Close below the day’s low may bring in more correction on the bourses
On Thursday the markets were closed on account of Parliamentary elections in Mumbai constituency. Today the indices had a weak opening and after a struggle to come in the positive the benchmark gave up and traded in the negative for the almost the entire session. The positive momentum was marred after the India Meteorological Department on Thursday said that the country will likely get below-normal levels of monsoon rain this year.
Sensex opened at 22,893 and immediately hit the days high of 22,939 while the Nifty opened at 6,856 and hit a high at 6,870. The indices edged lower and hit a low at 22,657 and 6,773. Sensex closed at 22,688 (down 188 points or 0.82%) while Nifty closed at 6,783 (down 58 points or 0.85%). The NSE recorded a volume of 87.14 crore shares.
Credit Suisse recently upgraded Mahindra & Mahindra to "outperform" from "neutral," saying that the company will benefit from even a short-lived economic recovery, while the auto-maker has "undemanding valuations." The company was the top gainer in the pack of Sensex 30 stocks.
Strides Arcolab's came as a top gainer in ‘A’ group of BSE. The company’s manufacturing facility in Bangalore has been approved by the US health regulator after a successful audit of the plant.
Ambuja Cements came out with its March quarter results today. It posted a net profit of Rs 520.01 crore for the quarter ended March 31, 2014 as compared to Rs 487.90 crore for the quarter ended March 31, 2013. The revenue for the quarter was Rs 2,649.32 crore as compared to Rs 2,557.02 crore for year ago period. The stock was among the top five losers in the ‘A’ group of BSE.
All members of the Reserve Bank of India's monetary policy technical advisory committee recommended that Governor Raghuram Rajan keep interest rates unchanged at its policy review on April 1, according to minutes out on Friday.
Monsoon rainfall is likely to be below average this year, the India Meteorological Department (IMD) said on Thursday. The monsoon seasonal rainfall is likely to be 95% of the Long Period Average (LPA) with a model error of ± 5%. The LPA of the season rainfall over the country as a whole for the period 1951-2000 is 89 cm, IMD said. The June-September monsoon accounts for more than 70% of the annual rainfall in India and irrigates crops grown on half the country's farmlands.
US indices closed in the green on Thursday.
Orders for durable goods such as computers, aircraft and heavy machinery jumped 2.6% in March and posted the biggest gain in four months, offering another sign that the US economy might be on the upswing after a winter-induced lull. The number of Americans who applied for unemployment benefits last week rose to the highest level in April, but most of the bump may have been related to a seasonal quirk tied to the Easter holiday.
Except for Jakarta Composite (0.13%) and Nikkei 225 (0.17%) all the other Asian indices closed in the negative. Taiwan Weighted (1.92%) was the top loser.
European indices were trading in the red. US Futures were also trading lower.
For FY14, Axis Bank reported net profit of Rs6,218 crore, as its net interest income grew 24%; it also announced 1:5 share split having face value of Rs10 to Rs2
Axis Bank Ltd reported a 20% higher net profit for FY2013-14 mainly on increase in its net interest income (NII) and revenues. “The board of directors of Axis Bank has approved (1:5) stock split, for one share of the bank having face value of Rs10 into five shares of face value Rs2 each,” the lender said in a regulatory filing.
For the 12 month to end-March, Axis Bank said its net profit increased 20% to Rs6,218 crore from Rs5,179 crore, while its total revenues, including interest income, grew 13% to Rs38,046 crore from Rs33,733 crore, a year ago period.
During FY14, the private sector lender said NII increased 24% to Rs11,952 crore from Rs9,666 crore of FY13. Its non-interest income (other income) grew 13% to Rs7,405 crore from Rs6,551 crore in FY13.
As on 31 March 2014, total advances of Axis Bank increased 17% to Rs2.30 lakh crore. Axis Bank's saving account deposits grew 22% to Rs77,776 crore compared with same period a year ago, while current account deposit stood at Rs48,686 crore.
As on 31 March 2014, Axis Bank's capital adequacy ratio (CAR) stood at 16.07%, gross non performing assets ratio (GNPAs) stood at 1.22% (Rs3,146 crore). Its net non-performing assets stood at 0.40%.
For the quarter to end-March, Axis Bank said its net profit grew 18% to Rs1,842 crore from Rs1,555 crore while its total revenues, including interest income, grew 12% to Rs10,178 crore from Rs9,057.72 crore, same period last year.
As on 31 March 2014, the Axis Bank's total number of branches (including extension counters) and ATM network stood at 2,402 and 12,922 respectively.
Axis Bank declared a final dividend of Rs20 per share.
Axis Bank shares closed 1.10% up on Friday at Rs1,534 on the BSE, while the 30-share Sensex ended the day flat at 22,688.
For more stock results, check out this page
A below normal monsoon will hurt food output, agriculture, GDP growth and possibly inflation. However, it is too early to estimate the extent of the damage, with trends likely to be clearer in July, says Nomura
The India Meteorological Department (IMD) has predicted that rainfall will be 5% below normal during the 2014 Southwest Monsoon (June-September). "If the IMD is right and monsoons are only 5% below normal, then while food output will be hit, the overall macro impact will likely be contained. However, IMD forecasts tend to be conservative. Also it is too early to estimate the extent of the damage and the trends are likely to be cleared in July only," says Nomura in a research note.
The Australian Bureau of Meteorology has noted that while the Southern Oscillation Index has risen to neutral recently, the likelihood of El Niño remains high, with six of the seven models suggesting El Niño thresholds may be exceeded as early as July. In Nomura's view, rains during July matter the most for food production in India and this poses a risk to agriculture growth, and thus the risk of rainfall below the IMD’s forecast is non-trivial.
What if it’s a below-normal monsoon?
Nomura says, even in a scenario of below-normal rains, there is large uncertainty around the distribution of rains and severity of any shortfall. Past episodes of lower SOI thresholds have been associated with severe droughts, below-normal rains as well as normal rains (figure above). Hence, a realistic assessment of the impact can only be taken around July.
Previous weak rains (10%-15% below normal) and droughts (over 20% below normal) have been associated with lower food-grain output growth, zero to negative agriculture GDP growth and higher food price inflation (figures above). In particular, food production has fallen by 5%-10%, cutting agriculture GDP growth by 0.5%-5%, and pushed up food price inflation by over 3 percentage points.
"Agriculture GDP growth of zero in FY15 (versus our current forecast of 2.8%) would reduce our current overall GDP growth forecast of 5.0% y-o-y by about 40 basis points (bp). We estimate that rainfall 10% below normal adds 60bp to headline CPI inflation in the following four quarters, ceteris paribus (figure above). Output and prices of pulses and oil seeds will likely be impacted, while the impact on cereals may be contained given the higher stocks with the Food Corporation of India," Nomura added.