High volatility was witnessed on the first trading session of the week as key benchmark indices erased a lion's part of the intraday losses. With a small decline, the barometer index, the S&P BSE Sensex, reached its lowest closing level in more than a week. The 50-unit CNX Nifty registered miniscule gains for the day. The market breadth, indicating the overall health of the market turned positive from negative in late trade. The Sensex shed 16.05 points or 0.07%, up about 146 points from the day's low and off close to 138 points from the day's high.
The Sensex fell for the third day in a row today, 7 April 2014. From a record closing high of 22,551.49 on 2 April 2014, the Sensex has declined 208.04 points or 0.92% in three trading sessions. The Sensex has fallen 42.82 points or 0.19% in this month so far (till 7 April 2014). The Sensex has gained 1,172.77 points or 5.54% in calendar year 2014 so far (till 7 April 2014). From a record high 22,620.65 on 3 April 2014, the Sensex has declined 277.20 points or 1.23%. From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 4,894.74 points or 28.05%.
Coming back to today's trade, cement stocks gained on hopes of consolidation in the sector after the world's two largest cement makers, France's Lafarge and Holcim of Switzerland, agreed the terms of a merger, creating the world's biggest cement company with more than $40 billion in sales. UltraTech Cement scaled record high. Sun Pharmaceutical Industries rose while Ranbaxy Laboratories dropped after the two companies in a joint statement issued on Sunday, 6 April 2014, announced that they have entered into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. Shares of other pharma stocks declined.
The market was volatile. Key benchmark indices edged higher in early trade. Key benchmark indices trimmed gains after hitting fresh intraday high in morning trade after the Bharatiya Janata Party (BJP) announced the release of the party's manifesto for the Lok Sabha elections. Key benchmark indices slipped into the red in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in more than a week. The Sensex languished in the negative terrain in mid-afternoon trade as European stocks dropped in early trade there. Volatility ruled the roost as key benchmark indices trimmed losses in late trade.
The stock market remains closed tomorrow, 8 April 2014, on account of Ram Navami.
The S&P BSE Sensex shed 16.05 points or 0.07% to setttle at 22,343.45, its lowest closing level since 28 March 2014. The index declined 161.99 points at the day's low of 22,197.51 in afternoon trade. The index jumped 122.12 points at the day's high of 22,481.62 in morning trade.
The CNX Nifty rose 0.70 points or 0.01% to settle at 6,695.05, its highest closing level since 3 April 2014. The index hit a low of 6,650.40 in intraday trade, its lowest level since 28 March 2014. The index hit a high of 6,725.15 in intraday trade.
The BSE Mid-Cap index fell 32.26 points or 0.45% to settle at 7,165.36, underperforming the Sensex. The BSE Small-Cap index garnered 16.02 points or 0.22% to settle at 7,281.07, outperforming the Sensex.
The market breadth, indicating the overall health of the market, turned positive from negative in late trade. On BSE, 1,408 shares rose and 1,180 shares fell. A total of 103 shares were unchanged.
The total turnover on BSE amounted to Rs 1506 crore, lower than Rs 2513.53 crore on Friday, 4 April 2014.
The S&P BSE Metal index (up 0.24%) and the S&P BSE FMCG index (up 0.14%), outperformed the Sensex. The S&P BSE Teck index was unchanged for the day.
The S&P BSE Realty index (down 1.37%), the S&P BSE Consumer Durables index (down 1.24%), the S&P BSE Power index (down 0.69%), the S&P BSE Bankex (down 0.4%), the S&P BSE Healthcare index (down 0.25%), the S&P BSE IT index (down 0.13%), the S&P BSE Auto index (down 0.11%), the S&P BSE Oil & Gas index (down 0.1%) and the S&P BSE Capital Goods index (down 0.09%) underperformed the Sensex.
Among the 30 Sensex shares, 16 fell and the remaining shares rose.
