Nifty News (Sep-21)-www.banknifty.com

Nifty hits highest level in nearly 14 months

DATE: 21/09/2012  

Key benchmark indices continued their uptrend to hit fresh intraday high in mid-morning trade as the government on Thursday evening braved intense political opposition to notify the rules for allowing greater foreign investment in retail, aviation and broadcasting sectors. The 50-unit S&P CNX Nifty hit its highest level in nearly 14 months. The barometer index, BSE Sensex, was up 297.89 points or 1.62%, up about 240 points from the day's low and off close to 20 points from the day's high. The market breadth was strong. All the 13 sectoral indices on BSE were in the green. Gains in Asian stocks also boosted sentiment.

Index heavyweight and cigarette maker ITC extended initial gains. Another index heavyweight Reliance Industries (RIL) retained positive zone. Shares of aviation firms jumped after the government on Thursday evening notified the norms for allowing 49% investment by foreign airlines in Indian carriers. Media shares rose after the government on Thursday notified rules for greater foreign investment in some sections of the broadcasting sector.

The market opened on a firm note after the government on Thursday formally notified its decision to allow greater foreign investment in retail, aviation and broadcasting sectors. The market extended initial gains to hit fresh intraday high in morning trade. The Sensex hit fresh intraday high in mid-morning trade.

Asian stocks rose on Friday as Apple Inc.'s iPhone 5 debut boosted information technology shares and energy companies advanced on higher crude prices.

BSE Sensex was up 297.89 points or 1.62% to 18,647.14. The index jumped 317.60 points at the day's high of 18,666.85 in morning trade, its highest level since 17 September 2012. The index rose 61.95 points at the day's low of 18,411.20 at the onset of the trading session.

The S&P CNX Nifty was up 92.65 points or 1.67% to 5,646.90. The index hit a high of 5,657.75 in intraday trade, its highest level since 26 July 2011. The index hit a low of 5,575.45 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,627 shares rose and 667 shares fell. A total of 109 shares were unchanged.

From the 30-share Sensex pack, 29 stocks rose and only one of them fell.

Index heavyweight and cigarette maker ITC rose 2.07% to Rs 261.75. The stock had scaled a record high of Rs 272.50 in intraday trade on 14 September 2012.

Index heavyweight Reliance Industries (RIL) rose 0.89%. DSP Merrill Lynch and Citigroup Global Markets India, who are the managers of RIL's buyback programme, have announced that RIL has purchased 3.90 crore shares and spent Rs 2794.73 crore (excluding brokerage, service tax, Securities Transaction Tax, Stamp Duty, Exchange Transaction Charges and Sebi fees) till 18 September 2012 under the company's 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. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 that the company's buyback program represents a highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future.

Shares of aviation firms jumped after the government on Thursday evening notified the norms for allowing 49% investment by foreign airlines in Indian carriers. Kingfisher Airlines, Jet Airways and SpiceJet surged by between 1.33% to 4.41%.

The Cabinet Committee on Economic Affairs last week approved the proposal of the Department of Industrial Policy and Promotion for permitting foreign airlines to make foreign investment, up to 49% in scheduled and non-scheduled air transport services. Removing the existing restriction on investment by foreign airlines would assist in bringing in strategic investors into the civil aviation sector, the government said in a statement issued last week. Higher foreign investment inflows are necessary at the present juncture, in order to strengthen the sector, the government had said. Introduction of global best practices, concomitant with the induction of FDI from foreign airlines, is expected to lead to higher service standards, international best practices and induction of state-of-the-art technologies, in the air transport sector, the government had said.

Media shares rose after the government on Thursday notified rules for greater foreign investment in some sections of the broadcasting sector. Balaji Telefilms, Zee News, NDTV, TV Today Network, and Sun TV Network gained by between 0.11% to 2.73%.

Among cable TV and direct-to-home (DTH) service providers, Dish TV India, DEN Networks and Hathway Cable & Datacom rose by between 1.02% to 2.17%

The Cabinet Committee on Economic Affairs (CCEA) last week announced increase in foreign investment limit from 49% to 74% in teleports (setting up up-linking HUBs/teleports), Direct to Home (DTH), Cable Networks (Multi-System-Operators operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability). In respect of Cable Networks (Other Multi-System-Operators not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators), the existing limit of 49% foreign investment, under the automatic route, would continue. The CCEA also allowed foreign investment (FI) up to 74 percent in mobile TV.

Zee Entertainment Enterprises fell 0.46%, with the stock reversing initial gains. The company on Thursday launched 24-hour Bangla Movie Channel -'Zee Bangla Cinema'. With a rich and varied film library, the Zee Bangla Cinema promises to offer a mixed bag of blockbusters from the golden era directors and the best masterpieces of Satyajit Ray, Mrinal Sen, Ritwick Ghatak, Tarun Mazumdar to the present movies of directors like Rituparno Ghosh, Raj Chakraborty and Anjan Dutta. The channel will go on-air on September 23rd and will telecast 2012's blockbuster movie 'Shatru' starring Jeet and Nusrot.

Mahindra & Mahindra (M&M) jumped 3.36%. The company Thursday unveiled the eagerly awaited all new compact and versatile sports utility vehicle (SUV) Quanto in Mumbai. Designed and developed in-house by Mahindra on the robust, proven and highly successful Ingenio platform, the Quanto is a direct outcome of customer insights pointing to the need for a compact and affordable SUV.

