Published on March 5, 2014
India-Global Market Summary 5-3-2014 • Market edged higher in choppy trade after a survey showed that private sector output across India rose for the first time in eight months during February and that Indian services companies maintained their positive outlook for output growth over the coming year in February 2014. Services contribute about 60% to India's gross domestic product. The market breadth, indicating the overall health of the market, was positive. Receding geopolitical worries over Ukraine aided the upmove on the domestic bourses as Indian stocks rose for the second day in a row. Sensex and Nifty attained highest closing level in nearly 6 weeks. The market edged higher in early trade on firm Asian stocks. Sensex garnered 0.32% to settle at 21,276.86 and Nifty garnered 0.49% to settle at 6,328.5. The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Tuesday. Among the 30-share Sensex pack, 17 stocks rose and rest of them declined. • In the foreign exchange market, the rupee edged higher against the dollar as equities rose. The partially convertible rupee was hovering at 61.77, compared with its close of 61.845/855 on Tuesday, 4 March 2014. • Private sector output across India rose for the first time in eight months during February. The seasonally adjusted HSBC India Composite Output Index posted 50.3 in February 2014, higher than 49.6 in January 2014, indicating a fractional rate of expansion. The latest growth was centred on the manufacturing sector, Markit Economics said in a statement. Adjusted for seasonal influences, the headline HSBC Services Business Activity Index rose from 48.3 in the previous month to 48.8 in February. This was consistent with a slight rate of contraction, and one that was the slowest in the current eight-month period of reduction, Markit Economics said. Where output declined, this was linked by survey respondents to lower levels of incoming new work and economic instability across the country. Sector data indicated that four of the six monitored categories recorded falling business activity, with the fastest decrease noted in Financial Intermediation.
• • • • • • February data highlighted an eighth consecutive monthly decline in new business placed with Indian services firms. That said, the pace of reduction eased to the weakest in that sequence and was marginal overall, Markit Economics said. Panellists reported weaker demand, a fragile economy and competitive pressures. Three of the six monitored sub-sectors registered lower new orders, namely Financial Intermediation, Renting & Business Activities and Transport & Storage. New business rose at a marked pace in the manufacturing economy, supporting growth across the private sector as a whole. Staffing levels at service providers were broadly unchanged in February, with the index measuring employment posting only fractionally above the 50 no-change mark. Payroll numbers at manufacturers rose, albeit marginally. Concurrently, workforce numbers across the private sector as a whole were little-changed from those seen in January. Indian service providers reported higher input prices in February 2014. The rate of cost inflation was solid, but eased since January and was weaker than the series average. Higher food, fuel and gold prices were cited by panellists as the main drivers of the rise in input costs. Input price inflation in the private sector accelerated to the strongest in four months, as manufacturers registered a sharp and accelerated increase. Reflective of sustained increases in costs, prices charged by services companies were raised further in February. Although the fastest in three months, the rate of charge inflation was moderate and below its average, Markit Economics said. Output prices in the private sector as a whole rose at a moderate pace that was unchanged from January. Indian services companies maintained their positive outlook for output growth over the coming year, which they mainly linked to planned increases in marketing, forecasts of stronger demand and hopes of an overall improvement in economic conditions. Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Service sector activity continued to stabilize, but the PMI reading remains below the water line and point to weak growth conditions. While inflation for input prices eased a bit, it picked up for prices charged as businesses passed on higher costs to clients. Despite the weak growth backdrop, the RBI will have to keep its inflation guards up to address lingering inflation pressures. Moreover, fiscal policy tightening to meet the deficit target will hold back government spending. This suggests that growth will remain subdued in coming months". On the political front, the Election Commission today, 5 March 2014, announced the dates for 2014 Lok Sabha elections. The polls will be held between 7 April 2014 and 12 May 2014 in nine phases. The counting of votes will be take place on 16 May 2014. With the announcement of poll dates, the Model Code of Conduct for governments and political parties comes into force with immediate effect. Therefore the Cabinet will no longer be able to take key decisions. Chief Election Commissioner VS Sampath said the dates have been decided keeping in view certain factors. "The parties brought to our notice a wide range of issues pertaining to security, revising the ceiling of poll expenditure, keeping the regional cultures and festivals in view while deciding dates," Sampath said.
