Stocks
Nifty, Sensex, Bank Nifty on a downtrend – Wednesday closing report
Nifty may get support near 8,000 while Bank Nifty may fall to 17,000, if it goes below today’s low
 
We had mentioned in Tuesday’s closing report that Nifty is headed higher if it manages staying above 8,300. In line with negative closing of US indices on Tuesday and the most of the Asian indices closing in the red on Wednesday the indices back home opened in the negative and suddenly started hurtling lower. After barely half and hour, they had fallen by more than 1%. 
 
Sensex opened at 27,473, while Nifty opened at 8,317. Immediately after hitting a high at 27,501 and 8,332 the indices moved lower. At the end of the session the index hit a low at 26,678 and 8,083. Sensex closed at 26717 (down 723 points or 2.63%) while Nifty closed at 8,097 (down 228 points or 2.74%). NSE recorded a higher volume of 89.37 crore shares. Bank Nifty too lost heavily today. The index opened at 18,437 and after hitting a high at 18,580 the index moved lower to the level of 17,758 and closed at 17,800 (down 672 points or 3.64%). India VIX rose 13.27% to close at 19.6700.
 
The seasonally adjusted HSBC India Services Business Activity Index declined to a three-month low of 52.4 in April from 53 in March. On the positive side, panellists' confidence regarding the one-year outlook for activity improved, indicating that firms are optimistic the current deceleration in growth is a temporary soft patch.
 
The Real Estate (Amendment) Bill was listed for consideration and passing in Rajya Sabha yesterday, 5 May 2015, but opposition members objected to this, saying Housing and Poverty Alleviation Minister Venkaiah Naidu had assured the House that it will be brought only after consultations with various parties. The opposition parties insisted on sending the bill to a Select Committee. Sensing the mood, the government said it was not insisting on taking up the bill although it had been listed for consideration. The Lok Sabha on Wednesday passed the much-delayed and -debated Goods and Services Tax (GST) bill despite a walkout by the Congress party. The bill is likely to get support from most opposition parties in Rajya Sabha.
 
NMDC today said Life Insurance Corporation of India (LIC) has acquired almost 8 crore of its shares shares worth over Rs 1,116 crore in a market purchase. Post the share purchase, LIC's stake in NMDC has risen to 10.124% from 8.111%.
 
Ajanta Pharma rose 5.33% to close at 1411.60. It was the top gainer in ‘A’ group on the BSE. HDIL (10.13%) was the top loser in ‘A’ group on the BSE. Bharti Airtel (0.80%) was the only gainer in the Sensex 30 pack while BHEL (6.21%) was the top loser in the pack.
 
All the sectoral indices on the BSE fell, in the range of 1.65% to 4.24%. BSE Capital Goods (4.24%) was the top loser.
 
On Tuesday US indices closed in the red. Trade-deficit report indicated that the nation's trade gap hit its highest level in seven years. The widening trade deficit suggests that the US gross domestic product reading will go from a meagre 0.2% to negative territory when figures are revised later this month.
 
Asian indices which were trading today closed mostly in the red. Jakarta Composite (0.48%) was the only gainer while the top loser was Shanghai Composite (1.62%) was the top loser.
 
The HSBC China Services Purchasing Managers' Index rose to a four-month high of 52.9 from 52.3 in March, HSBC Holdings PLC said today suggesting activity outside the nation's factories improved modestly.
 
European indices were trading in the green. US Futures too were trading higher. Greece has reportedly made a loan repayment to the International Monetary Fund of 200 million euros ($224.9 million). The Greece government now faces a €750 million ($832 million) debt repayment to the IMF which is due on 12 May 2015. In the UK, Parliamentary Election is scheduled tomorrow, 7 May 2015.

