Nifty has to stay above today’s low for the momentum to continue
Ahead of the Reserve Bank of India (RBI)'s monetary policy review the benchmark indices moved sideways in the morning session. On the outcome of the review, after a minor plunge in the red, the indices made a quick recovery and entered the green territory where it stayed till the end of the session. The benchmark on Tuesday hit a six day high (including today) since 27 May 2014 and closed at new life time high. RBI's review was in line with market anticipation, which helped the indices rise further.
The S&P BSE Sensex opened at 24,729 while the NSE 50-share Nifty opened at 7,375. Sensex moved from the intra-day low of 24,627 to the high of 24,892 and closed at 24,859 (up 174 points or 0.70%) while the Nifty hit a low of 7,342 and rose to hit a high at 7,425 and closed at 7,416 (up 53 points or 0.72%). The NSE recorded a higher volume of 130.86 crore shares. India VIX fell 4.26% to close at 15.7950.
Among the other indices on the NSE the top five gainers were Metal (4.85%), Commodities (3.33%), Realty (3.04%), PSE (2.20%) and Energy (1.69%). The top five losers were FMCG (-0.50%), Pharma (-0.47%), PSU Bank (-0.40%), NI15 (-0.32%) and Bank Nifty (-0.19%).
Of the 50 stocks on the Nifty, 30 ended in the green. The top five gainers were Tata Steel (6.72%), Sesa Sterlite (5.98%), Coal India (5.64%), DLF (5.21%) and Grasim (5.16%). The top five losers were Dr Reddy (3.10%), HCL Technologies (2.43%), IndusInd Bank (2.36%), Gail (2.11%) and Kotak Mahindra Bank (1.61%).
Of the 1,582 companies on the NSE, 956 companies closed in the green, 568 companies closed in the red while 58 companies closed flat.
The Eight Core Industries, having a combined weight of 37.90 % in the index of industrial production (IIP), recorded a 4.2 % increase in output during April 2014. Coal production increased 3.3 %, while the electricity generation increased 11.2% in April 2014 over April 2013. Fertilizer output increased 11.1%, while that of steel and cement also increased 3.1% and 6.7% in April 2014. However, the output of crude Oil declined 0.1 %, while that of natural gas and petroleum refineries also dipped 7.7% and 2.2% in April 2014.
Rural Development Minister Gopinath Munde died on Tuesday after a head-on road collision in New Delhi. Munde, appointed just over a week ago to Prime Minister Narendra Modi's new government, suffered serious injuries while driving to the airport and died of cardiac arrest in hospital at the age of 64.
The RBI kept its main lending rate viz. the repo rate unchanged while cutting the statutory liquidity ratio by 50 basis points after a monetary policy review. The RBI has said it wants the consumer price index inflation rate to cool to 8% by January and further to 6% a year after that. RBI's announcement came after a monetary policy review to allow foreign portfolio investors to participate in the domestic exchange traded currency derivatives market to the extent of their underlying exposures plus an additional $10 million.
Reports are making round that the government is planning a revival of sugar industries by pushing ethanol blending in petrol and releasing arrears of cane growers in Uttar Pradesh.
Tata Steel (6.69%) was the top gainer in the Sensex 30 pack, after having received clearance from the Odisha government for renewal of mining leases will re-start operations at their captive iron ore mines.
Again today Dr Reddys Lab (-3.15%) was the top loser in the Sensex 30 pack and among the top two losers in the ‘A’ group on the BSE. Wockhardt (-3.11%) was among the top three losers in the ‘A’ group on the BSE. The USFDA has found as many as 12 procedural lapses in drug maker Wockhardt's US facility in Illinois. The inspection pointed out that the responsibilities and procedures applicable to the quality control unit are not in writing and fully followed. The FDA has already issued warning letters to two of the Wockhardt's plants in India.
Post the reporting of an improved March 2014 quarter result and clarification given by the company regarding Suzlon Energy to raise up to Rs1,000 crore from non-core asset sales, the stock (7.25%) was among the top two gainers in the ‘A’ group on the BSE.
US indices closed mostly in the green.
Manufacturing expanded in May at the fastest pace this year as American assembly-line workers responded to increased orders by cranking up production. The Institute for Supply Management's factory index rose to 55.4 from the prior month's 54.9. Readings above 50 indicate expansion.
Except for Shanghai Composite (-0.04%), NZSE 50 (-0.28%) and Straits Times (-0.17%) all the other Asian indices closed in the green. Hang Seng (0.91%) was the top gainer.
European indices were trading in the red. US Futures were also trading lower.
Companies such as Bharati Shipyard, Hindustan Motors, Essar Shipping, Aditya Birla Money, BAG Films would be shifted to 'T' group as part of surveillance measures of the regulators
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have decided to shift over 200 companies to the restricted trading segment or 'T' group from 6th June. Among the companies that are being shifted to 'T' segment are 'once upon a time' big names like Bharati Shipyard, Hindustan Motors, BPL Ltd, Aditya Birla Money and Essar Shipping.