• • • • • • • • • • • • • • • • • Bank stocks edged higher. Bharti Infratel surged whereas Reliance Industries (RIL) fell after Reliance Jio Infocomm (Reliance Jio), a subsidiary of RIL, and Bharti Infratel after market hours on Tuesday, 4 March 2014, announced the signing of a Master Services Agreement. Most metal stocks rose a China's leaders retained an economic growth target for this year. Capital goods stocks rose, with ABB India and Thermax hitting 52-week high. Realty stocks also edged higher. PSU OMCs hiked the price of petrol by 60 paise and diesel by 50 paise per litre effective 1 March 2014 midnight amid rising crude oil prices and depreciation of rupee against the dollar. This price hike is exclusive of local taxes. PSU OMCs also hiked the price of jet fuel or aviation turbine fuel by 1% effective 1 March 2014. Separately, the price of non-subsidized cooking gas (LPG), which customers buy after using up their quota of 12 subsidised cylinders, was cut by Rs 53.5 per cylinder, the second straight reduction in rates since February. The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas reviewed international prices of crude oil and petroleum products during the second fortnight of February 2014. The under-recovery on High Speed Diesel (HSD) applicable for first fortnight of March 2014 rose to Rs 8.37 per/litre. This was Rs 8.31 per litre during the second fortnight of February 2014. In case of PDS Kerosene, the underrecovery is Rs 36.34 per litre for March 2014. The under-recovery is Rs 605.80 per cylinder for domestic LPG cylinders for March 2014. While the under-recovery for diesel is calculated on fortnightly basis, the under-recovery for PDS Kerosene and LPG is calculated on monthly basis. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals. The government has already freed pricing of petrol. Tata Power Company fell 3.25% after it said that the duly empowered committee of the board of directors will meet on Saturday, 8 March 2014, to consider and decide upon the terms and conditions of the proposed rights issue Shares of infrastructure developers edged higher as Finance Minister P Chidambaram reportedly gave a nod to suggestions made by Rangarajan committee to allow rescheduling of premium payment for stressed highway projects. ONGC said that a meeting of the board of directors of the company will be held on 24 March 2014, to consider payment of second interim dividend for the financial year ending 31 March 2014. Punjab National Bank announced that after regulatory approvals, bank has sold its entire stake in Credit Information Bureau India (CIBIL) to TransUnion International Inc.(FII). TCS announced an exciting new partnership with Microsoft Business Solutions (MBS) at the annual Microsoft Dynamics Convergence Conference. National Aluminium Company (Nalco) turns ex-dividend today, 5 March 2014, for interim dividend of Rs 1.10 per share for the year ending 31 March 2014. Reliance Jio Infocomm (Reliance Jio), a subsidiary of Reliance Industries (RIL) and Bharti Infratel announced the signing of a Master Services Agreement UPL rose 3.32% after the company said it has increased its stake in Brazilian firm UPL do Brasil to 73% from 51% earlier. Autoline Industries spurted 11.06% after the company said its board will meet on 11 March 2014, inter alia, to explore various avenues of raising funds to meet the funding requirements of the company. Cairn India lost 1.15% as US crude oil futures tumbled the most in two months amid speculation that tension between Ukraine and Russia won't disrupt oil supplies IT stocks rose after the Obama administration predicted that US gross domestic product will expand 3.1% in 2014 after rising 1.9% last year Dr. Reddy's Laboratories rose 1.19% after the company said it launched anti-bacterial Moxifloxacin generic in the US market on 4 March 2014.