Cement stocks gained on hopes of consolidation in the sector after the world's two largest cement makers, France's Lafarge and Holcim of Switzerland, agreed the terms of a merger, creating the world's biggest cement company with more than $40 billion in sales. Jaiprakash Associates (up 5.21%), Saurastra Cement (up 4.75%), Ambuja Cements (up 2.71%), Prism Cement (up 2.52%), Mangalam Cement (up 1.59%), HeidelbergCement India (up 1.4%), India Cements (up 0.92%), ACC (up 0.83%), Kakatiya Cement (up 0.58%) and Birla Corporation (up 0.48%), edged higher.
UltraTech Cement gained 3.24% to Rs 2,220.15 after hitting record high of Rs 2,230 in intraday trade.
Sun Pharmaceutical Industries rose 2.68% to Rs 587.25. Ranbaxy Laboratories dropped 3.12% to Rs 445.20, with the stock reversing direction after hitting 52-week high of Rs 505 in intraday trade. The two companies in a joint statement issued on Sunday, 6 April 2014, announced that they have entered into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. As per the share swap ratio, Ranbaxy shareholders will receive 8 shares of Sun Pharma for every 10 equity shares of Ranbaxy. This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on 4 April 2014.
The combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world and the largest pharmaceutical company in India. The combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. On a pro forma basis, the combined entity's revenues are estimated at $4.2 billion with EBITDA of $1.2 billion for the twelve month period ended December 31, 2013. The transaction value implies a revenue multiple of 2.2 based on 12 months ended 31 December 2013.
Dilip Shanghvi, Managing Director of Sun Pharma said, "Ranbaxy has a significant presence in the Indian pharma market and in the US where it offers a broad portfolio of ANDAs and first-to-file opportunities. In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma's strengths. We see tremendous growth opportunities and are excited with the prospects to create lasting value for both our shareholders through a successful combination of our franchises."
Arun Sahwney, Managing Director and Chief Executive Officer of Ranbaxy stated, "We believe this transaction brings significant value to all Ranbaxy shareholders. Sun Pharma has a proven track record of creating significant long-term shareholder value and successfully integrating acquisitions into its growing portfolio of assets. We are confident that Sun Pharma is the ideal partner to help us realize our full potential and are excited to participate in future value creation opportunities,".
The combination will create a large specialty pharmaceutical company with strong capabilities in developing complex products and exploiting first to file opportunities. A combined Sun Pharma and Ranbaxy will have a diverse, highly complementary portfolio of specialty and generic products targeting a spectrum of chronic and acute treatments. The combined business will have a strong portfolio of specialty and generic products marketed globally, including 445 ANDAs. Additionally, the combination will create one of the leading dermatology platforms in the United States.
The combination creates the fifth-largest generic company in the world and the largest pharmaceutical entity in India. The combined entity will have 47 manufacturing facilities across 5 continents. The transaction will combine Sun Pharma's proven complex product capabilities with Ranbaxy's strong global footprint, leading to significant value creation opportunities. Additionally, the combined entity will have increased exposure to emerging economies while also bolstering Sun Pharma's commercial and manufacturing presence in the United States and India. It will have an established presence in key high-growth emerging markets. In India, it will be ranked No. 1 by prescriptions amongst 13 different classes of specialist doctors.
The acquisition is expected to be accretive to Sun Pharma's cash earnings per share in the first full year. Additionally, Ranbaxy's shareholders will participate in the value creation of the combined company through their ownership of Sun Pharma shares. Sun Pharma expects to realize revenue and operating synergies of $250 million by third year post closing of the transaction. These synergies are expected to result primarily from topline growth, efficient procurement and supply chain efficiencies. As part of the transaction, Sun Pharma intends to leverage the human capital that has supported both companies, in order to drive future growth.
Daiichi Sankyo will become a significant shareholder of Sun Pharma and will have the right to nominate one director to Sun Pharma's Board of Directors. Ranbaxy has recently received a subpoena from the United States Attorney for the District of New Jersey requesting that Ranbaxy produce certain documents relating to issues previously raised by the FDA with respect to Ranbaxy's Toansa facility. In connection with the transaction, Daiichi Sankyo has agreed to indemnify Sun Pharma and Ranbaxy for, among other things, certain costs and expenses that may arise from the subpoena.
