Sensex up 97 points; Realty, bank stocks steal the show

Indian stock markets rose over 0.4 per cent at the pre-close session on Wednesday led by realty, banking, FMCG and oil & gas stocks amid firm European cues.

Global markets await the much-anticipated outcome of the US Federal Reserve policy meeting in which the central bank is expected to reduce the scale of its bond-buying programme.

At 3.00 p.m., the Sensex was trading at 19,900.74, up 96.71 points or 0.49 per cent and the Nifty was up 32.75 points or 0.56 per cent at 5,882.95.

“Apart from the Fed's policy results, investors will now look forward for the first monetary policy decision by the new RBI chief Raghuram Rajan on 20th September, 2013,” Angel Broking said in a research report.

Among sectoral indices, Realty (1.82 per cent), Bankex (1.37 per cent) and FMCG (1.27 per cent) led the charge on the BSE. Top losers were Auto (0.13 per cent) and Metal (0.04 per cent).

NTPC, Tata Power, SBI, HUL and Dr Reddy's were the top five Sensex gainers, while the top five losers were BHEL, Hero MotoCorp, Sesa Goa, HDFC and M&M.

A report from India Forex Advisors said: “For the Fed, consensus has congealed around a reduction of $10-$15 billion a month, with all purchases ending by the middle of next year. The bigger reaction will likely come if the Fed pulled back more aggressively, as that would lead the markets to price in an earlier start to rate rises as well. That would be especially painful for Emerging Market countries that rely on foreign capital to fund current account deficits, with India and Indonesia being amongst the most vulnerable.”

European stocks were up as investors awaited the Federal Reserve’s decision on reducing its monthly bond purchases. US index futures were little changed, while Asian shares rose.

Muthoot, Manappuram Finance extends fall on RBI new norms

Muthoot Finance was down nearly 6% at Rs 98, while Manappuram Finance down 5% at Rs 14.75 on BSE.

Shares of gold finance companies such as Muthoot Finance and Manappuram Finance are under pressure second day in a row after the Reserve Bank of India (RBI) issued gold loan guidelines.

Muthoot Finance has dipped 5.5% at Rs 97.95 on BSE. The stock had tanked over 8% yesterday. Manappuram Finance is locked in lower circuit of 5% at Rs 14.75 with no buyers are seen on the counter.

In a notification on Monday, RBI said, the recommendations of the working group, in so far as they relate to non banking finance companies (NBFCs) lending against the collateral of gold jewellery, have been broadly accepted by the bank.

The notification said that NBFCs shall not issue misleading advertisements like claiming the availability of loans in a matter of 2-3 minutes.

High value loans of one lakh and above must only be disbursed by cheque, while borrowers' PAN mandatory for loan over five lakh rupees, the RBI said.

The RBI also said, the loan-to-value (LTV) ratio for loans against jewellery would continue to be at 60%. The RBI directed the NBFCs to have board-approved policies on auction of gold jewellery that ''are transparent to the borrowers and adequate prior notice has been issued to them.”

Sensex trims initial gains, still up by 16 points

The S&P BSE benchmark sensex trimmed its initial gains on Wednesday but was still quoted higher by 16 points in late morning deals on buying in realty, consumer durable, FMCG and metal sectors despite selling in IT, power and auto sectors.

The BSE-30 share index sensex opened higher at 19,865.99 and firmed up further to 19,900.68 on initial buying.

However, it declined afterwards to 19,775.29 in view of weak Asian cues before quoting 19,819.99 points at 1025 hours.

It still showed a gain of 15.96 points or 0.08% from its last close.

The NSE 50-share barometer Nifty also inched up by 1.50 points or 0.03% to 5,851.70 at 1025 hours.

Major gainers were Cipla (1.68%), Coal India (1.43%), HUL (1.31%), SBI (1.29%), Tata Power (1.19%) and Dr Reddy's Lab (1.16%).

However, HDFC dropped by 2.29% followed by M&M 1.05 (per cent), HDFC bank (1.03%) and Sun Pharma (0.98%).

Foreign institutional investors (FIIs) bought shares worth a net Rs 318.05 crore yesterday, as per provisional data from the stock exchanges.

Most Asian stocks fell in their early trade amid prospects that the Federal Reserve will announce today whether it intends to pare back economic stimulus.

Key benchmark indices in China, Taiwan, Hong Kong, and Indonesia shed by 0.07 to 0.72%, while indices in Singapore and Japan rose by 0.58 to 1.85%. 

