RIL EXTENDS RECENT GAINS
Mar-13-2012
Date: 13.03.2012
Key benchmark indices were hovering near intraday highs in afternoon trade on firm Asian shares. The barometer index, BSE Sensex, was up 225.99 points or 1.28%, off close to 20 points from the day's high and up about 130 points from the day's low. The market breadth was positive. All the 13 sectoral indices on BSE were in the green. Index heavyweight Reliance Industries (RIL) rose more than 2%.
Shares of companies whose fortunes are linked to orders from Indian Railways were mostly higher ahead of the railway budget tomorrow, 14 March 2012. Interest rate sensitive realty stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. Cement stocks rose on reports the recent hike in railway freight rates is expected to push up cement prices by R 8 to R 10 a 50-kg bag. UltraTech Cements hit record high.
PSU stocks rose after Finance Minister Pranab Mukherjee said on Tuesday the government plans to raise R 30000 crore by selling stakes in state-run firms in the fiscal year that begins on 1 April 2012. Textile stocks gained after trade secretary Rahul Khullar told reporters on Monday a panel of ministers will likely review a halt on fresh cotton exports from India in two weeks.
Key benchmark indices surged in early trade on firm Asian equities. The market extended initial gains in morning trade to hit its highest level in nearly two weeks. The market held firm in mid-morning trade. Firmness continued in early afternoon trade. The market was hovering near intraday highs in afternoon trade.
BSE Sensex was up 225.99 points or 1.28% to 17,813.66. The index jumped 246.14 points at the day's high of 17,833.81 in morning trade, its highest level since 29 February 2012. The index rose 92.56 points at the day's low of 17,680.23 in early trade.
The S&P CNX Nifty was up 67.45 points or 1.26% to 5,427. The index hit high of 5,435.95 in intraday trade, its highest level since 29 February 2012. The Nifty hit a low of 5,390.80 in intraday trade.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,625 shares rose and 1,085 shares fell. A total of 146 shares were unchanged.
Among the 30-share Sensex pack, 25 gained while only five of them declined. Sterlite Industries, Jindal Steel & Power and GAIL (India) rose by between 3.23% to 5.19%. Wipro, M&M and Bajaj Auto fell by between 0.5% to 1.46%.
Index heavyweight Reliance Industries (RIL) rose 2.39% to R 816, with the stock extending two-day 4.66% gain. RIL along with BP PLC will reportedly submit a joint plan to the government to develop the D6 natural gas block and its satellite fields as an integrated unit. The proposal is significant in that it will seek approval to develop an entire block as one unit, rather than follow the current practice of getting clearance for one oil or natural gas field at a time.
In 2011, BP purchased a 30% stake in 21 RIL's oil and gas blocks across India, including D6, which is India's biggest gas discovery so far. RIL is facing declining output at D6 due to reservoir complexity, a natural decline in reserves and delays in developing satellite fields. Output at the D1, D3 and MA fields in the D6 block has plunged to about 38 million metric standard cubic meters a day (MMSCMD) from 60 MMSCMD in June 2010. It is estimated that output will fall further to 27.60 MMSCMD in the next financial year starting April, and to 22.60 MMSCMD in the year after that.
Essar Oil rose 2.34% after the company announced during market hours today the successful commissioning of a Diesel Hydrotreater Unit I (DHDT-I) at its Vadinar Refinery. With the phase wise commissioning of three additional units slated for the end of this month, the refinery is now firmly on track to complete the Phase I expansion by March 2012, which entails the addition of nine new units that will expand capacity to 18 million metric tonnes per annum (MMTPA) (375,000 barrels per day) and enhance complexity to 11.8 (from 6.1 currently). With this commissioning, Essar Oil's capital expenditure programme is beginning to taper downwards and will see substantial pick up in revenue and profitability of the company going forward, the company said.
Shares of companies whose fortunes are linked to orders from Indian Railways were mostly higher ahead of the railway budget. Kernex Microsystems, BEML, Texmaco and Stone India rose by between 0.01% to 1.17%. Kalindee Rail Nirman and Titagarh Wagons fell by between 0.28% to 0.92%. The Railway Budget will be presented tomorrow, 14 March 2012.
Given the financial condition of railways, this Rail Budget is likely to seek a two-year moratorium on paying dividend to the government.
Interest rate sensitive realty stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. Lower interest rates may help revive demand for properties. Purchases of both residential and commercial property are largely driven by finance. HDIL, D B Realty and Unitech rose by between 2.15% to 3.34%.