Shares of other pharma stocks declined after Sun Pharma announced the acquisition of Ranbaxy. Cipla (down 1.84%), Biocon (down 1.79%), Dr Reddy's Laboratories (down 1.64%), Lupin (down 1.55%), Aurobindo Pharma (down 1.49%), Cadila Healthcare (down 1.42%), Apollo Hospitals (down 1.17%), Wockhardt (down 1.05%), Ipca Laboratories (down 0.45%), GlaxoSmithKline Pharmaceuticals (down 0.08%) and Divi's Laboratories (down 0.06%), edged lower. Strides Arcolab (up 8.39%) and Glenmark Pharmaceuticals (up 0.93%), edged higher.
ING Vysya Bank fell 0.48% to Rs 599.75. The bank announced after market hours today, 7 April 2014, that pension, gratuity and leave encashment operate as defined benefit schemes for the benefit of a portion of the bank's employees. The calculation of the bank's obligation under these plans is performed by a qualified actuary using the projected unit credit method. One of the assumptions used by the actuary for calculating the bank's obligation under these plans is the estimated salary escalation rate (SER). For ING Vysya Bank, the weighted average increase in pay per annum for IBA employees (to whom the defined benefit pension scheme applies) is only 2.25%, as recruitment under IBA category has significantly slowed down since 2002 and 63.5% of the IBA employees have reached their maximum scales of pay with eligibility for only stagnated increments once in 2 or 3 years depending on their cadre or scale, the bank said in a statement. However, for the purpose of actuarial valuation, from the year ended 31 March 2013, the bank has increased its estimated SER for employees under the IBA category to 3.5%, in line with the Indian Bank's Association's (IBA) guidelines which required the SER to be adjusted further to take into account future wage revisions, the bank said.
The bank has since a communication from the Reserve Bank of India (RBI) dated 24 March 2014, requiring the bank to adopt the IBA mentioned SER of 5-5.5%, to be further adjusted upwards to take into account future wage revisions, before finalizing the results for the year ended 31 March 2014. ING Vysya Bank said it has approached RBI to permit the bank to adjust, the impact of increase in estimated SER from 3.5% to 5%, along with adjustments to further take into account future wage revisions, on bank's obligation under the defined benefit retiral plans, against the opening reserves. However, in the eventuality of RBI not acceding to the bank's request, the impact of this adjustment, which is estimated to be around Rs 60 crore pre-tax, will reflect in the bank's earnings for the quarter and year ended 31 March 2014, ING Vysya Bank said.
Capital goods shares were mixed. ALSTOM India (down 4.55%), Crompton Greaves (down 3.44%), Bharat Electronics (down 2.64%), BEML (down 2.32%), Praj Industries (down 1.89%), ABB (down 1.45%), Lakshmi Machine Works (down 1.06%), Thermax (down 0.83%), Havells India (down 0.42%), Jindal Saw (down 0.17%) and SKF India (down 0.06%), edged lower.
Suzlon Energy (up 12.4%), Punj Lloyd (up 5.94%), Alstom T&D India (up 1.16%), Pipavav Defence & Offshore Engineering Company (up 0.94%), AIA Engineering (up 0.89%), Larsen & Toubro (up 0.48%) and Siemens (up 0.11%), edged higher.
Bharat Heavy Electricals (Bhel) dropped 3.32% to Rs 177.85 after the company reported weak results on provisional basis for the year ended 31 March 2014. The company's net profit on provisional basis fell 51.2% to Rs 3228 crore on 19.51% decline in turnover to Rs 40366 crore in the year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013). The orders inflow declined 11.51% to Rs 28007 crore in FY 2014 over FY 2013. The provisional result was announced on Saturday, 5 April 2014. The company ended the year with an orderbook of Rs 101538 crore.
Reliance Communications (RCom) rose 3.41%. Reliance Industries (RIL) declined 0.02%. RCom today, 7 April 2014, said it has signed a master services agreement with RIL's telecom unit -- Reliance Jio Infocomm -- for sharing of RCom's extensive intra-city optic fiber infrastructure. Under the terms of the agreement, Reliance Jio Infocomm will utilize RCom's nationwide intracity fiber network for accelerated roll out of the state of the art 4G services in the country. The agreement is based on arm's length pricing at prevailing market prices.