Suzlon unit REpower UK bags 4 contracts

Construction of the windfarm has already commenced and is due for completion by March 2015

Wind turbine maker Suzlon Group today said its subsidiary REpower has signed four orders for supplying equipment in the United Kingdom.

"Suzlon Group's UK subsidiary, REpower UK, has signed four new turbine contracts for supplying turbines for new wind farms in UK in 2013," the company said in a statement.

No financial details of the deal were provided by the company.

The company's UK operation will be supplying turbines for new wind farms at Clashindarroch in Aberdeenshire, Scotland, Eye Airfield in Suffolk in the South East of England, Hampole in Yorkshire and Westnewton in Cumbria, the statement said.

"I am delighted to announce the closure of four new UK contracts. We are particularly delighted to continue our working partnerships with Vattenfall, Broadview Energy and Temporis Capital, as well as signing our first contract with Good Energy with whom we look forward to working with in 2013 and beyond," Andreas Nauen, CEO Repower Systems SE said in the statement.

The Clashindarroch Wind Farm, developed by Vattenfall, is situated in the Clashindarroch Forest near Huntly, Aberdeenshire, and will consist of 18 turbines. With a total installed capacity of 37 MW, the wind farm will provide enough electricity for approximately 19,580 homes per-annum.

Construction of the windfarm has already commenced and is due for completion by March 2015.

Eye Airfield Wind Farm, developed by the Ventus funds and managed by Temporis Capital, will consist of two turbines with a total capacity of 6.8 MW, enough to power approximately 3,600 homes.

Construction at Eye is due to start in November, 2013 and will be completed in April, 2014, it added.

Hampole Wind Farm, developed by Good Energy, will consist of four turbines and represents the first turbine contract to be signed between the two companies.

The site will have a total capacity of 8.2 MW and is expected to generate enough power to meet requirements of over 4,800 homes.

Construction at Hampole has started, and the turbines will arrive in January, 2014 and the site is scheduled for completion by July, 2014, the statement further added.

The Westnewton Wind Farm, developed by Broadview Energy, is located in Cumbria between the villages of Aspatria and Westnewton and will consist of three turbines.

With a total capacity of 6.15 MW, the turbines will generate enough electricity to power approximately 3,250 homes.

Work at the Westnewton Wind Farm is due to commence this winter and will be completed by March, 2014.

Suzlon shares were trading at Rs 6.57, up 2.18% on the BSE in the afternoon trade.

NTPC gains on achieving highest capacity addition of 4,170 MW in 2012-13

NTPC is currently trading at Rs. 141.45, up by 1.05 points or 0.75% from its previous closing of Rs. 140.40 on the BSE.

The scrip opened at Rs. 141.00 and has touched a high and low of Rs. 141.50 and Rs. 139.75 respectively. So far 7,364 shares were traded on the counter.

The BSE group 'A' stock of face value Rs. 10 has touched a 52 week high of Rs. 173.70 on 08-Oct-2012 and a 52 week low of Rs. 122.65 on 28-Aug-2013.

Last one week high and low of the scrip stood at Rs. 145.45 and Rs. 135.50 respectively. The current market cap of the company is Rs. 1,16,632.00 crore.

The promoters holding in the company stood at 75.00% while Institutions and Non-Institutions held 20.16% and 4.84% respectively.

NTPC has achieved highest ever capacity addition of 4,170 MW in 2012-13, including 1,000 MW through its joint venture projects, to provide further push to the growth momentum gained over the previous two years. With 18.4 per cent of India’s total installed capacity, NTPC accounted for 27.4 per cent of India’s total power generation during 2012-13 underlining its consistently high operational efficiency. NTPC remained the market leader and also among the cheapest producers of power. The company’s power generation capacity has reached 41,187 MW.

NTPC is the largest power generating company in the country. It has also diversified into hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power trading & distribution.

Jewellery Stocks rally 2-7 % on import duty hike

Shares of jewellery companies rallied in early morning trade on Wednesday as the government increased import duty on gold jewellery from 10 to 15 percent. Investors were buying Titan Industries  (up 2.6 percent), Tribhovandas Bhimji Zaveri   (up 6 percent), PC Jeweller  (up 7 percent), Gitanjali Gems  (up 4 percent) and Shree Ganesh Jewellery (up 4 percent) riding on the euphoria. The finance ministry said setting import duty on gold jewellery higher than raw gold duty is aimed more at protecting the domestic jewellery industry than stemming bullion imports.

 The hike in import duty on jewellery had been a demand from the industry to ensure the viability of the domestic jewellery manufacturing, and avoid imports of cheaper jewellery from Thailand, Malaysia or elsewhere. "To protect the interests of small artisans, the customs duty on articles of jewellery and of goldsmiths' or silversmiths' wares and parts thereof is being increased from 10 percent to 15 percent," the government said in a statement.

