Market breadth turns negative from positive

A range bound movement was witnessed as the barometer index, the S&P BSE Sensex, languished in negative zone and the Nifty 50 index alternately swung between positive and negative zone near the flat line in early afternoon trade. At 12:15 IST, the Sensex was down 25.10 points or 0.09% at 27,721.56. The Nifty 50 index was currently down 0.15 points at 8,508.55. The Sensex lost 56.70 points, or 0.20% at the day's low of 27,689.96 in morning trade, its lowest level since 12 July 2016. The barometer index rose 58.07 points, or 0.21% at the day's high of 27,804.73 at the onset of trading session. The Nifty fell 15.05 points, or 0.18% at the day's low of 8,493.65 in morning trade, its lowest level since 13 July 2016. The index rose 17.25 points, or 0.20% at the day's high of 8,525.95 at the onset of trading session.

 

The market breadth indicating the overall health of the market turned negative from positive in early afternoon trade. On BSE, 1,219 shares fell and 1,144 shares rose. A total of 150 shares were unchanged. The BSE Mid-Cap index was currently up 0.03%, outperforming the Sensex. The BSE Small-Cap index was currently down 0.03%. The decline in this index was lower than the Sensex's decline in percentage terms.

Investors are hopeful about the passage of the Goods and Services tax (GST) bill during the monsoon session of Parliament which began yesterday, 18 July 2016. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. The monsoon session of Parliament kicked off from 18 July 2016 and concludes on 12 August 2016.

In overseas markets, Asian stocks witnessed a mixed trend. Stocks in Japan rose for the sixth straight trading session in a row amid continued expectations that the Bank of Japan will soon roll out stimulus for the economy. The Nikkei 225 Average ended 1.37% higher. US stocks eked out small gains Monday, 18 July 2016, pushing both the Dow Jones Industrial Average and the S&P 500 Index to fresh all-time closing highs and the Nasdaq Composite Index to its highest finish of 2016. Stocks got a boost by a flurry of upbeat earnings reports from financial companies.

Bank stocks were mixed. Among state-run banks, Vijaya Bank (down 1.27%), UCO Bank (down 1.25%), Punjab National Bank (down 1.17%), United Bank of India (down 1.07%), Central Bank of India (down 0.98%), Andhra Bank (down 0.92%), Indian Bank (down 0.85%), Bank of India (down 0.77%), Union Bank of India (down 0.61%), Bank of Maharashtra (down 0.59%), Corporation Bank (down 0.47%), Allahabad Bank (down 0.4%) and Syndicate Bank (down 0.06%), edged lower. State Bank of India (up 0.04%), Canara Bank (up 0.10%), Punjab and Sind Bank (up 0.10%), Dena Bank (up 0.25%), IDBI Bank (up 0.55%) and Bank of Baroda (up 0.57%), edged higher.

Among private sector banks, IndusInd Bank (down 1.93%), HDFC Bank (down 1.07%), Axis Bank (down 0.52%) and Kotak Mahindra Bank (down 0.15%), edged lower. City Union Bank (up 0.21%), Federal Bank (up 0.50%) and ICICI Bank (up 1.73%), edged higher.

Yes Bank was down 1.04%. Global credit rating agency Moody's Investor Service, vide its credit opinion dated 18 July 2016, has maintained its long term rating on Yes Bank at 'Baa3/P-3' with stable outlook. Moody's said that Yes Bank's Baa3/Prime-3 foreign currency deposit ratings are underpinned by the bank's standalone credit strength or baseline credit assessment (BCA) of ba1 and one notch of government support. The bank's BCA of ba1 reflects its sound asset quality, consistent profitability, and small but rapidly growing franchise when compared with its Indian banking sector peers.