India's largest real estate developer by sales DLF advanced 1.79%. After market hours on Monday, 12 March 2012, the company said it received an order from Competition Commission of India (CCI) in connection with information filed by Magnolia Flat Owners Association against the company. DLF said that conclusion of the said order is similar to the order of the CCI dated 16 August 2011. However, the order says that since a penalty has been imposed in the earlier case, it will not be appropriate to separately impose penalty again in the instant case. DLF said it will take requisite legal action against the order at the Competition Appellate Tribunal (COMPAT). DLF said it believes that it has a strong case.
Property consultants and real estate developers have reportedly demanded industry status to the realty sector in the forthcoming Budget. They have also sought incentives to promote affordable housing and an increase in the tax exemption on home loans. To boost supply, they have also asked for a single-window clearance for real estate development projects and foreign direct investment (FDI) in multi-brand retail to create demand for retail space in shopping malls.
PSU stocks rose after Finance Minister Pranab Mukherjee said on Tuesday the government plans to raise R 30000 crore by selling stakes in state-run firms in the fiscal year that begins on 1 April 2012. Sail, MTNL, ONGC, Bhel, REC, and Bharat Electronics rose by between 1.98% to 4.57%.
The government has also set a target of R 25000 crore from asset sales for the 2013/14 fiscal year, Mukherjee told lawmakers in a written reply. Mukherjee said the projections are based on the medium-term fiscal policy laid out last year.
Textile stocks gained after trade secretary Rahul Khullar told reporters on Monday a panel of ministers will likely review a halt on fresh cotton exports from India in two weeks. Arvind Mills, Patspin India, Jindal Cotex, Birla Cotsyn, Jindal Worldwide, Alok Industries and Vardhman Textile rose by between 0.36% to 5.71%. The government has flip-flopped on the issue of banning cotton exports. After saying it was lifting a ban on overseas sales of the fibre on the weekend, Khullar said on Monday no fresh exports would be allowed and only the quantity permitted to be sold before the ban will be allowed to be shipped.
Cement stocks rose on reports the recent hike in railway freight rates is expected to push up cement prices by R 8 to R 10 a 50-kg bag. ACC, Ambuja Cements, Jaiprakash Associates and India Cements gained by between 0.93% to 3.73%. UltraTech Cements rose 1.38% to R 1493.20. The stock hit a record high of R 1501 today. There are expectations that the Government may increase excise duty by two per cent in the Budget to make up for the widening fiscal deficit, reports said.
Foreign institutional investors (FIIs) made substantial purchases of Indian stocks over the past two trading sessions. FIIs bought shares worth a net R 1298.64 crore on Monday, 12 March 2012, as per provisional data from the stock exchanges. Their inflow totaled R 2583.29 crore in two trading sessions on 9 and 12 March 2012, as per provisional data from the stock exchanges
Data on advance tax for the last installment of 15 March 2012 may provide cues on Q4 March 2012 corporate earnings.
Industrial production grew 6.8% in January 2012 from a year earlier, sharply higher than a revised 2.5% rise in December 2011, helped by a strong rebound in manufacturing output, data released by the government on Monday, 12 March 2012, showed. Manufacturing output, which has a 75.5% weight in the index of industrial production, rose 8.5% from a year earlier in January. It had risen a revised 2.6% on year in December. Electricity production increased 3.2% from a year earlier in January while capital goods output shrank 1.5%.
The Reserve Bank of India (RBI) after market hours on Friday, 9 March 2012, surprised the markets by slashing the cash reserve ratio (CRR) by 75 basis points to 4.75% from 5.5% to ease liquidity situation. The CRR cut, effective the fortnight beginning 10 March 2012, will inject around R 48000 crore of primary liquidity into the banking system. At the 3rd quarter policy review in late January 2012, RBI had announced a cut of 50 basis points in CRR, thereby injecting R 32000 crore into the cash-strapped system.
The government will release data on inflation based on the wholesale price index (WPI) for February 2012 tomorrow, 14 March 2012. WPI inflation for February 2012 is projected at 6.7% as per the median estimate of a poll of economists carried out by Capital Market. WPI inflation stood at 6.55% in January 2012.
The Reserve Bank of India (RBI) is slated to announce a mid-quarter review of the monetary policy on Thursday, 15 March 2012, a day before the presentation of the Union Budget 2012/13.
The government is working with state governments for early implementation of a goods and services tax (GST), Finance Minister Pranab Mukherjee said on 22 February 2012.