 Bhaskar Bhat, MD, Titan says that the import duty hike will not have much impact as market demand for gold driven by sentiment. However, he feels that import duty hike will help to reduce current account deficit to a certain extent.  "It is going to make little impact whereas the customs duty hike has increased smuggling. You go to the hawala market, you get gold at Rs 200 lower than what a manufacturer legitimately can import and pay duties and sell gold jewellery at," he said.

At 11:40 hrs Titan Industries was quoting at Rs 223.50, up Rs 1.60, or 0.72 percent, TBZ was at Rs 139.60, up Rs 5.20, or 3.87 percent, PC Jeweller was at Rs 91.20, up Rs 4.35, or 5.01 percent, Gitanjali Gems was at Rs 68.65, up Rs 0.40, or 0.59 percent, Shree Ganesh Jewellery House (I) was at Rs 59.40, up Rs 1.20, or 2.06 percent on the BSE.

Silver futures decline to Rs 48,666 per kg

Silver prices fell 1.49 per cent to Rs 48,666 per kg at the futures trade today as speculators indulged in trimming positions, taking weak cues from the global markets.

On the Multi Commodity Exchange, silver for delivery in December traded lower by Rs 735 or 1.49 per cent to Rs 48,666 per kg in a business turnover of 470 lots. Similarly, the white metal for delivery in March declined by Rs 617 or 1.22 per cent to Rs 49,883 per kg in a business volume of four lots.

In the international market, silver dropped for the third day in Singapore. The white metal was trading 1.2 per cent lower at $21.47 an ounce.

Market analysts said a weak trend in precious metals in the global market on speculation that the US Federal Reserve will cut its monthly asset purchases at the end of a two-day meeting today, led the fall in silver prices at the futures trade here.

Crude oil prices mixed in Asian trade

World oil prices were mixed in Asian trade today as investors await the end of the US Federal Reserve’s closely watched policy meeting to find out its plans for its stimulus programme.

New York’s main contract, West Texas Intermediate crude for delivery in October, was up 18 cents at $ 105.60 in the morning trade, while Brent North Sea crude for November fell 36 cents to $107.83.

With the threat of military action in Syria receding, attention has turned to the outcome of the Fed’s two-day meeting, with expectations for a reduction in its $85-billion-a-month bond purchases, known as quantitative easing.

Federal Reserve chief Ben Bernanke will make a statement after the meeting before holding a news conference.

“The Fed is expected to announce the long-awaited decision to taper asset purchases,” DBS Bank said in a market commentary, adding that market consensus is for a “cautious” reduction of about $15-20 billion.

“The Fed’s first order of business will be to reassure global markets that the taper will not derail the recovery,” DBS said.

US military strikes

Oil prices rose to multi-month highs this month on fears that the US would launch military strikes against Syria to punish the Assad regime for its alleged use of chemical weapons on its own people.

But the prices eased after a US-Russia deal that will see Syria’s toxic arsenal destroyed has averted an attack for now.

News that Libya has resumed some oil production has also helped put downward pressure on prices. Protests by oil field workers since July had crippled Libyan production.

RBI acts tough on offshore FX trading on the internet

The RBI cracked down on offshore foreign exchange trading by Indians through online trading websites, asking banks to report any such remittances to the regulator.

In a circular issued late on Tuesday, the Reserve Bank of India (RBI) asked banks to advise customers not to undertake forex trading on foreign websites that offer currency contracts by accepting margins through credit card and online money transfer mechanisms.

The RBI also asked banks to close the credit card or online bank account of a customer that is found to be in violation of the rule.

The rupee has been hard hit in this summer's rout of emerging currencies, losing around 20 percent of its value against the dollar at one point, and significantly increasing the burden of Indian companies' dollar debt.

The central bank has been trying to curb the offshore rupee market by asking banks to cut down on overnight positions as well as asking foreign institutional investors to produce documentation from clients in order to hedge their currency risk in the onshore forward markets.

The central bank has already reduced the limit for remittances made by residents to $75,000 from $200,000 per financial year.

Bank of India surges on plan to mop-up Rs 1,500 crore via Basel III bonds

Bank of India is currently trading at Rs 172.80, up by 1.10 points or 0.64% from its previous closing of Rs. 171.70 on the BSE.

The scrip opened at Rs 172.00 and has touched a high and low of Rs 173.70 and Rs 171.50 respectively. So far 23993 shares were traded on the counter.

