Key benchmark indices surged and scaled their fresh lifetime high in early trade on speculation the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) will be able to form the next government at the centre and that Narendra Modi will be the next Prime Minister of India after Lok Sabha elections which conclude today, 12 May 2014. The barometer index, the S&P BSE Sensex crossed 23,000 level. The Sensex was up 334.32 points or 1.45%, up about 320 points from the day's low and off close to 20 points from the day's high. The market breadth, indicating the overall health of the market, was strong.
Index heavyweight Reliance Industries (RIL) rose after the company, British Petroleum (BP) and NIKO have issued a Notice of Arbitration on 9 May 2014 to the Government of India seeking the implementation of the "Domestic Natural Gas Pricing Guideline 2014" notified on 10 January 2014.
The market sentiment was boosted by data showing that foreign funds made heavy purchases of Indian stocks on Friday, 9 May 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 1268.78 crore on Friday, 9 May 2014, as per provisional data from the stock exchanges.
At 9:32 IST, the S&P BSE Sensex was up 334.32 points or 1.45% to 23,328.55. The index jumped 362.07 points at the day's high of 23,356.30 in early trade, a lifetime high for the index. The index rose 14.42 points at the day's low of 23,008.65 in early trade.
The CNX Nifty was up 99.60 points or 1.45% to 6,958.40. The index hit a high of 6,975.70 in intraday trade, a lifetime high for the index. The index hit a low of 6,862.90 in intraday trade.
The BSE Mid-Cap index was up 70.59 points or 0.95% to 7,526.68 The BSE Small-Cap index was up 44.76 points or 0.59% to 7,638.44. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong. On BSE, 823 shares gained and 268 shares fell. A total of 44 shares were unchanged.
Among the 30-share Sensex pack, 27 stocks gained and rest of them fell. State Bank of India (SBI) (up 3.55%), Axis Bank (up 3.43%) and ONGC (up 2.98%) edged higher from the Sensex pack.
United Spirits (USL) dropped 0.49%. The company said after market hours on Friday, 9 May 2014, sale of Whyte & Mackay for enterprise value of GBP 430 million to Emperador Inc, leading Phillipines based integrated manufacturer of alcoholic beverages. There is agreement to supply scotch whisky to USL for period of 3 years.Sale is subject lo USL shareholder approval as well as Indian and UK regulatory requirements and is pursuant to a commitment given to the UK Competition and Markets Authority.
Dr Vijay Mallya, Chairman of USL said, "I am very proud of what Whyte and Mackay had achieved under USI ownership. Moreover, I am delighted to be able lo pass on Whyte and Mackay into the hands of a new owner who is committed to realising the full potential of the business and whose vision for Whyte and Mackay is aligned with that of USL.
Andrew Tan, Chairman of Emperador said, " Whisky is the second fastest growing spirits segment in the World next to Brandy. With this acquisition Emperador will be exposed to two of the fastest growing spirits segments in the World. The global demand for Scotch Whisky has shown strong growth over recent years and is expected to continue this momentum going forward. We are continuously looking to enhance shareholder value through earnings accretive investments. We believe that Whyte and Mackay is a prized asset with excellent growth opportunity and its acquisition is in line with our plans to enhance our product portfolio. Whyte and Mackay has a global distribution network in over fifty countries that Emperador Brandy will have access to".
Index heavyweight Reliance Industries (RIL) rose 2.07% after the company, BP and Niko Resources have issued a Notice of Arbitration on 9 May 2014 to the Government of India seeking the implementation of the Domestic Natural Gas Pricing Guideline 2014 notified on 10 January 2014. The continuing delay on part of the Government of India in notifying the price in accordance with the approved formula for the Gas to be sold has left the Parties with no other option but to pursue this course of action.
