Market slips ahead of RBI policy

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Trading for the week started on a subdued note as key benchmark indices edged lower as investors maintained caution ahead of the Reserve Bank of India’s (RBI) monetary policy meeting. The barometer index, the S&PSensex, fell 65.58 points or 0.24% to settle at 26,777.45. The 50 index fell 19.75 points or 0.24% to settle at 8,201.05. The RBI is widely expected to keep its benchmark viz. the repo rate unchanged at a monetary policy review tomorrow, 7 June 2016, as it awaits the transmission of its previous cuts to the repo rate. The edged lower for the second trading session in a row. The Nifty snapped a three-day winning streak.

In overseas stock markets, main European markets witnessed a mixed trend. Earlier during the global day, most Asian stocks edged higher as a dismal US job report for May 2016 triggered expectations of a possible delay in interest rate increases from the US Federal Reserve. Investors in emerging markets, including India have been worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies. The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 14-15 June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.

US stocks fell during the previous trading session on Friday, 3 June 2016, after data showed that US employers in May added the fewest jobs in more than five years. The Labor Department said that nonfarm payrolls rose by 38,000 in May, the weakest performance since September 2010. Federal Reserve Governor Lael Brainard on 3 June 2016 called for the central bank to wait for more data before lifting interest rates as she said the jobs report shows the labor market has slowed.

The Sensex fell 65.58 points or 0.24% to settle at 26,777.45, its lowest closing level since 1 June 2016. The index fell 113.49 points or 0.427% at the day’s low of 26,729.54. The index rose 58.39 points or 0.21% at the day’s high of 26,901.42.

The Nifty 50 index fell 19.75 points or 0.24% to settle at 8,201.05, its lowest closing level since 1 June 2016. The index shed 34.75 points or 0.42% at the day’s low of 8,186.05. The index rose 13.90 points or 0.16% at the day’s high of 8,234.70.

The market breadth indicating the overall health of the market was negative. On BSE, 1,460 shares fell and 1,178 shares rose. A total of 133 shares were unchanged.

The BSE Mid-Cap index fell 0.09%. The decline in this index was lower than the Sensex’s decline in percentage terms. The BSE Small-Cap index rose 0.22%, outperforming the Sensex.

Among the sectoral indices on BSE, the S&P BSE Telecom index (down 1.97%), the S&P BSE Consumer Durables index (down 1.39%), the S&P BSE Healthcare index (down 0.79%), the S&P BSE Energy index (down 0.54%), the S&P BSE Oil & Gas index (down 0.54%), the S&P BSE Teck index (down 0.54%) and the S&P BSE IT index (down 0.33%), underperformed the Sensex. The S&P BSE Finance index (down 0.1%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.08%), the S&P BSE Bankex (down 0.07%), the S&P BSE Metal index (down 0.06%), the S&P BSE Power index (down 0.03%), the S&P BSE FMCG index (up 0.01%), the S&P BSE Auto index (up 0.10%), the S&P BSE Utilities index (up 0.22%), the S&P BSE Industrials index (up 0.29%), the S&P BSE Capital Goods index (up 0.47%), the S&P BSE Basic Materials index (up 0.55%) and the S&P BSE Realty index (up 0.80%), outperformed the Sensex.

Pharma stocks were mixed. Glenmark Pharmaceuticals (down 3.45%), IPCA Laboratories (down 2.69%), Piramal Enterprises (down 1.69%), Aurobindo Pharma (down 1.27%), Dr Reddy’s Laboratories (down 0.24%) and GlaxoSmithKline Pharmaceuticals (down 0.10%) edged lower. Alkem Laboratories (up 0.01%), Wockhardt (up 0.02%), Divi’s Laboratories (up 0.32%), Cipla (up 0.55%) and Strides Shasun (up 1.07%) edged higher.

Lupin declined 2.08%. Lupin today, 6 June 2016, announced that its US subsidiary Gavis Pharmaceuticals LLC. has received final approvals for its Voriconazole Tablets, 50 mg & 200 mg and Voriconazole Oral Suspension, 40 mg/mL from the United States Food and Drug Administration (USFDA). The drug is a generic version of PF Prism C.V’s Vfend Tablets, 50 mg & 200 mg and Vfend Oral Suspension, 40 mg/mL. Lupin will commence promoting the products in the US shortly. The drug is indicated for the treatment of some fungal infections for patients of 12 years of age and older. Vfend Tablets, 50mg & 200mg had annual sales of $92.8 million in the United States, as per IMS MAT March 2016 data while Vfend Oral Suspension, 40 mg/mL had annual US sales of $15.9 million as per IMS MAT March 2016 data.

Sun Pharmaceutical Industries declined 1.67%. The company on Saturday, 4 June 2016, announced that as a part of its manufacturing consolidation in the US, one of its wholly owned subsidiaries has entered into an agreement with Frontida BioPharm, Inc (Frontida) for divestment of its two oral solid dosage manufacturing facilities located at Philadelphia, PA, and Aurora, IL both in the US, along with 15 related pharmaceutical products. In connection with the transaction, Frontida has agreed to continue manufacturing certain products for Sun Pharma at these facilities on a contract basis for a predetermined period. Frontida has also agreed to offer employment to all production, quality and administrative personnel at the sites. The impact of this development on Sun Pharma’s consolidated financials and operations is not material, the company said. Sun Pharma did not disclose other details of the transaction.