This third agreement further strengthens the comprehensive framework of business co-operation between Reliance Jio and RCom, following the inter-city optic fiber sharing agreement signed in April 2013, and the nationwide towers infrastructure sharing agreement signed in August 2013, RCom said in a statement.
Separately, RIL on Saturday, 5 April 2014, said that neither the company nor IndiaWin Sports, which owns the IPL franchise Mumbai Indians, have bid for a franchise in the upcoming Indian Super League.
JSW Steel fell 1.08% to Rs 1,055. The stock reversed direction after hitting 52-week high of Rs 1,073.75 in intraday trade. The company today, 7 April 2014, said that its crude steel production rose 14% to 3.15 million tonnes in Q4 March 2014 over Q4 March 2013. Production of flat rolled products rose 8% to 2.48 million tonnes in Q4 March 2014 over Q4 March 2013. Production of long rolled products rose 10% to 0.48 million tonnes in Q4 March 2014 over Q4 March 2013. The figures for the corresponding period in the previous year are adjusted figures after giving effect to the scheme of amalgamation and arrangement between JSW Steel, JSW ISPAT Steel and others.
Crude steel production rose 9% to 12.17 million tonnes in the year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013). Production of flat rolled products rose 10% to 9.74 million tonnes in FY 2014 over FY 2013. Production of long rolled products rose 2% to 1.83 million tonnes in FY 2014 over FY 2013. The figures for FY 2013 are adjusted figures after giving effect to the scheme of amalgamation and arrangement between JSW Steel, JSW ISPAT Steel and others.
JSW Steel said that the company exceeded the guidance for crude steel production of 12 million tonnes for FY 2014 by 0.17 million tonnes despite tough business environment of slow growth, inadequate availability & poor quality of iron ore and shortage of natural gas.
Shares of organised retailers declined after the BJP in its manifesto for the Lok Sabha elections said that if the party comes to power after elections, it will allow foreign direct investment in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise but not in multi-brand retailing. Future Retail (down 5.13%), Trent (down 1.40%) and Shoppers Stop (down 0.90%), declined.
BJP said in its Lok Sabha poll manifesto that the party is committed to protecting the interest of small and medium retailers, SMEs and those employed by them.
DLF clocked the highest turnover of Rs 89.97 crore on BSE. HDIL (Rs 38.14 crore), Ranbaxy Laboratories (Rs 37.57 crore), TCS (Rs 32.73 crore) and Dr. Reddy's Laboratories (Rs 29.53 crore), were the other turnover toppers on BSE in that order.
Empower India reported highest volumes of 57.39 lakh shares on BSE. HDIL (53.02 lakh shares), DLF (52.54 lakh shares), Suzlon Energy (51.98 lakh shares) and Unitech (49.74 lakh shares), were the other volume toppers on BSE in that order.
The Reserve Bank of India conducted two term repurchase auctions on Friday, 4 April 2014, to add cash to the banking system.
The next major trigger for the stock market is Q4 March 2014 and year ended 31 March 2014 (FY 2014) corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the results to see if there is any revision in their future earnings forecast of the company for the year ending 31 March 2015 (FY 2015) and/or for the year ending 31 March 2016 (FY 2016). Indian companies will start reporting their Q4 and full year results from mid-April 2014. The result season will conclude in end-May 2014.
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.
On the political front, the Bharatiya Janata Party (BJP) today, 7 April 2014, accused its main political rival, Congress, of driving away investors during its decade in power and promised more business-friendly policies if it wins Lok Sabha polls. In its election manifesto, released today, 7 April 2014, in New Delhi, the BJP attacked the incumbent Congress-led government for using 'tax terrorism' against companies. The BJP said it would provide a non-adversarial administration and simplify the country's complicated tax laws. The BJP said that economic revival will be the party's priority if it comes to power after elections. In its manifesto, the BJP has promised faster infrastructure development, job creation and measures to control inflation. The BJP said that it will bring on board all state governments in adopting the GST, addressing all their concerns. The party also promised a massive low cost housing program.