Without this clarity, the Parties are unable to sanction planned investments of close to $4 billion this year. In addition, this will also delay the ability of the Parties to appraise and develop other significant discoveries made last year. Overall, the Parties were planning to invest $ 8-10 billion in the next few years to significantly increase production from the KGD6 block. This domestic production is essential for meeting India's energy needs and will also help conserve foreign exchange which is required for imports of natural gas into India at the present time. All of this requires clarity on pricing. The three Parties shall endeavour to work with the Government to achieve a prompt and efficient resolution of this dispute.
Separately, RIL said after market hours on Friday, 9 May 2014, that it has not received any notice of any petition so far filed by Mr. Prashant Bhushan. This appears to be one more in a series of attempts to create a controversy in a next generation foray which RIL is determined to create in the service of the nation, it said in a statement.
On the macro front, industrial production is seen remaining in contraction mode in March 2014. Industrial production is expected to shrink 1.4% in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. Industrial production declined 1.9% in February 2014. The government unveils data on industrial production for March 2014 after trading hours today, 12 May 2014.
The rate of inflation based on the combined consumer price index (CPI) for urban India and rural India is seen accelerating to 8.6% in April 2014, from 8.3% in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government unveils CPI data for April 2014 after trading hours today, 12 May 2014.
The rate of inflation based on the wholesale price index is expected to remain at 5.7% in April 2014, at the same level it was in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government will unveil data on inflation based on the wholesale price index (WPI) for April 2014 at about 12:00 noon on Thursday, 15 May 2014.
India's merchandise exports rose 5.26% to $25.63 billion in April 2014 over April 2013, data released by the government after trading hours on Friday, 9 May 2014, showed. Imports dropped 15% at $35.72 billion in April 2014 over April 2013. Oil imports declined 0.6% at $12.98 billion in April 2014 over April 2013. Non-oil imports dropped 21.5% at $22.74 billion in April 2014 over April 2013. The trade deficit for April 2014 was estimated at $10.09 billion, which was sharply lower than the trade deficit of $17.67 billion during April 2013.
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 ongoing Lok Sabha elections. The 36 days long voting process began on 7 April 2014 and will conclude today, 12 May 2014. Results of exit polls predicting the outcome of the election will likely start coming in from today evening. The counting of votes will take place on 16 May 2014 and the results are expected on the same day. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.
Investors are hoping that a stable government which will complete its full term of five years in office comes to power after the elections. A party or a pre-poll alliance will need 272 MPs to form government at the Centre, which is a simple majority in 543-member Lok Sabha. Investors are expecting measures for revival of the economy, business-friendly policies and good governance from the new government that comes to power after the elections. Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis.
There are expectations that the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) will be able to form the next government at the centre with support from some regional parties after Lok Sabha elections which conclude next week. Various opinion polls have forecast that the NDA with Narendra Modi as its prime ministerial candidate is leading the race to Parliament. Most opinion polls have forecast that the NDA will be unable to form the government on its own and that it will have to rely on support from smaller regional parties to form the government. For the first time in mid-April, an opinion poll for a television news channel showed the NDA winning a narrow majority of 275 seats.
Most Asian stocks rose on Monday after Chinese President Xi Jinping said the nation needs to adapt to a new normal in the pace of economic growth. Key benchmark indices in Indonesia, South Korea, Hong Kong, China and Indonesia were up 0.35% to 1.9%. Key benchmark indices in Taiwan, Singapore and Japan were down 0.15% to 0.59%.
China's growth fundamentals haven't changed and the country is still in a significant period of strategic opportunity, Xi reportedly said. At the same time, the government must prevent risks and take timely countermeasures to reduce potential negative effects, he said.
Japan's current-account surplus narrowed more than forecast in March as a surge in imports before last month's sales-tax increase trimmed gains from overseas investments. The excess of 116.4 billion yen ($1.14 billion) reported today by the Ministry of Finance in Tokyo. A 782.9 billion yen deficit on a seasonally adjusted basis was the largest in comparable data back to at least 1996.
US stocks rose with the Dow Jones Industrial Average ended at a record high on Friday, boosted by IBM, while a rebound in high-growth momentum names helped the broader market.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.
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