Stating that the United Progressive Alliance (UPA) was committed to honest and efficient governance, President Pratibha Patil on Monday said the country would soon be back on the high growth path of eight to nine percent from the seven percent estimated for the current fiscal. Addressing the joint session of Parliament on first day of the budget session, the President said the long-term fundamentals of the Indian economy remain robust. The government plans to achieve a 9% annual growth target in the five-year plan period ending on 31 March 2017.
Mukherjee will present the annual budget for 2012/13 on Friday, 16 March 2012, while the railways budget will be presented on Wednesday, 14 March 2012. The government will present on Thursday, 15 March 2012 the Economic Survey for 2011/12, a document on the state of economy prepared by the economic division in the ministry of finance. The annual budget is usually presented on the last working day of February. However, the budget has been delayed this time due to the assembly polls.
Reports indicate that the finance ministry is considering a proposal to increase excise duty from 10% to 12%, although still lower than the level before the 2008 financial crisis. The move is aimed at helping the government improve its fiscal situation but it is expected to push up the cost of almost all manufactured goods from food products to consumer durables and automobiles.
Meanwhile, the parliamentary standing committee on finance on Friday, 9 March 2012, gave its approval to a revised version of the proposed Direct Taxes Code (DTC) Bill, 2010. The committee has recommended a more progressive tax regime, which entails widening of the income-tax slabs, increasing the exemption limit for savings and raising the ceiling for wealth tax. If accepted, these recommendations will increase disposable incomes in the hands of taxpayers, encourage savings and levy a higher tax on the rich, besides reducing compliance costs for the income-tax department.
The DTC Bill, 2010, consolidates and integrates all the direct tax laws and replaces both the Income Tax Act, 1961, and the Wealth Tax Act, 1957. The committee headed by Bharatiya Janata Party leader Yashwant Sinha, which submitted its report to the Lok Sabha speaker on Friday, 9 March 2012, has also recommended abolition of the securities transaction tax (STT). The committee has favoured a corporate tax rate of 30% and also recommended that the government should calibrate the capital gains tax regime for long term and short term.
Securities Transaction Tax (STT) is applicable to the purchase or sale of equity shares, derivatives, units of equity-oriented funds through a recognised stock exchange in India or the sale of a unit of an equity-oriented fund to a mutual fund. STT is payable equally by the purchaser and seller at 0.125% of the transaction value on delivery based transactions. On non-delivery based transactions in equities or units of an equity oriented fund, it is payable by the seller at 0.025%. In case of sale of options in securities, STT is levied at the rate of 0.017% of the option premium to be paid by the seller. In case of sale of options in securities where the option is exercised, STT is levied at 0.125% of the settlement price and is paid by the purchaser. In case of sale of futures in securities, STT at 0.017% is to be paid by the seller.
Asian markets edged higher on Tuesday on optimism that the Euro-area finance chiefs will complete the second Greek bailout. Key benchmark indices in Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan were up by between 0.09% to 1.31%.
The Bank of Japan held off on easing monetary policy on Tuesday after last month's surprise loosening, but board member Ryuzo Miyao unsuccessfully proposed a further easing by increasing the bank's asset-buying and loan scheme by 5 trillion yen ($61 billion). As widely expected, the BoJ maintained its key policy rate at a range of zero to 0.1% by a unanimous vote. The bank left its asset purchase fund at 30 trillion yen and a credit-loan program at 35 trillion yen.
Euro-area finance ministers on Monday, 12 March 2012 signed off on a second Greek bailout and will give a formal approval on Wednesday, 14 March 2012, a day before the International Monetary Fund board votes on its contribution.
Trading in US index futures indicated that the Dow could gain 56 points at the opening bell on Tuesday, 13 March 2012.
US stocks ended on a flat note on Monday, 12 March 2012 after Federal Reserve Chairman Ben Bernanke stopped short of giving a strong signal of more stimulus during testimony in front of the US House of Representatives Financial Services Committee. The Dow Jones Industrial Average gained 37.69 points, or 0.29%, to 12,959.71. The Standard & Poor's 500 index rose 0.22 points, or 0.02%, to 1,371.09. The Nasdaq Composite index dropped 4.68 points, or 0.16%, to 2,983.66.
Analysts don't expect the US Federal Reserve to make any changes to its interest rate policy at today's policy meeting. The Fed has pledged to keep short-term interest rates at a record low until at least late 2014.
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