The bank's BCA also reflects potential weaknesses in Yes Bank's funding and liquidity profile. While the bank maintained an adequate loans to customer deposit ratio of 95% at end-March 2016, its higher reliance on corporate deposits relative to its peers creates risks in volatile markets. Moody's also said that Yes Bank may encounter operating challenges at a time when it is expanding its retail presence. While the bank's current level of CASA deposits remains below the domestic peer average, it has been building up its deposit base as well as increasing its branch network.

Capital goods shares were mixed. AIA Engineering (up 2.37%), SKF India (up 2.23%), ABB India (up 1.18%), Praj Industries (up 1.18%), Alstom T&D India (up 1.15%), Siemens (up 0.64%), Reliance Defence and Engineering (up 0.58%), Bharat Electronics (up 0.35%), Punj Lloyd (up 0.31%), ALSTOM India (up 0.12%) and Jindal Saw (up 0.09%), edged higher. Bharat Heavy Electricals (down 0.04%), Crompton Greaves (down 0.07%), Havells India (down 0.07%), BEML (down 0.13%), Thermax (down 0.49%) and Lakshmi Machine Works (down 0.56%), edged lower.

Engineering and construction major L&T was up 0.10% at Rs 1,576.50.

MindTree lost 5.89% after consolidated net profit declined 7.2% to Rs 123.50 crore on 0.6% growth in revenue to Rs 1327.60 crore in Q1 June 2016 over Q4 March 2016. The result was announced after market hours yesterday, 18 July 2016. In dollar terms, MindTree's consolidated net profit declined 5.8% to $18.50 million on 2% growth in revenue to $199 million in Q1 June 2016 over Q4 March 2016.

The company's CEO & Managing Director Rostow Ravanan said that while the global environment poses some short term challenges, the management remains confident that the company's investments are on the right track to accelerate growth for its clients and the company.

MindTree's board of directors at its meeting held yesterday, 18 July 2016, approved amalgamation of its wholly owned subsidiary Magnet 360, LLC subject to necessary approvals.

Camlin Fine Sciences rose 4.04% after the company said that the state level environment impact assessment authority, Gujarat has granted environmental clearance for the company's proposed manufacturing facility for Hydroquinone/Catechol and its down-stream products at Dahej SEZ, Bharuch District in Gujarat. The environmental clearance was granted with all the conditions recommended by the State Level Expert Appraisal Committee.

Meanwhile, global credit rating agency Fitch Ratings yesterday, 18 July 2016, affirmed India's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB-'. The outlook on the rating is stable. The affirmation of India's sovereign ratings balances a strong medium-term growth outlook and favourable external balances against a weak fiscal position and still-difficult business environment. Fitch expects the government's continued structural reform push to support GDP growth in the medium term. A resulting improvement in the business environment is also indicated by swelling foreign direct investment inflows. On the flip side, India still ranks lowest among sovereigns in the 'BBB' category in the World Bank's Ease of Doing Business index and Fitch does not expect change anytime soon.

According to the rating agency, the review of the Fiscal Responsibility and Budget Management Act leads to short-term uncertainty on the medium-term fiscal framework, but might also provide an opportunity if it brings the fiscal parameters closer in line with India's peers. Fitch estimates the banking system needs around $90 billion (Rs 6 lakh crore or 4% of GDP in FY 2017) of capital, while many public-sector banks are likely to find it difficult to access new capital from non-government sources.

Fitch said that the main factors that could lead to positive rating action include fiscal initiatives that would cause the general government debt burden to fall more rapidly than expected in the medium term. Positive rating action could also arise from improved business environment resulting from implemented reforms and persistently contained inflation which would support higher private investment and real GDP growth. The main factors that could lead to negative rating action include further deviation of the already high public-debt burden from the peer median, which may be caused by stalling fiscal consolidation or greater-than-expected deterioration in the banking sector's asset quality that would prompt large-scale sovereign financial support. Negative rating action could also arise from loose macroeconomic policy settings that cause a return of persistently high inflation levels and a widening current-account deficit which would increase the risk of external funding stress.

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