Key benchmark indices extended initial losses to hit fresh intraday low in morning trade as Asian stocks fell after US House Republican leaders on Thursday, 20 December 2012, canceled a planned vote that would permit higher taxes amid stalled budget talks. United States is the world's biggest economy. The barometer index, BSE Sensex, was down 144.18 points or 0.74%, up close to 20 points from the day's low and off about 85 points from the day's high. The market breadth was weak. Index heavyweight and cigarette maker ITC edged lower. Another index heavyweight Reliance Industries (RIL) also edged lower.
Bank stocks fell on profit taking after recent strong gains. Gulf Oil Corporation (GOCL) jumped after the company said that through a step down subsidiary structure in the United Kingdom and USA, it has completed acquisition of 100% stake in Houghton International Inc. for $1.045 billion. In media pack, Zee Entertainment Enterprises hit 52-week high.
The market edged lower in early trade on weak Asian stocks. The market extended initial losses to hit fresh intraday low in morning trade.
At 10:20 IST, the BSE Sensex was down 144.18 points or 0.74% to 19,309.74. The index lost 163.42 points at the day's low of 19,290.50 in morning trade, its lowest level since 18 December 2012. The index fell 59.37 points at the day's high of 19,394.55 in opening trade.
The S&P CNX Nifty was down 48.55 points or 0.82% to 5,867.85. The index hit low of 5,860.70 in intraday trade, its lowest level since 18 December 2012. The index hit a high of 5,888 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,212 shares declined and 738 shares rose. A total of 87 shares were unchanged.
From the 30-share Sensex pack, 26 stocks declined while the rest of them gained.
Index heavyweight Reliance Industries (RIL) was down 0.62% to Rs 831.90. Russia's Spirit DPS early this week said that Indian telecom operator Infotel, a subsidiary of Reliance Group, has licensed its software TeamSpirit Voice and Video Engine. "Reliance intends to invest $10 billion in its LTE network and has turned to Spirit's software products for voice and video calls over LTE instead of waiting for phone makers who are slow in offering handsets transmitting voice and video in 4G networks. The lack of mobile devices supporting VoLTE (Voice-over-LTE) drives a growing number of carriers to implement a software-only product, which is more flexible, scalable and offers a quicker time to market. By using Spirit engines, Reliance will be able to offer its subscribers high-quality services as an alternative to Skype over cellular networks and attract new high-value subscribers that used services from other operators and commercial OTT service providers", Spirit DPS said in a statement.
RIL has bought back 4.62 crore shares for about of Rs 3358.09 crore till 11 December 2012 under its ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013.
Gulf Oil Corporation (GOCL) jumped 3.75%. The company after trading hours on Thursday, 20 December 2012, said that through a step down subsidiary structure in the United Kingdom and USA, it has completed acquisition of 100% stake in Houghton International Inc. for $1.045 billion after satisfactory conclusion of regulatory approvals. Houghton has a global footprint, with sales in more than 75 countries supported by 12 manufacturing facilities in 10 countries. Houghton recorded sales of $858 million and adjusted EBITDA of $132 million (15.4%) for the 12 months ended 30 September 2012. The acquisition which makes Gulf Oil the world's 9th largest lubricant company, fits extremely well with Gulf Oil's existing lubricant portfolio and makes it a 'full range' lubricants company serving customers from automotive, metal working to energy, aerospace and marine, Gulf Oil said. Houghton has a very strong industrial portfolio, which perfectly complements Gulf Oil's very strong presence in the automotive lubricant sector, the company said.
Gulf Oil will operate Houghton as a separate company and the rest of Gulf Oil's operations will be able to leverage Houghton's extensive base of industrial customers to offer them a complete end-to-end range of lubricants, the company said. Similarly, Houghton will be able to leverage Gulf Oil's existing global network, Gulf Oil said. There are various other synergies that can be achieved in manufacturing, strategic sourcing and distribution, the company said in a statement. The acquisition through the step-down subsidiary ensures that the financials of GOCL will not be affected, the company said. The debt will be serviced through Houghton International Inc's cash flows.
