Maharashtra and Madhya Pradesh, less rainfall in some pockets of Bihar and East Uttar Pradesh. Skymet's model suggests moderate risk of weak rainfall in Tamil Nadu, Northeast India and South Interior Karnataka.
According to Skymet, the El Ni is tapering down and it will collapse after the onset of the monsoon. There are more chances of getting into La-Ni in the latter part of this year. Skymet expects the total area under kharif foodgrains to increase by 15 to 20% in 2016 over last year. Area under oilseeds including soybean, groundnut, pulses (tur, moong and urad) and rice may increase. Area under cotton may reduce marginally. However, cotton production is expected to be better than last year. Total agricultural land under sugarcane may remain the same as previous year.
The market breadth indicating the overall health of the market was weak. On BSE, 1,599 hares fell and 907 shares rose. A total of 186 shares were unchanged. The BSE Mid-Cap index provisionally dropped 0.16%. The BSE Small-Cap index provisionally fell 0.65%. Both these indices underperformed the Sensex.
In overseas stock markets, European stocks reversed initial losses after the Federal Statistical Office in Germany said German economic growth accelerated at the start of the year helped by robust domestic demand. Confirming its earlier assessment of Europe's largest economy, Destatis said that Germany's gross domestic product grew at a quarterly rate of 0.7% in the first three months of the year, which translated into an annualized rate of 2.7%. Growth in the quarter was more than double the rate of 0.3% recorded in the fourth quarter of 2015.
Asian stocks dropped as speculation mounted that the US Federal Reserve will raise interest rates as early as next month. Investors in emerging markets are worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies.
US stocks finished lower yesterday, 23 May 2016, as the prospect that interest rates might rise as soon as next month weighed on utilities shares. Philadelphia Fed President Patrick Harker said yesterday, 23 May 2016, that he could see two to three rate hikes in calendar year 2016 and that if the US economy shows sufficient strength, a June increase would be appropriate. St. Louis Fed President James Bullard said holding rates too low for too long could cause financial instability. San Francisco Fed President John Williams said on Sunday, 22 May 2016, that the presidential election in the US this year wouldn't prevent the central bank from raising interest rates and that a hike in interest rate in June remains likely.
The minutes from the US Federal Reserve's April policy meeting released last week showed that Fed policy setters discussed the possibility of a June rate increase if the economy continued to strengthen. The Federal Open Market Committee next undertakes monetary policy review on 14-15 June 2016. The US central bank had lifted rates in December 2015 for the first time in nearly a decade.
The total turnover on BSE amounted to Rs 2599 crore, higher than turnover of Rs 2084.84 crore registered during the previous trading session.
Cement stocks gained on renewed buying. ACC (up 1.59%), Ambuja Cements (up 1.1%), and UltraTech Cement (up 1.4%), gained. Shree Cement fell 1.17%.
Grasim Industries rose 2.13%. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Tata Power Company (Tata Power) rose after the company announced strong Q4 results. The stock gained 1.77%. The company's consolidated net profit rose 126% to Rs 360 crore on 17% growth in revenue to Rs 9626 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 23 May 2016. Tata Power said that the company aims to increase the share of non-fossil fuel based power generation output to 30-40% by 2025, up from its earlier target of 20%.
Airline stocks declined as a weak rupee heightened concerns about its impact on operating costs. SpiceJet (down 5.36%), Jet Airways (down 3.89%) and InterGlobe Aviation (down 1.4%) declined. A weak rupee impacts aviation sector adversely as almost a third of operational expenses of aviation firms are denominated in dollars. Among the payments made in dollars, include rentals of leased aircraft, maintenance, spare parts and salary paid out to foreign crew.
In the foreign exchange market, the partially convertible rupee was currently hovering at 67.62, compared with its close of 67.4925 during the previous trading session.
VRL Logistics tanked 20% at Rs 315.10 on BSE after the company said its promoters may dilute a portion of their stake in the company to fund their proposed airline venture. The company said that promoters Vijay Sankeshwar and Anand Sankeshwar informed the board of directors of the company that they are currently proposing to enter the civil aviation industry by incorporating a separate company to undertake the business of a regional airline. The announcement was made after market hours yesterday, 23 May 2016. The promoters said that they have taken this in-principle decision after a lot of study and inputs from industry experts. They intend to promote this new airline and induct a professional management to manage the day to day operations and grow this business, the statement said. The promoters have assured the company's board that they will continue to hold a majority stake in the company. Vijay Sankeshwar and Anand Sankeshwar held 34.84% and 34.27% stake respectively in VRL Logistics as on 31 March 2016.
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