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KPIT Technologies stock tanked before the results
The share price of KPIT Technologies fell sharply before the weak March quarter results
 
In just over a month, KPIT Technologies tanked 53% to Rs106 as on 30 April 2015, from Rs224 as on 3 March 2015. Prior to the results announcement on 28 April 2015, the stock had already tanked 31%. On the day after the results the stocks went down another 20% and got locked in the lower circuit. Why was there such a sharp correction before the results? There was a sequence of events that unfolded over the past two months.
 
As on 31 December 2015, the promoters of KPIT Technologies had pledged around 9.73% of their stake. On 5 March 2015, Kotak Mahindra Bank, in whose favour 600,000 shares were encumbered, released 250,000 shares. Then again on 9 March, the promoters took back another 100,000 shares pledged to the Bank, leaving the Bank with 250,000 pledged shares. By this time the stock price fell by 5% to Rs214 from the peak of Rs224 on 9 March. The release of pledged shares took place after the promoters had pledged 250,000 shares to another related entity—Kotak Mahindra Investments on 18 February. 
 
On 16 March, the technology solutions company issued an update stating their Q4FY2015 revenues will be flat as compared to the revenues of the same quarter in the previous year citing a negative cross currency impact. Further, they stated that there will be marginal growth in profit after tax for the same period. This sent the stock into another downtrend. On 19 March the stock closed at Rs182, down 19% from the peak.
 
After Kotak Mahindra Bank released as much as 350,000 shares, the promoter pledged another 60,000 shares to Kotak Mahindra Investments, increasing the number of shares pledged to the finance company to 310,000.
 
On 26 March 2015, promoters pledged 20,000 shares to Kotak Mahindra Investments according to disclosures on the BSE. On 26 March the stock price was around Rs180. Then again on 22 April, as the price move lower, the promoters pledged another 40,000 shares to Kotak Mahindra Investments. The price of the stock bottomed to around Rs153.
 
Poor results made matters worse. Though revenues increased by around 14% year-on-year in the quarter ended March 2015, operating profit declined nearly 30% over the same period. Operating profit margins which were around 22% in the previous quarters declined to 14% in the latest quarter.
 
The issue of pledged shares has gained importance after it was discovered that the entire promoter stake of the fraud-hit Satyam Computers was pledged with various financial institutions. Securities & Exchange Board of India has since made it mandatory for companies to disclose details related to pledge shares.

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British Petroleum's application for retailing jet fuel rejected
The government has rejected British oil major BP's application for selling aviation turbine fuel (ATF) to airlines because the company's investment does not qualify it for a retailing licence, Petroleum Minister Dharmendra Pradhan said on Wednesday.
 
"To get marketing rights for transportation fuels, namely, Motor Spirit (MS), High Speed Diesel (HSD) and Aviation Turbine Fuel (ATF), applicants must meet the requirements that inter alia include investment or proposed investment of Rs.2,000 crore in exploration or production, refining, pipelines or terminals," Pradhan told the Rajya Sabha in a written reply.
 
"With reference to this application dated June 11, 2014, the directorate general of hydrocarbons has reported that BP's share of expenditure was $508 million between 2011-12 and 2013-14 of which the capital expenditure component and operational expenditure component is $171 million and $337 million, respectively."
 
"This did not meet the joint requirements of Clause 3(I) and 3(IV) of the Marketing Resolution dated March 8, 2002 and thus the application was rejected," he added.
 
BP Exploration (Alpha) Ltd., a wholly-owned subsidiary of BP, had submitted an application for authorisation to market ATF, or jet fuel, claiming to have invested $477 million in India.
 
Pradhan said that of the $477 million invested in India, $259 million was said to be capital investment and another $2.3 billion was proposed to be further invested.
 
BP's $7.2 billion spent in buying 30 percent stake in 21 exploration blocks of Reliance Industries in the eastern offshore is not being considered as capital investment.
 
To qualify for a fuel retailing licence as per the 2002 fuel retailing guidelines, a company should have made capital investment of Rs.2,000 crore, or $500 million.
 
The petroleum ministry had written to BP in March that it could apply afresh, detailing future investments to qualify for an ATF licence.

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