May 12

Daily Market Commentary : 11th May 2016

After enjoying two consecutive days of gains, the Indian equity market took a breather amid a volatile day of trades. Sentiment was hit after the government announced that it would tax capital gains on foreign investments from Mauritius made from April 2017 at 50% of the domestic rate for two years, and at the full rate thereafter. Nifty closed with a a loss of 39 points at 7,848 while Sensex ended with a loss of 176 points at 25,597.

In the global markets, most of the Asian indices closed the day on a positive note. The Hong Kong’s Hang Seng ended higher by 0.43%, while Japan’s Nikkei 225 ended higher by 2.15%. The European indices also witnessed buying interest. The FTSE 100 was up 0.77%, France’s CAC 40 was up 1.09% and Germany’s DAX was up 1.13%. The rupee was trading at Rs 66.61 to the dollar at the time of writing.

Stocks in the steel sector ended the day on a mixed note with Adhunik Metaliks and Bhushan Steel leading the gains. As per a leading financial daily, Tata Steel has received seven expressions of interest (EoI) to acquire the firm’s loss-making UK business. According to the company, all of these seven EoI have been immediately taken forward to the next stage of the sales process, which involves inputs from the UK government.

Tata Steel UK’s assets include Port Talbot plant in south Wales, UK’s largest with around 4,000 workers, as well as sites at Newport, and Rotherham.

Shares of Yes Bank finished the trading day on an optimistic note (up 0.7%) after the bank announced its plan to raise around Rs 165 billion through issue of debt securities as well as equity capital. The bank is seeking shareholders’ approval for this fund raising, which will be completed in one or more tranches. The bank has scheduled a shareholders’ meeting on June 7, 2016, where it will ask shareholders to approve raising Rs 100 billion of debt by issuing securities to eligible investors on private placement basis. The proposed fund would be raised in one or more tranches in domestic and or overseas markets, as per the structure and within the limits permitted by the RBI and other regulatory authorities.

Furthermore, the bank has also proposed to raise additional capital aggregating up to US$ 1 billion (about Rs 65 billion) by way of placement of shares through Qualified Institutional Placement (QIP) and/or private placement in international markets through ADRs/ GDRs.

In another development,The Economic Times reported that the government will allocate fresh capital only to those PSU banks that have performed better than average and have improved their bad loan recovery effort. Finance ministry officials have begun one-to-one interactions with MDs and CFOs of government owned banks to understand their capital requirement for the full year 2016-17. Banks need to maintain a minimum capital to absorb losses on their loans. During the meeting, finance ministry officials have conveyed to the banks that they would receive the bare minimum capital that’s needed to meet the regulatory requirements and to stay afloat. From FY17, banks will have to maintain minimum capital adequacy ratio of 10.25%.

PSU banks languished in red today with PNB and Indian Bank bearing majority of the brunt.

Barring Escorts Ltd, majority of the stocks in the automobile space finished in red.Tata Motors DVR and Tata Motors lead the losses.

According to a leading financial daily, Maruti Suzuki India will be increasing the production capacity at its plants to meet the growing demand of the Vitara Brezza and the Baleno so as the reduce the waiting period for both the cars. Maruti has decided to increase the production of the Vitara Brezza from 80,000 units to over 120,000 units per annum. Production of the Baleno hatchback is being increased to about 165,000 units this year. With the new plant in Gujarat on its way, Maruti Suzuki is hoping that it will help the company to reduce the waiting period for both these cars.

Maruti reported a 13.3% rise in total sales in April at 126,569 units as against 111,748 units last year. The company’s domestic sales increased by 16.2% during the month to 117,045 units as against 100,709 units in April 2015. Maruti Suzuki finished the day up by 1.3% on the BSE.

USDINR trade today trading up 4 paise at 66.62 per US dollar.

Out of 1,811 stocks traded on the NSE, 896 declined and 631 advanced today.

Top 5 Nifty Gainers: ICICI Bank (2.74%), Asian Paints (1.82%), Adani Ports & Sez (1.66%), TCS (1.56%), and GAIL (1.40%).

Top 5 Nifty Losers: Hind. Unilever (-0.63%), Tata Steel (-0.03%).

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