The BSE group 'A' stock of face value Rs 10 has touched a 52 week high of Rs 392.20 on 18-Jan-2013 and a 52 week low of Rs 126.95 on 28-Aug-2013.

Last one week high and low of the scrip stood at Rs 176.90 and Rs 148.10 respectively. The current market cap of the company is Rs 10231.64 crore.

The promoters holding in the company stood at 64.11% while Institutions and Non-Institutions held 29.22% and 6.67% respectively.

In a bid to boost its tier II capital for business growth, public sector lender Bank of India is planning to raise around Rs 1,500 crore through Basel III compliant bonds. These bonds carry a feature called 'Point of non-viability (PONV)' trigger. Occurrence of such event results in loss of principal amount to investors and default on the instrument.

Rating agency CRISIL has assigned ‘AAA/Stable’ rating to Tier II bonds issue. The rating agency has also reaffirmed its ratings on the bank’s existing debt instruments at ‘CRISIL AAA/Stable/CRISIL A1+’.

The ratings continue to reflect expectation of strong support from the Government of India (GoI), the bank’s majority shareholder, both on an ongoing basis and in the event of any distress.

Government hikes import duty on gold jewellery to 15%

In its other move to balance the soaring trade and current account deficits, the government has hiked the import duty on gold and silver jewellery to 15 percent. A finance ministry statement said that 'To protect the interests of small artisans, the customs duty on articles of jewellery and of goldsmiths’ or silversmiths’ wares and parts thereof is being increased from 10 percent to 15 percent.”

The move was mainly to plug the loophole in government's earlier step, after the traders had started exploring the possibility of importing jewellery, as it was hassle-free and does not attract the Reserve Bank of India’s 80:20 norms. The finance ministry arguing for its latest move has said that jewellery making was a labour-intensive industry, with millions of artisans dependent on this sector for their livelihood and in the absence of any duty, differential between articles of jewellery and primary metal, there was an apprehension that Indian jewellery makers would not be able to compete with cheaper imports, particularly when majority of the imported jewellery is machine-made as compared to handmade jewellery in India.

Besides providing a level playing field for domestic jewellery makers, the hike in jewellery duty seeks to contain imports of gold ornaments. The government has increased the import duty on the gold from around 1 percent at the start of 2012 to discourage imports and manage the current account deficit, which was estimated at a record 4.8 percent of GDP in 2012-13. Gold imports in value terms fell to $650 million in August, from $2.2 billion in July.

Bank of India to mop-up Rs 1,500 crore via Basel III bonds

In a bid to boost its tier II capital for business growth, public sector lender Bank of India is planning to raise around Rs 1,500 crore through Basel III compliant bonds. These bonds carry a feature called 'Point of non-viability (PONV)' trigger. Occurrence of such event results in loss of principal amount to investors and default on the instrument.

Rating agency CRISIL has assigned ‘AAA/Stable’ rating to Tier II bonds issue. The rating agency has also reaffirmed its ratings on the bank’s existing debt instruments at ‘CRISIL AAA/Stable/CRISIL A1+’.

The ratings continue to reflect expectation of strong support from the Government of India (GoI), the bank’s majority shareholder, both on an ongoing basis and in the event of any distress.

RBI’s monetary policy: A delicate balancing act

Markets are eagerly waiting for a glimpse into the monetary policy framework of the new RBI leadership team

Never has a Reserve Bank of India (RBI) review met with as much anticipation as the one on 20 September. The new RBI governor Raghuram Rajan has boosted sentiment and excited markets with a slew of financial reforms on his first day in office. Now, markets eagerly await a glimpse into the monetary policy framework of the new RBI leadership team.

To be sure, market expectations are all over the map. Some believe a substantial rollback of the tightening is imminent; others fear decisive rate hikes are on the cards. Some believe the worst is over with the rupee. Others believe this is a temporary respite.

Before evaluating RBI’s options, it is important to understand the backdrop. As feared, the sharp rupee depreciation has imparted a stagflationary shock—pushing up inflation (the annualized momentum of wholesale price inflation is now above 10%, in part, because of the rupee pass-through) while simultaneously impinging on growth by reducing purchasing power and stressing corporate balance sheets. More generally, growth impulses remain weak. The momentum of gross domestic product (GDP) in the second quarter of 2013 slowed sharply and both PMIs (Purchasing Managers Index)—services as well as manufacturing—are well below 50, suggesting momentum continues to slow. How should RBI react to a stagflationary shock?
There has been unambiguously good news on the rupee which seems to have broken out of a vicious, self-fulfilling spiral over the last fortnight. A combination of domestic events (the new governor’s focus on financial liberalization, creation of an oil swap window, more banking capital) and global good fortune (soft US payrolls number and a diplomatic resolution in Syria) have combined to deliver a sharp mean-reversion to what was obviously an undervalued currency.

