Nifty is like to put in an intraday rally soon. But such rallies will be met with selling
We had mentioned in Tuesday’s closing report that the Indian indices are on course for a fall. On Wednesday, the indices moved close to yesterday’s closing for most of the session.
Of the two major plunges today, the one that made the indices to hit the day’s low was the Supreme Court judgement. The apex court cancelled all coal block allocations since 1993 except for government-run blocks that operate on a non-JV basis. However, the benchmarks made a smart recovery and re-entered the green zone. It again made a range bound ultimately to close lower for the second consecutive session.
S&P BSE Sensex opened at 26,818 and moved in the range of 26,560 and 26,845 before closing at 26,745 (down 31 points or 0.12%). The NSE's CNX Nifty opened at 8,016 and moved between 7,950 and 8,042 and closed at 8,002 (down 15 points or 0.19%). NSE recorded a volume of 99.77 crore shares. India VIX rose 1.01% to close at 12.5350.
Thursday trading session may be a volatile one with the expiry of September Futures & Options.
Prime Minister Narendra Modi will leave for a five-day visit to the US on 26 September 2014. Modi will meet US President Barack Obama at the White House on 30 September 2014. The two leaders will discuss a range of issues of mutual interest in order to expand and deepen the US-India strategic partnership.
The Supreme Court scrapped all but four of the coal blocks allocated between 1993 and 2010 which the court had termed illegal earlier. The bench also directed the companies, which were allocated coal blocks but had not operationalised them, to pay compensation to the government for the loss of exchequer. A penalty of Rs295 per tonne will be imposed on all cancelled block holders.
Post the verdict, Reliance Power (5.34%) and Coal India (5.02%) rallied and were among the top two gainers in ‘A’ group on the BSE. Coal India was also the top gainer in the Sensex 30 pack. However, among the worst affected by this move were GMR Infrastructure (10.55%), Jindal Steel & Power (9.99%), which hit its 52-week low today.
Both were among the top three losers in ‘A’ group on the BSE. Jaypee Infratech (8.71%) was also among the major losers. Tata Steel (2.63%) was among the top two losers in Sensex 30 stock.
Oracle Financial Services Software which traded ex-dividend today fell 12.89% and was the top loser in ‘A’ group on the BSE.
State Bank of India (2.68%) was the top loser in the Sensex 30 stock. The board of directors have decided to reduce the face value of equity shares of the bank from Rs10 per share to Re1 per share.
US indices closed Tuesday in the red.
US manufacturing activity hovered at a near 4-1/2-year high in September and factory employment surged, supporting views of sturdy economic growth this quarter. The growth picture was also boosted by other data on Tuesday which showed acceleration in the services industry growth this month. Markit said its preliminary or flash US Manufacturing Purchasing Managers Index was at 57.9, unchanged from August's reading when it touched its highest level since April 2010. A reading above 50 signals expansion in manufacturing. Factory employment increased for a second straight month, with a gauge of labour market conditions touching its highest level since March 2012. Separately, the Federal Reserve Bank of Philadelphia said its general activity index for non-manufacturing firms jumped to 35.7 this month from 27.3 in August.
Asian indices showed mixed performances. Shanghai Composite (1.47%) was the top gainer while Jakarta Composite (0.27%) was the top loser.
European indices were trading in the green. US Futures too were trading higher.
German business confidence fell for a fifth month even after the European Central Bank stepped up plans to revive the faltering euro-area recovery. The Ifo institute's business climate index, based on a survey of 7,000 executives, dropped to 104.7 in September from 106.3 in August.
In FY2014, India Inc's share of assistance from banks and FIs fell to 68.4% while share of overseas borrowing-ECB increased to 41.4%, says CARE Ratings report
Indian corporate houses have preferred to raise funds through the external commercial borrowing (ECB) route over other avenues even as there has been a slowdown in total capital expenditure (capex) during FY14.
In a research report, CARE Ratings said, "Over the cumulative period (FY2009-FY2014), capital formation by way of assistance from banks and financial institutions (FIs) accounted for 84.8% of finance for the capital formation while that through ECBs stood at 13.8%. In the last three years, the share of ECBs for capital formation has been increasing."
In FY2014, India Inc's share of assistance from banks and FIs fell to 68.4% from its peak of 91.1% in FY2010. On the other hand, share of overseas borrowing-ECB increased to 41.4% in FY14 from 12.3% in FY2009, the report said.
CARE Ratings listed four reasons for increased preference for ECB:
1. Interest rates were slashed to historically low level in the USA post the financial crisis in order to foster growth in the country. This situation when juxtaposed with the high interest rate regime in India prevalent since FY12, clearly suggests that in order to make the most of the interest differentials, companies preferred borrowing through the ECB route.
2. Additionally, in FY14 in particular, there was serious concern over the rising non-performing assets in the Indian banking system. This would have lead to some reluctance on the Banks to lend to companies.
3. RBI increased the limits for external commercial borrowings in FY14, thereby enabling companies to borrow more for capital formation.
4. Lastly, companies in general prefer raising capital through debt instruments as opposed to equity issues. Therefore, even though the secondary market was buoyant, companies preferred the debt route. Overall IPOs issuances had peaked at Rs33,097 crore in FY11, and then declined to Rs5,886 crore, Rs6,289 crore and Rs919 crore in FY12, FY13 and FY14, respectively.
However, CARE Ratings pointed out that in the debt market, corporates prefer private placement over the public issues. Banks and FIs play a significant role here as they mobilize a sizeable share of resources in the private placement market which in turn they lend to companies. The share of non-financial institutions in the private placement market has been more or less steady for the period under consideration. It fell slightly in FY11 and FY12 to 28.3% and 25.6%, respectively and then moved upwards in the subsequent two years in FY13 and FY14, the ratings agency said.
According to the research note, the capex envisaged by India Inc during FY15 stands at Rs1.24 lakh crore, which is less than 50% of the amount (Rs2.51 lakh crore) in FY14. "...in order to improve the capital expenditure in FY15 from its counterpart in FY14 would warrant more than Rs1.27 lakh crore by way of new investment plans in FY15. It remains to be seen if this is achieved," it added.
"However," CARE Ratings said, "the pace of turn around will be gradual interest rate environment, demand conditions and overall growth environment is still not overtly supportive of rapid investment. First quarter of FY15 has shown stability in capital formation and fresh spending by government as per the budgetary estimates and traction in the stalled projects space will be the supporting factors."
The decision to split stock will enhance broader investor participation specifically retail participation and increase in demand, SBI said
State Bank of India (SBI), the country's largest lender on Wednesday said its board approved reduction in the face value of its shares to Re1 from Rs10 and subsequently increase number of issued shares in proportion.
In a release, Arundhati Bhattacharya, Chairman of SBI said, “The decision to split stock will enhance broader investor participation specifically retail participation and increase in demand will enhance P/E Ratio”.
The reduction in face value would also reflect in its existing GDR programme.
SBI closed Wednesday 2.7% down at Rs2487 on the BSE, while the 30-share Sensex ended the day marginally down at 26,744.7.