Few other stocks which would be moved to trade-for-trade category or 'T' group on both the exchanges are -- Aditya Birla Money, BAG Films and Media, BPL Ltd, Digjam, Khaitan Electrical, Moser-Baer and Parrys Sugar Industries and Ramco Systems.
As per separate notices issued by both the bourses, BSE will transfer 213 stocks to the 'T Group', while NSE will move 117 scrips. "The scrips will be included in "T" Group and they would be traded and settled on Trade to Trade basis from 6 June 2014 and would attract a circuit filter of 5% or lower as applicable," BSE said in a release.
In 'T' segment no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory.
The bourses said the decision is part of a surveillance review to ensure market safety and safeguard the interest of investors.
The exchanges have asked its members "to take adequate precaution" while trading in these stocks.
They said, however, the transfer of security for trading and settlement on a trade-to-trade basis "is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company".
These stocks would attract a circuit filter of up to 5% which would be the maximum permissible limit within which the share price can move.
Meanwhile, NSE also said that as many as 307 stocks would continue in the trade-for-trade segment on its platform which included securities of Jubilant Industries and Birla Cotsyn.
Bullishness in the secondary market has failed to spill over to the IPO market. From January to May 2014, there was only one IPO
Over the past four years, due to poor sentiment and secondary market volatility, there were very few initial public offerings (IPO). Now, although the stock markets have been hitting new highs, there is still no sign of any IPOs. In fact, from January till May 2014, only one company entered the capital markets through the IPO route. So where are the IPOs?
According to Jagannadham Thunuguntla, head of research, SMC Global, generally, the bullishness of the secondary market spills over to the IPO market and brings back the action. "...this time the action on IPO market still waiting to catch up despite the fact that the secondary market is making 'all-time highs' virtually every day. One can hope that IPO market will catch up quite soon," he said.
In addition, investor disenchantment with IPOs is clearly so high that even good companies have to make an extra push to attract investor attention. The reason is obvious, even today, volumes of information in the IPO prospectus does not help retail investors with one crucial data—that is, expected profits, that determines the most crucial aspect of a public issue—valuation. As Moneylife pointed out, lack of knowledge about this data ensures that promoters and lead managers can price an issue exorbitantly and get away. That is why after listing, share prices of many stocks have simply crashed.
During 2014, there was only one IPO of Wonderla Holiday, that too when over the past six months, the markets have turned bullish. Over the past 12 months, the S&P BSE Sensex hit a low of 17448.71 on August 2013 and a high of 25375.63 last month. Especially after August 2013, the Sensex, except for three months, has closed on higher compared to the previous month.
And yet there is no sign of a new IPO. Between 2011 to June 2014, almost 109 companies, including Ambiance, BPTP, Glenmark Generics, Lavasa Corporation, Joyalukkas, Reid & Taylor, Intas Pharma, Rashtriya Ispat Nigam and IFCI Factors have called off their IPOs. That too, when all of these companies had received approvals from market regulator SEBI. Even then these companies could not open their IPOs within the one year validity period from the date of SEBI approval. These 109 IPOs were valued at Rs52,000 crore.
In 2013 there was a mobilisation of just Rs1,619 crore through IPOs, which was termed as the lowest over the past 12 years, the previous low being in 2001 when only Rs296 crore had been raised through IPOs. The highest-ever mobilisation through IPOs was as recently as 2010 at Rs37,535 crore.
During 2013, there were just three main-board IPOs during the entire year: Just Dial: Rs919 crore, Repco Home Finance: Rs270 crore and V-Mart Retail: Rs94 crore (in 2012, there were 11 IPOs worth Rs6,835 crore).
According to Thunuguntla, considering the subdued market conditions during this period, it was quite understandable that so many IPOs got called off. Overall poor sentiments, secondary market volatility, promoters not getting the valuations they think they deserve, apprehensions of regulator’s views on valuations, lack of appetite for equity of big-time issuers from the infrastructure sector, especially power, telecom and real estate were cited as the reason for companies not willing to take the IPO route between 2011 to 2014. In addition, the government was also not been able to push through its disinvestment programme.
"One can hope that the IPO market will catch up soon and corporate India shall get ready with new fund raising plans. Else, if this slowdown of fund raising continues longer, it can impact the Indian corporates' ability to finance their expansion projects resulting in a slow down in capacity building and job creation," Thunuguntla said.
The sustainability of the secondary market, Indian government's approach to disinvestment and global liquidity hold the keys for the future of the IPO market. In addition, there is a need to make certain changes in the present system, where IPO pricing and sales are often subjected to manipulation done by the promoters and executed by the lead managers, as Moneylife has pointed out several times in the past.