So, how should RBI respond? Given weak growth and signs of a stabilizing currency, should the tightening measures be unwound? The central bank appears unlikely to take such a gamble. Policymakers have had to engage in a fierce firefight over the last two months to break the rupee’s vicious spiral. It appears unlikely that they are ready to risk hard-earned gains by completely undoing the liquidity tightening measures—especially when part of these have accrued due to a more benign global environment, which could easily reverse. Doing so would signal that either its foreign exchange objectives have been accomplished or that the currency is no longer the burning priority—and either of these messages could unsettle the foreign exchange market.
What about a partial rollback? That is possible, but the signal is still important. The interest rate defence was never about the quantum of the increase. A 300 basis points (bps) increase in annualized rates (i.e. less than 30 bps on a monthly basis) was never going to be sufficient deterrent against a currency that was moving 100 bps a day. One basis point is one-hundredth of a percentage point. But it was a signal to markets that policymakers believed the currency had undershot and they would not turn a blind eye to further weakness. It could be important to sustain that message for a while longer.

To be sure, with growth momentum so weak, these emergency measures cannot go on forever. That said, the sharp real depreciation of the currency against a backdrop of firming global growth suggests that monetary conditions, more generally, are not as tight as suggested just by the level of interest rates. So it’s likely the central bank will want to more fully ascertain that the rupee has stabilized, expected capital flows are materializing, and global risks are fading before beginning any rollback.
Furthermore, if and when a rollback does occur, it may be accompanied by some increase in policy rates to ensure that the entire tightening is not reversed. Besides, this will also combat rising inflationary pressures. More fundamentally, with global rates on the rise and the US yield curve steepening sharply, it’s hard to imagine that India’s yield curve can remain so flat for long in any new equilibrium.

All told, the central bank is likely to leave this one outside the off stump. Instead the governor could well propose new initiatives to further reform, liberalize and deepen forex and money markets—something that he has long advocated and could have a long standing impact on India’s financial development and potential growth.
There is no end to the market clamour for focusing on growth but it is questionable whether easing monetary policy— given binding supply constraints on the ground—will have the desired efficacy on investment. More fundamentally, a return of macroeconomic stability will have to precede any growth pick-up. There is finally some good news on that front. The trade deficit has narrowed sharply, the rupee has begun to stabilize, and the government has underscored its fiscal intent. These are all encouraging but fledgling signs. And it’s important not to jump the gun.

Financial market volatility has potential to dampen invt recovery in Asia-Pacific: S&P

Financial market volatility still has the potential to derail or dampen investment recovery in Asia-Pacific despite the region's resilience to global economic weakness so
far. That's according to Standard & Poor's Ratings Services' report published today, titled "Investment Drivers In Asia-Pacific: Global Financial Risk Appetite May Matter More Than External Demand."
The report delves deeper into the factors influencing Asia-Pacific investment by focusing on the responsiveness of cyclical investment to external shocks on the real (i.e., goods and services producing) and financial sectors.

"One of the main results of our analysis is that for most of Asia-Pacific, changes in global financial risk appetite matter more to regional investment outcomes than changes in real external demand," said Standard & Poor's economist Vincent Conti. "Our results suggest that, despite the expected improvement in global growth prospects, the current bout of global risk aversion may temper investment growth in Asia-Pacific."
The report notes that Southeast Asian economies' large young labor force, rising incomes, and renewed push to further private and public investment allow these economies to grow at reasonable rates despite global economic shocks. In contrast, growth in the more export-dependent, newly industrialized economies of Korea, Taiwan, Hong Kong, and Singapore tends to suffer when global economic activity slows. This is given the dominance of high value-added consumer and capital goods in the economies' production base, which are in highest demand in the advanced economies.

"It is important to distinguish real sector factors from global risk sentiment because financing needs, foreign holdings of local securities, and depth of financial markets vary across Asia-Pacific," said Mr. Conti. "Sudden shifts in global investor sentiment could dramatically influence funding costs through capital flows, possibly affecting the real economy. Moreover, increases in global risk aversion do not necessarily occur in periods of weak global growth."

For its analysis, Standard & Poor's used a common statistical model called a vector autoregression that considers the feedback loops and dynamic effects of four variables: investment, global risk sentiment, exports, and interest rates.