Commenting on the development, Sanjay G. Hinduja, Chairman, Gulf Oil Corporation said: "We are delighted that we have been successful in acquiring Houghton in the face of strong competition and shall strive to strengthen and support Houghton in the coming days".
Index heavyweight and cigarette maker ITC shed 1.74% to Rs 282.70. The Ministry of Health and Family Welfare in October 2012 notified new pictorial health warnings to be depicted on tobacco product packs which will come into effect from 1 April 2013. The Ministry of Health and Family Welfare said in a statement on 22 October 2012 that three sets of warnings each have been notified for smoking as well as smokeless forms of tobacco product packages. The well-designed health warnings and messages are part of a range of measures to communicate health risks due to tobacco use. Pictorial health warnings communicate health risks in a visible way, provoke a greater emotional response and increase the motivation of tobacco users to quit and to decrease their tobacco consumption, the ministry's statement said. Graphic warning labels have a greater impact than text-only labels and can be recognized by low-literacy audiences and children, the statement added.
Bank stocks fell across the board. India's largest private sector bank by net profit ICICI Bank declined 0.53% to Rs 1132.15. The stock had hit 52-week high of Rs 1,159 in intraday trade on Wednesday, 19 December 2012.
India's second largest private sector bank by net profit HDFC Bank shed 0.68% to Rs 678.35. The stock had hit a record high of Rs 705 in intraday trade on 30 November 2012. HDFC Bank's net profit jumped 30.06% to Rs 1559.98 crore on 24.47% growth in total income to Rs 9869.8 crore in Q2 September 2012 over Q2 September 2011.
State Bank of India (SBI) shed 0.86%. SBI's net profit rose 30.16% to Rs 3658.14 crore on 12.21% increase in total income to Rs 32983.47 crore in Q2 September 2012 over Q2 September 2011. The result was announced on 9 November 2012. The bank's ratio of net non-performing assets to net advances stood at 2.44% as on 30 September 2012, higher than 2.22% as on 30 June 2012 and 2.04% as on 30 September 2011. The bank's ratio of gross non-performing assets (NPA) to gross advances stood at 5.15% as on 30 September 2012, higher than 4.99% as on 30 June 2012 and 4.19% as on 30 September 2011.
Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank dropped by between 0.17% to 1.67%.
The Minister of State for Finance Mr. Namo Narain Meena said in a written reply to a question in the Rajya Sabha on Thursday, 20 December 2012, that the Government of India intends to infuse capital in the Public Sector Banks (PSBs) in order to maintain their Capital to Risk Weighted Asset Ratio (CRAR) above regulatory norms and at a comfortable level and also to cater to the growing credit needs of productive sectors of economy as well as to help the banks in getting prepared for implementation of Basel III norms which are effective from 01.01.2013. The position of level of CRAR is reviewed at the end of the Finance Year. Bank-wise details of capital infusion are being firmed up for the year 2012-13, the minister said.
Rajya Sabha on Thursday, 20 December 2012, passed the Banking Laws (Amendment) Bill, 2011. The bill was passed in Lok Sabha early this week. The passage of the Banking Laws (Amendment) Bill, 2011 in parliament is expected to pave the way for issuance of the new bank licenses by the RBI. The Banking Laws (Amendment) Bill, 2011 proposes to give the Reserve Bank of India the power to take temporary control of private sector banks in the event of operational irregularities. It would also increase the limit on the voting rights of any one shareholder in a private bank to 26% from 10%. The cap would rise to 10% from 1% for state-run banks. Voting rights of 26% in a private sector bank could allow an investor to gain operational control over a bank, or at least significant influence over the board. Higher voting rights in private sector bank could also encourage foreign banks to expand in India by buying stakes in local banks, as they would have greater operational control.
In 2011, the RBI drafted rules allowing industrial firms, except those in real estate, to enter banking, but held back on their implementation, saying it would need more powers under the new regime. Tuesday's banking bill would give the RBI the power it had sought, clearing the way for the licensing regulations to take effect.
