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Tyre shares in demand as Tokyo rubber futures hit 5-month low

Key benchmark indices languished in the negative terrain in early afternoon trade. The market breadth, indicating the overall health of the market, was negative. The barometer index, the S&P BSE Sensex, was down 49.75 points or 0.24%, up about 30 points from the day’s low and off close to 70 points from the day’s high. Weakness in Asian stocks weighed on investor sentiment.

Realty stocks edged lower. IT stocks fell on profit booking after recent strong gains. TCS reversed direction after hitting record high. Tech Mahindra scaled a 52-week high. Dr Reddy’s Laboratories scaled record high. Shares of tyres makers rose as natural rubber futures dropped in Tokyo.

A bout of volatility was witnessed as key benchmark indices alternately swung between gains and losses in early trade. Volatility continued as key benchmark indices trimmed losses after hitting fresh intraday low in morning trade. The Sensex extended losses and hit fresh intraday low in mid-morning trade. The Sensex languished in the negative terrain in early afternoon trade.

Foreign institutional investors (FIIs) bought shares worth a net Rs 413.85 crore on Monday, 13 January 2014, as per provisional data from the stock exchanges.

At 12:20 IST, the S&P BSE Sensex was down 49.75 points or 0.24% to 21,084.46. The index fell 79.20 points at the day’s low of 21,055.01 in mid-morning trade. The index rose 20.55 points at the day’s high of 21,154.76 in morning trade.

The CNX Nifty was down 14.95 points or 0.24% to 6,257.80. The index hit a low of 6,250.20 in intraday trade. The index hit a high of 6,280.35 in intraday trade.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,219 shares dropped and 1,055 shares rose. A total of 159 shares were unchanged.

Among the 30-share Sensex pack, 23 stocks fell and rest of them rose. Hindustan Unilever (down 1.17%), Tata Motors (down 1.54%) and Tata Steel (down 1.86%) declined.

IT stocks fell on profit booking after recent strong gains. Infosys fell 0.29% to Rs 3,655 after recent gains triggerd by the company raising its revenue growth guidance for the year ending 31 March 2014. The stock had hit a record high of Rs 3,674.40 in intraday trade on Monday, 13 January 2014. At the time of announcement of Q3 December 2013 earnings, Infosys, before trading hours on Friday, 10 January 2014, raised its revenue growth guidance in both rupee and dollar terms for the year ending 31 March 2014. The company expects consolidated revenue in rupee terms to grow 24.4% to 24.9% for the year ending 31 March 2014 (FY 2014). This guidance is based on rupee dollar conversion rate of 61.81 for the rest of the financial year. The company expects consolidated revenue in dollar terms to grow 11.5% to 12% in FY 2014.

Many other IT stocks dropped on profit taking.

HCL Technologies dropped 1.18% to Rs 1,328.90. The stock had hit a record high of Rs 1,352 in intraday trade on Monday, 13 January 2014.

Wipro fell 1.32% to Rs 554.05. The stock had hit 52-week high of Rs 567.45 in intraday trade on Monday, 13 January 2014.

CMC plunged 8.21% after the company reported 4.79% rise in consolidated net profit to Rs 70.54 crore on 0.03% increase in net sales to Rs 560.93 crore in Q3 December 2013 over Q2 September 2013. Net profit rose 15.5% to Rs 70.54 crore on 13.9% growth in net sales to Rs 560.93 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Monday, 13 January 2014.

Commenting on the results, CMC CEO and MD R Ramanan said: “The revenue growth in this quarter has been in line with our expectation, considering that traditionally Q3 is not a growth quarter in the international markets. The company continues to find good traction across geographies and added 14 clients during the quarter. The company continues to focus on people excellence and was assessed at PCMM level 5 by SEI during the quarter”.

CMC is a pioneer information technology solutions provider in India and is a subsidiary of Tata Consultancy Services (TCS).

TCS dropped 1.51% to Rs 2,334.55, with the stock reversing direction after hitting a record high of Rs 2,384.20 in intraday trade. The company unveils Q3 results on Thursday, 16 January 2014.

Tech Mahindra advanced 0.1% to Rs 1,887.30 after hitting a 52-week high of Rs 1,906 in intraday trade.

Dr Reddy’s Laboratories advanced 0.52% to Rs 2,639.85 after hitting a record high of Rs 2,645 in intraday trade

Realty stocks edged lower. DLF (down 1.93%), D B Realty (down 0.58%), HDIL (down 0.01%), and Unitech (down 2.19%) declined.

Tyres shares rose as natural rubber prices dropped. CEAT (up 3.11%), JK Tyre & Industries (up 2.7%) and MRF (up 1.08%).

Apollo Tyres was up 0.9% at Rs 118.10. The stock hit record high of Rs 118.70 in intraday trade.