Shares of state-run banks edged higher on comments from finance minister Arun Jaitley that the government will support state-run banks to commercially deal with bad loans. Indian Bank (up 3.09%), Union (up 2.52%), (up 1.96%), Punjab and Sind Bank (up 1.74%), (up 1.56%), (up 1.38%), (up 1.30%), Syndicate Bank (up 1.26%), Punjab National Bank (up 1.12%), IDBI Bank (up 1.09%), Vijaya Bank (up 0.99%), (up 0.80%), UCO Bank (up 0.59%), Dena Bank (up 0.52%), Bank of India (up 0.48%), (up 0.18%) and Corporation Bank (up 0.15%), edged higher.fell 0.88%.

Jaitley was quoted as saying at a news conference after a quarterly performance review meeting with the heads of state-run banks that banks should be empowered and constitutionally protected to conduct commercially prudent settlement of bad loans. Jaitley also said that the Indian Banks’ Association would meet later today, 6 June 2016, to discuss and suggest a mechanism to handle such settlements.

Stocks of most private sector banks edged lower. (down 1.6%), Kotak Mahindra Bank (down 0.54%), IndusInd Bank (down 0.49%), ICICI Bank (down 0.12%), HDFC Bank (down 0.09%), edged lower. Bank (up 0.33%) and Federal Bank (up 5.09%) edged higher.

Yes Bank rose 1.28% to Rs 1,062.65. The stock hit a high of Rs 1068.65 in intraday trade, which is also a record high for the counter.

Stocks of public sector oil marketing companies fell on rebound in crude oil prices. Indian Oil Corporation (down 1.37%) and HPCL (down 1.12%) edged lower. Higher crude oil prices could increase under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices. On the flip side, a recovery in the rupee against the dollar has eased concerns about higher crude import costs. A weak rupee raises the cost of imports. The government has already freed pricing of petrol and diesel.

BPCL fell 1.91% at Rs 993.55 as the stock turned ex-dividend for final dividend of Rs 15 per share for the year ended 31 March 2016. Before turning ex-dividend, the BPCL stock offered a dividend yield of 1.48% based on the stock’s closing price of Rs 1,012.85 on the BSE on Friday, 3 June 2016.

Shares of BPCL are currently trading cum bonus. The company had recommended a 1:1 bonus issue on 26 May 2016. The stock will go ex-bonus on 13 July 2016. BPCL has fixed 14 July 2016 as the record date for the bonus issue.

Shares of oil exploration and production firms declined. (down 1.06%), Reliance Industries (RIL) (down 0.21%) and ONGC (down 0.38%), declined. Oil India ended flat at Rs 351.25.

In global commodities markets, Brent crude oil futures edged higher on renewed hope for more cohesion within the Organization of the Petroleum Exporting Countries (OPEC) to contain supply glut. Brent for August settlement was currently up 53 cents at $50.17 a barrel. The contract had declined 40 cents or 0.79% to settle at $49.64 a barrel during the previous trading session.

In the foreign exchange market, the rupee strengthened against the dollar. The partially convertible rupee was hovering at 67.0075, compared with its close of 67.26 during the previous trading session.

Metal shares were mixed. National Aluminium Company (down 1.42%), Steel Authority of India (down 0.6%), Bhushan Steel (down 0.57%), Tata Steel (down 0.28%) and JSW Steel (down 0.12%), edged lower. NMDC (up 0.11%), Hindustan Zinc (up 0.80%), Hindalco Industries (up 1.33%), Jindal Steel & Power (up 1.39%) and Vedanta (up 1.67%), edged higher.

Copper edged higher in the global commodities markets. High Grade Copper for July 2016 delivery was currently up 0.76% at $2.129 per pound on the COMEX.

Mahindra & Mahindra (M&M) rose 1.19% to Rs 1,369.60, with the stock extending gains registered during the previous trading session triggered by the weather office retaining its forecast of above normal rains for the 2016 monsoon season. Shares of M&M had risen 1.55% to settle at Rs 1,353.45 during the previous trading session on Friday, 3 June 2016, after India Meteorological Department (IMD) retained its previous forecast of above normal rains for the 2016 southwest monsoon season (June to September). Good rains may boost demand for tractors. Mahindra & Mahindra (M&M) is the largest tractor maker in India in terms of market share.

Quantitatively, monsoon season rainfall for the country as a whole is likely to be 106% of the long period average (LPA) with a model error of plus/minus 4%, the IMD said after trading hours on 2 June 2016. In its first stage forecast issued on 12 April 2016, the IMD had forecast rainfall to be 106% of the LPA with a model error of plus/minus 5%.

IMD today, 6 June 2016, said that conditions continue to remain favorable for the onset of the southwest monsoon over Kerala during next 2-3 days. There has been delay in the onset of the monsoon rains in Kerala this year from the normal onset date which is 1 June. The arrival of the rains at the Kerala coast marks the onset of the June-September southwest monsoon season in India.

Telecom stocks declined. Bharti Airtel (down 2.62%), MTNL (down 2.05%), Tata Teleservices (Maharashtra) (down 2.05%), Reliance Communications (down 1.94%) and Idea Cellular (down 0.38%), edged lower.

Telecom tower company Bharti Infratel fell 1.98% to Rs 376.80.

The Sensex edged lower for the second trading session in a row. The Sensex has risen 109.49 points or 0.41% in this month so far (till 6 June 2016). The Sensex has risen 659.91 points or 2.53% in calendar year 2016 so far (till 6 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,282.84 points or 19.04%. The Sensex is off 1,800.88 points or 6.30% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,247.29 points or 10.82% from a record high of 30,024.74 hit on 4 March 2015.