Zee Entertainment Enterprises rose 1.33% to Rs 224.75. The stock hit a 52-week high of Rs 226.45 in intraday trade today, 20 December 2012.
Indian companies will start unveiling Q3 December 2012 results from mid-January 2013. Investors and analysts will closely watch the management commentary that would accompany the result which could cause revision in their future earnings forecast of the company for the current year and or next year. Bajaj Auto unveils Q3 results on 16 January 2013. HDFC Bank unveils Q3 results on 18 January 2013. HDFC unveils Q3 results on 21 January 2013.
On the macro front, the rate of inflation based on the Consumer Price Index-Agricultural Labourers increased to 10.31% in November 2012 from 9.85% in October 2012, the Ministry of Labour & Employment said after trading hours on Thursday, 20 December 2012. The rate of inflation based on the Consumer Price Index-Rural Labourers edged up to 10.47% in November 2012 from 9.84% in October 2012.
The Reserve Bank of India (RBI) undertakes Third Quarter Review of Monetary Policy 2012-13 on 29 January 2013. RBI kept its key policy rate viz. the repo rate unchanged at 8% after mid-quarter monetary policy review on 18 December 2012. The central bank said that in view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards. Liquidity conditions will be managed with a view to supporting growth as stated in the Second Quarter Review (SQR) of Monetary Policy 2012-13 on 30 October 2012, thereby preparing the ground for further shifting the policy stance to support growth, RBI said. Overall, recent inflation patterns and projections provide a basis for reinforcing October guidance about policy easing in the fourth quarter, RBI said. However, risks to inflation remain and accordingly, even as the policy emphasis shifts towards growth, the policy stance will remain sensitive to these risks, RBI said.
The Lok Sabha early this week approved the much-awaited Companies Bill, 2011, making it mandatory for profit-making companies to spend on activities related to corporate social responsibility (CSR). If a company does not do so, it will have to explain the reasons for it. The Bill, aimed at improving corporate governance, also contains provisions to strengthen regulations for companies and auditing firms.
The changes in the bill include provisions that make it mandatory for firms -- those that have reported profits of Rs 5 crore or more in last three years -- to spend at least two per cent of their average net profit on CSR activities. Companies failing to meet the obligation and not disclosing reasons for it in their books of account would face action, including penalty.
The next general elections in India must be held before May 2014.
Asian stocks fell on Friday, 21 December 2012, after US House Republican leaders canceled a planned vote that would permit higher taxes amid stalled budget talks. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Taiwan, Singapore and South Korea fell by between 0.04% to 1.18%.
Trading in US index futures indicated that the Dow could slump 197 points at the opening bell on Friday, 21 December 2012. US stocks ended Thursday's session on a moderately positive note after Republican House Speaker John Boehner expressed optimism about reaching a budget deal with President Barack Obama. However, on Thursday evening House Republican leaders canceled a vote on a "Plan B" that would have extended tax cuts on incomes below $1 million, saying it didn't have the votes to pass. The failure to attract support among Republican members for their own leadership's bill cast a shadow over prospects for a bipartisan deal.
The US fiscal cliff refers to the year-end deadline for the expiration of hundreds of billions of dollars worth of tax cuts and the triggering of $109 billion in across-the-board spending cuts, if the US Congress fails to act. The US Congress created the hazardous deadline of 31 December 2012 in August 2011 when it agreed to a deficit deal as a way out of a deadlock over raising the US debt ceiling. The Congressional Budget Office has estimated the US economy would drop into a recession in the first half of the new year if a deal is not reached.
Purchases of existing houses increased 5.9% to a 5.04 million annual rate, the most since November 2009, the National Association of Realtors said yesterday. The data reinforces forecasts that the industry is set to contribute to annual economic growth for the first time since 2005.
Separately, the US economy grew at a 3.1% annual rate in the third quarter, more than previously reported, according to Commerce Department figures released on Thursday, 20 December 2012.
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