Rubber futures in Tokyo reached a five-month low as stockpiles in China continued expanding, deepening concern that demand from the largest user is slowing. The contract for delivery in June 2014 on the Tokyo Commodity Exchange was down 1.48% at 252.50 yen a kilogram. The contract dropped as much as 3.9% to 246.4 yen a kilogram in intraday trade, the lowest level since 8 August 2013. Futures extended last week’s 6.6% drop, the most since the five days through 19 April 2013.

Decline in rubber prices could boost profit margin of tyre firms. Rubber is a key raw material in tyre manufacturing.

VA Tech Wabag rose 1.11% after the company said it has won a repeat order from Bangalore Water Supply and Sewerage Board for a value of around Rs 250 crore. The new order was announced before market hours today, 14 January 2014. VA Tech Wabag said that the scope of order from Bangalore Water Supply and Sewerage Board (BWSSB) comprises of design and construction of 90 MLD waste water treatment plant at Bellandur Amanikere, Karnataka with operation and maintenance (O&M) for a period of 7 years. The project is funded by Japan International Cooperation Agency (JICA), the company said in a statement.

Commenting on this development, Mr. S Natrajan, Sales Head, VA Tech Wabag said, “We are delighted to get this repeat order from BWSSB, one of our key clients in municipal sector. We continue to enjoy customer confidence of Municipal clients based on our proven track record and execution capability”.

Currently Wabag is executing a WWTP project at K&C Valley for BWSSB which is also funded by JICA. In addition, Wabag has been operating and maintaining five WWTPs in and around Bangalore, the company said in a statement.

Jay Bharat Maruti rose 2.84% after net profit surged 63.7% to Rs 7.58 crore on 0.5% growth in net sales to Rs 286.66 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Monday, 13 January 2014.

The Reserve Bank of India (RBI) said on Monday, 13 January 2014, it had eased rules for hedging foreign exchange exposures, allowing greater flexibility for cancelling and rebooking forward contracts. The RBI is now allowing domestically-held forward contracts for all current as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and taken out again, called rebooking. Before the changes domestic exporters could cancel and rebook up to 50% of the contracts booked in a financial year for hedging their contracted export exposures. Importers were allowed to cancel and rebook up to 25% of contracts booked in a financial year. These limits have been dropped. Foreign investors will be allowed to rebook 10% of the value of cancelled contracts, up from nothing previously.

On macro front, the rate of inflation based on the combined combined consumer price index (CPI) of urban and rural India slowed to 9.87% in December 2013, from 11.16% in November 2013, data released by the government after trading hours on Monday, 13 January 2014, showed. The moderation was largely driven by a fall in vegetable prices, which cooled nearly 19% from November on improved supplies. That helped slow down annual food inflation to 12.16% last month from 14.72% in November.

The core CPI inflation excluding the volatile food and fuel prices, edged up to 8.05% in December 2013, from 7.97% in November 2013.

Inflation based on the wholesale price index (WPI) is seen easing up a bit at 7.1% in December 2013, from 7.52% in November 2013, as per the median estimate of a poll of economists carried out by Capital Market. WPI had accelerated to 7.52% in November 2013, from 7% in October 2013. The government will unveil WPI data for December 2013 at 12 noon tomorrow, 15 January 2014.

The Reserve Bank of India’s Third Quarter Review of Monetary Policy for 2013-14 is scheduled on 28 January 2014. The Reserve Bank of India kept its main lending rate viz. the repo rate unchanged after its last policy review in December and said at that time that it expected inflation to ease in the following months.

Asian stocks fell on Tuesday, 14 January 2014, after Federal Reserve Bank of Atlanta President Dennis Lockhart on Monday, 13 January 2014, said that the US economy is on solid footing and he would support continued cuts to stimulus. Fed’s bond-buying program has been a source of liquidity for most Asian and emerging markets in recent years. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Taiwan were down 0.16% to 3.08%. China’s Shanghai Composite rose 0.35%.

Japan’s current-account deficit widened to a record in November 2013 at 592.8 billion yen ($5.75 billion) before seasonal adjustment, data showed today, 14 January 2014.

Trading in US index futures indicated that the Dow could drop 12 points at the opening bell on Tuesday, 14 January 2014. US stocks sold off sharply Monday, resulting in the worst losses for benchmark indexes in several months, on concerns about the weak December jobs report and comments from a Federal Reserve official about a further reduction in stimulus. In a speech to the Rotary Club of America, Federal Reserve Bank of Atlanta President Dennis Lockhart said he supports “similar tapering steps” as the one taken to reduce bond-market purchases by $10 billion by the Federal Reserve last month, so long as the economy grows at the 2.5% to 3% clip he’s forecasting this year. He pointed out that the labor market is not as healthy as a 6.7% unemployment rate suggests. He said continued disinflation could pose risks to economic performance.

The Federal Open Market Committee (FOMC) holds a two-day monetary policy meeting on 28 and 29 January 2014. By a 9-to-1 vote, the Fed on 18 December 2013 decided to trim its asset-purchase program by $10 billion to $75 billion per month starting in January 2014.

Business Standard

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