Global news • • • • • • • • • • European stocks fell on Wednesday, 5 March 2014, after rallying yesterday by the most in eight months, as investors turned their attention from the crisis in Ukraine to economic data from Europe and America. Asian stocks edged higher on Wednesday, 5 March 2014, after comments from Russian President Vladimir Putin on Tuesday, 4 March 2014, signaled the Ukraine crisis won't immediately escalate and as China's leaders retained an economic growth target for this year. Trading in US index futures indicated that the Dow could fall 7 points at the opening bell on Wednesday, 5 March 2014. US stocks surged on Tuesday, 4 March 2014, as fears of a confrontation between Russia and Ukraine eased and Russian President Vladimir Putin said there was no need to use military force in the Crimea region for now. A monthly meeting of the Governing Council of the European Central Bank (ECB) is scheduled tomorrow, 6 March 2014, in Frankfurt to decide euro zone interest rates. A two-day meeting of Bank of England's Monetary Policy Committee (MPC) begins today, 5 March 2014, to decide interest rates in UK. Policy rates are expected to remain unchanged at record low. The UK's central bank slashed interest rates to record low of 0.5% at the height of the financial crisis in 2009. the start of China's annual meeting of its legislature, the National People's Congress, Premier Li Keqiang today, 5 March 2014, said the government would keep its economic-growth target at 7.5% in 2014, unchanged from that of 2012 and 2013. Meanwhile, the consumer inflation target was set at 3.5%. The world's second-largest economy grew 7.6% in 2013, its slowest pace since 1999. Setting the target at 7.5% would strengthen market confidence, optimize economic structures, and protect jobs, Li said in his first "work report" to the legislature. "Growth is the key to solve all the key issues in our country. We have to hold firm to the focus of economic development in our work and maintain a proper economic growth rate," Li said. The 7.5% target "is in keeping with our goal of finishing building a moderately prosperous society in all respects, and it will boost market confidence and promote economic structural adjustment. More importantly, stable growth ensures employment," Li said. "China is still a developing country in the primary stage of socialism, and development remains the key to solving all our country's problems," Li said in the report. The expansion goal is "flexible and guiding,” the National Development and Reform Commission said in a related report today, 5 March 2014. Local governments "must not seek faster growth or compete with each other to have the highest growth rate," the economic-planning agency said. The budget deficit is estimated to rise to 1.35 trillion yuan this year from 1.2 trillion yuan last year, the Ministry of Finance said in its work report. That would account for about 2.1% of gross domestic product, it said. "China will expand the fiscal deficit to maintain a certain level of stimulus while keeping the deficit ratio unchanged, reflecting the stability and continuity of economic policy," the ministry said in today's report. China today, 5 March 2014, provided more details on how it plans to reform some of its tightly regulated resource prices this year and gave hard targets for reducing pollution in 2014. "The problems of consumption of resources and environmental pollution are prominent," the National Development and Reform Commission (NDRC), the country's top economic planning agency, said in an annual report. "In particular, smog frequently engulfs large areas of China and seriously affects people's lives and health," it said. The report was presented to the National People's Congress, which opened on Wednesday. The NDRC said it would introduce tiered-pricing models for resources that would charge some users higher prices based on the amount they consume. The HSBC China services Purchasing Managers' Index rose to 51 in February from 50.7 in January, HSBC Holdings PLC said on Wednesday. A reading above 50 indicates expansion in service-sector activity, while a reading below that shows a contraction. "The HSBC China Services PMI suggests that service sector growth seems to be stabilising at a relatively low level. However, combined with the weaker manufacturing PMI, the overall strength of economic growth is moderating and this is starting to weigh on employment growth," HSBC chief economist for China Qu Hongbin said in a statement. "Beijing policy makers can and should fine-tune policy to avoid growth deceleration in the first half of the year," he added. Shanghai Chaori Solar Energy Science & Technology Co, which makes solar cells and panels, announced late on Tuesday, 4 March 2014, that it may not be able to make an 89.8 million yuan ($14.6 million) interest payment in full on March 7, in what would be the first default of an onshore bond. The company plans to pay 4 million yuan to bondholders, the company said in a statement to the Shenzhen stock exchange yesterday. Its stock has been suspended from trade. A default would highlight strain in China's $4.2 trillion bond market after a trust product issued by China Credit Trust Co. was bailed out in January.
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