Sensex, Nifty may rally for another day or two: Tuesday closing report

The Nifty may rise higher as long as it manages to keep itself above 5,635

The weak industrial production data for June 2013 made the indices to open lower. At the beginning of the session both Sensex and Nifty indices hit their lows for the day but soon managed to gain strength and moved higher. It continued to rise throughout the day. At the end of the session, both the benchmarks hit a five day high (including today).


Sensex opened at 18,895 and after hitting a low of 18,865, progressed upward to touch a intra-day high of 19,248 and closed in the positive at 19,230 (up 283 points or 1.49%). Nifty-50 opened at 5,600 and reached 5,705 after hitting a low of 5,579 and closed in the positive at 5,699 (up 87 points or 1.55%). Both the benchmarks made the highest percentage closing gain since 11 Jul 2013. The National Stock Exchange (NSE) recorded a volume of 65.37 crore shares, higher than yesterday.


All the major indices on the NSE except for India VIX (fell 9.49%) closed in the positive. Nifty Dividend was the top gainer, up 5.80%.


Among the other indices, Realty (rose 5.04%);    Finance (rose 2.87%); Bank Nifty (rose 2.82%); Service (rose 2.49%) and Media (rose 2.31%) were the top five gainers. The lone loser was Metal (fell 0.12%).


Of the 50 stocks on the Nifty, 42 ended in the green. The major gainers were DLF (up 9.34%); Ranbaxy (up 8.86%); Axis Bank (up 7.77%); Jaiprakash Associates (up 5.25%) and IDFC (up 4.48%). The main losers were Hindalco (down 3.24%); Coal India (down 2.15%); Ambuja Cements (down 1.99%); Cairn (down 1.08%) and ONGC (down 0.95%).


Industrial production registered a contraction of 2.2% in June 2013, data released by the government on Monday showed. Mining production registered a decline of 4.1% and manufacturing production fell 2.2%. Electricity generation remained stagnant in June 2013. As per use-based classification, production of basic goods declined 1.9% in June 2013. Capital goods production fell 6.6%. Production of intermediate goods rose 1.1%. Consumer goods production declined 2.3%. Production of consumer durables declined 10.5%. Production of consumer non-durables rose 5%.


On a cumulative basis, industrial production registered a contraction of 1.1% during April-June 2013.


Inflation based on the consumer price index (CPI) eased in July 2013, data released by the government showed. The combined consumer price index (CPI) for urban and rural India eased to 9.64% in July 2013, from 9.87% in June 2013. The data showed that inflation under the category ‘food and beverages' stood at 11.24% in July 2013.


Reserve Bank of India (RBI) governor D Subbarao said that "perhaps" there was a need to reduce the reserves. Banks have to set aside via the cash reserve or the statutory liquidity ratios (SLR).


Curbs are planned on imports of gold, silver and some non-essential items, while rules governing overseas commercial borrowings and certain deposit programs for non-residents will be eased, finance minister P Chidambaram said yesterday.


The duties on gold and platinum imports were increased to 10% from 8%, while the levy on silver was boosted to 10% from 6%, the Ministry of Finance said in a notification tabled in parliament today. Taxes on shipments of gold and silver ores and dore bars have also been increased, it said, without specifying the rates.


US indices closed flat on Monday. The US ran a budget deficit in July, although government revenues increased from a year earlier due to tax hikes and a strengthening economy, a report from the Treasury showed on Monday. The US government spent $98 billion more than it took in last month, with the deficit driven by spending on healthcare programs, pensions for the elderly and the military.


All the Asian indices closed in the positive. Nikkei 225 was the top gainer, up 2.57%. Japan prime minister Shinzo Abe is considering a corporate tax cut as a way to offset the impact of a planned two-stage increase in the sales tax.


European indices were trading in the green and the US Futures were also trading in the positive. The German ZEW investor sentiment index showed economic conditions improved in August from July. Market awaits latest report on German business confidence and US retail sales later in the day.


Bosch, a supplier of automotive components to original equipment manufacturers (OEMs), is set to launch ABS (anti-lock braking system) for two-wheelers and three-wheelers early next year through OEMs in Indian market. According to the company, the new product is under the test stage and will be commercially launched early next year. ABS for two-wheelers and three-wheelers will be manufactured at Bosch’s unit in Chakan in Maharashtra and supplied to OEMs. The stock rose 1.60% to close at Rs8645 on the NSE.