The party said it wouldn't allow foreign direct investment (FDI) in multi-brand retail in India -- a sign a BJP government would rollback a key liberalization of the Congress government. Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise, BJP's manifesto stated. The BJP is committed to protecting the interest of small and medium retailers, SMEs and those employed by them, it said. The FIPBs (Foreign Investment Promotion Board) functioning shall be made more efficient and investor friendly, the manifesto stated.
The BJP and Telugu Desam Party on Sunday, 6 April 2014, finalised their pre-poll alliance in Andhra Pradesh. The BJP will contest on eight seats in Telangana and five seats in Seemandhra region of Andhra Pradesh. Telangana has 17 Lok Sabha seats and Seemandhra has 25. The BJP will contest on 47 Assembly seats out of 119 in Telangana and 15 Assembly seats out of 125 in Seemandhra. Assembly polls in Andhra Pradesh and Telangana are to be held along with the ongoing Lok Sabha polls.
A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. The 36 days long voting process began today, 7 April 2015, in 6 Lok Sabha constituencies of Assam and Tripura and will finally conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on June 1 and the new House has to be constituted by May 31.
European market edged lower on Monday, 7 April 2014, as technology shares tumbled following a selloff in America. Key benchmark indices in UK, France and Germany were off 0.56% to 1.13%.
A monthly meeting of the Monetary Policy Committee of the Bank of England's (BoE) for monetary policy review is scheduled on Thursday, 10 April 2014.
German industrial output rose for a fourth month in February in a sign that growth in Europe's largest economy continued to accelerate. Production adjusted for seasonal swings, climbed 0.4% from January, when it gained a revised 0.7%, the Federal Statistics Office in Wiesbaden said today.
Asian stocks edged lower on Monday, 7 April 2014, in the aftermath of a mostly disappointing US jobs report. Key benchmark indices in Hong Kong, Singapore and Japan were down 0.59% to 1.69%. Indonesia's Jakarta Composite rose 1.3%. South Korea's Kospi rose 0.08%. Markets in mainland China and Thailand are closed for a holiday.
The World Bank trimmed its 2014 growth forecast for developing East Asia but said the region's economies were likely to see steady growth in the next couple of years, helped by a pick-up in global growth and trade. The Washington-based development bank expects the developing East Asia and Pacific (EAP) region to grow 7.1% in 2014 and 2015, down from the 7.2% rate it had previously forecast for both years. Growth in 2016 is also seen at 7.1%, staying slightly below the 2013 growth rate of 7.2%.
Fitch Ratings has affirmed China's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'A+'. The issue ratings on China's senior unsecured foreign and local currency bonds are also affirmed at 'A+'. The Outlooks on the Long-Term IDRs are Stable. The Country Ceiling is affirmed at 'A+' and the Short-Term Foreign Currency IDR at 'F1'.
Trading in US index futures indicated that the Dow could fall 43 points at the opening bell on Monday, 7 April 2014. US stocks fell on Friday, 4 April 2014, with the Nasdaq Composite Index sliding the most in two months, after large technology stocks from Google Inc. to Yahoo Inc. plunged as investors sold the bull market's biggest winners.
Companies led the US job market past a milestone in March as private employment exceeded its pre-recession peak for the first time, progress that will allow the Federal Reserve to stick to its policy course. Payrolls excluding government agencies rose 192,000 after a 188,000 gain in February that was larger than first estimated, the Labor Department reported in Washington. That brought the job count to 116.1 million, beating the January 2008 high of 116 million. The jobless rate held at 6.7% even as half a million Americans entered the workforce.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 said after the conclusion of a monetary policy review that it will trim its monthly bond purchases by $10 billion to $55 billion. The Federal Reserve will end its bond-buying program before the end of the year with an interest-rate increase likely to follow in "around six months," Chair Janet Yellen said on 19 March 2014. Quarterly Fed forecasts on 19 March 2014 showed more officials predicting that the benchmark interest rate, now close to zero, will rise to at least 1% by the end of 2015 and 2.25% a year later.
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