Subbarao says RBI must regulate all deposit-taking entities

For monetary policy to be effective and financial markets to remain stable, banks, NBFCs and other deposit-taking entities should be regulated by the RBI, Subbaro said

Reserve Bank of India (RBI) governor Duvuuri Subbarao on Tuesday cautioned against taking away regulatory oversight on non-bank financial companies (NBFCs) from RBI and placing them under a Unified Financial Authority (UFA). He said such a move will go against financial stability and whittle down the impact of monetary policy.


Speaking at the FIBAC, the two-day annual banking summit organised by the industry body FICCI, the outgoing governor said, “A unified regulation by the same regulator (RBI) is essential for financial stability as there are strong inter—linkages between banks and deposit-taking non-banking financial companies. (Moreover), for monetary policy to be effective, credit creation by banks and credit institutions like NBFCs should be regulated by the central bank”.


Stating that there are strong inter-linkages between banks, NBFCs and other deposit-taking entities, he said for monetary policy to be effective and financial markets to remain stable, they should be regulated by the central bank.


Explaining the reasons for his reservations against the move and why the RBI should regulate both banks, non-banking entities and all other deposit-taking bodies, Subbarao said, “One of the major causes for the 2008 financial crisis was that credit intermediation activities were conducted by non—banks or the so—called shadow banks, which were primarily outside the regulatory purview.


“This raised serious concerns of regulatory arbitrage, requirements for similar regulation of entities performing similar activities and issues of commonality of risks and synergies of unified regulation for such entities,” Subbarao, who completes his five—year term on September 4, said.


He further said the country is going against the global trend wherein after the 2008 crisis, most of the leading governments have been entrusting more, and not less, regulatory powers to the central banks.


Following the 2008 global credit crisis, the government constituted the Financial Sector Legislative Reforms Commission (FSLRC) “with a view to rewriting and cleaning up the financial sector laws and to bring them in tune with the current requirements”, and the commission chairman retired justice BN Srikrishan had submitted report in March 2013.


M&M June quarter net profit up 17% on robust tractor sales

M&M's June quarter volumes were driven by robust growth in the tractors segment, however, volumes from automotive segment remained flat as utility vehicle volumes witnessed a sharp slowdown

Mahindra & Mahindra, India's largest tractor and utility vehicle maker, on Tuesday reported a 17% higher first quarter net profit on robust performance from its tractor division.


For the quarter to end-June the Mahindra group company said its net profit rose to Rs909 crore from Rs778 crore while total revenues, including sales, increased 8% to Rs10,801 crore, same period last year.


During the quarter, M&M's top-line registered 7% year-on-year (yoy) growth to Rs10,023 crore led by 6.4% yoy growth in volumes and 0.6% yoy growth in net average realization. The volume growth for the quarter was driven by an extremely strong growth in the tractors segment (up 25.2% yoy) on the back of the expectations of normal monsoon and better prospects for kharif crop. The automotive segment volumes however, remained flat as utility vehicle volumes witnessed a sharp slowdown following an increase in excise duty and also due to increasing competition in the segment.


The net average realization witnessed a decline of 3.7% sequentially as average realization in the tractor and automotive segments declined by 9% and 2.5% quarter-on-quarter (qoq), respectively. While the tractor segment revenues posted a strong growth of 26.7% yoy (36.6% qoq); automotive segment revenues recorded a 2.5% yoy (sharp fall of 19.6% qoq) decline during the quarter.


On the operating front, EBITDA margins expanded 100bp yoy (74bp qoq) to 12.8% marginally better than our expectations of 12.5%. The margin performance was led by softening of commodity prices, lower share of traded goods following decline in automotive volumes and also due to greater share of tractors (37.7% as against 25% yoy) in the product-mix. As a result, operating front grew 16% yoy (1.4% qoq) to Rs1,287 crore.


M&M closed Tuesday 1.3% up at RS870.9 on the BSE, while the 30-share Sensex too ended 1.5% higher at 19229.8.


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