The Quanto will be available nationally at Mahindra dealerships, with four distinct and attractive variants - C2, C4, C6 & C8. The Quanto price range starts from Rs 5.82 lakhs (ex-showroom Thane) for the base C2 model, to Rs 7.36 lakhs (ex showroom Thane) for the fully loaded top end C8 model. All the Quanto variants are powered by a 1.5 litre mCRlOO diesel engine giving a category best output of l00 bhp & a massive 240 nm of torque. The mCRlOO engine has India's first twin stage turbo technology for maximum power and excellent torque delivery.

Foreign institutional investors (FIIs) sold shares worth a net Rs 73.67 crore on Thursday, 20 September 2012, as per the provisional data from the stock exchanges. Earlier, FIIs made heavy purchases of Indian stocks. FIIs bought shares worth a net Rs 6267.30 crore from secondary markets in three sessions from 14 to 18 September 2012, as per data from Securities & Exchange Board of India (Sebi).

The government on Thursday evening braved intense political opposition to notify the rules for allowing 51% foreign direct investment (FDI) in multi-brand retail. The government also notified on Thursday the relaxed conditions for single brand retail as well as the norms for allowing 49% investment by foreign airlines in Indian carries and permitted greater foreign investment in some sections of the broadcasting sector.

The Congress led UPA government will become a minority government with six ministers of Trinamool Congress set to formally submit their resignation letters to President Pranab Mukherjee today, 21 September 2012. Trinamool Congress early this week decided to withdraw from the government due to a recent hike in diesel prices, the government's decision to cap subsidised LPG for households and to allow 51% FDI in multi-brand retail. As per media reports, Prime Minister Manmohan Singh will addresses the nation today, 21 September 2102, to explain the economic rationale behind the government's decisions to hike fuel prices and allow foreign supermarkets into the country.

With the TMC formally withdrawing support, UPA will now have just 254 MPs, lower than the half way mark of 271 in total strength of 540 of 15th Lok Sabha. There will be no immediate threat to the government's survival if Bahujan Samaj Party (BSP) with 21 MPs, Samajwadi Party with 22 MPs, Rashtriya Janata Dal (RJD) with 4 MPs and Janata Dal (Secular) with 3 MPs continue to provide outside support to the UPA.

The outlook for winter crops has improved due to the annual monsoon rains' delayed withdrawal, which has provided crops with badly needed moisture after months of insufficient rainfall. The monsoon rains usually leave India by 1 September, but this year rainfall began to pick up in late August, after insufficient rain in preceding months forced four major agricultural states to declare a drought. The rains are now expected to begin departing from northwest regions by Monday, 24 September 2012, the state-run India Meteorological Department said on Wednesday, 19 September 2012. The overall rainfall deficit for the monsoon season has narrowed to 5% below the long-term average from around 13% in July and 29% in June. The late rain was unexpected. In fact, weather department had forecast that an El Nino would emerge in September. The weather event usually limits rainfall in India.

Farm Secretary Ashish Bahuguna on Wednesday, 19 September 2012, said that the late rainfall would mitigate damage to summer crops caused by the earlier rain shortfall, but wouldn't result in a dramatic improvement. The insufficient rain is expected to hurt production of rice, sugar cane and corn. The government will release its latest crop estimate for the year that started on 1 July 2012 on Monday, 24 September 2012, Mr. Bahuguna said. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year.

The Reserve Bank of India Monday, 17 September 2012, announced a reduction of 25 basis points in the cash reserve ratio (CRR) of scheduled banks to 4.5% of their net demand and time liabilities (NDTL) effective the fortnight beginning 22 September 2012 from current 4.75% after mid-quarter review of monetary policy. The reduction in CRR will inject around Rs 17000 crore of primary liquidity into the banking system, RBI said in a statement. The RBI kept its policy rate viz. the repo rate unchanged at 8%, stating that inflationary pressures, both at wholesale and retail levels, remain strong. As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations, RBI said.

Finance Minister P. Chidambaram, Monday, 17 September 2012, said the government will unveil more measures to narrow fiscal deficit and to boost economic growth, which may encourage the central bank to cut interest rates at its next monetary policy review on 30 October 2012. He didn't elaborate on what the measures could be. RBI is scheduled to undertake Second Quarter Review of Monetary Policy - 2012-13 on 30 October 2012.

The Cabinet Committee on Political Affairs (CCPA) raised price of heavily subsidised diesel by Rs 5 per liter on 13 September 2012 to balance government's fiscal deficit situation. The CCPA also restricted the supply of subsidized LPG cylinders to each consumer to six cylinders (of 14.2 kg) per annum.

Finance Minister P. Chidambaram early this month said that India is making consistent efforts to check the abuse of a double-taxation-avoidance pact it has with Mauritius. India has in the past said it is considering a review of the treaty in an effort to boost tax revenue. An India-Mauritius joint working panel was set up in 2006 to put in place adequate safeguards for preventing the misuse of the double-taxation-avoidance agreement between the two countries. India, in the past, has said that Mauritius was unwilling to cooperate on this issue. Mauritius says it has taken India's concerns seriously.

Traditionally, Mauritius has accounted for nearly 40% of India's foreign investment. Under the avoidance of double taxation treaty, companies that invest through Mauritius do not have to pay tax in India but only have to pay tax in the island. But capital gains tax is close to zero in Mauritius, making it a popular investment hub.

India wants to renegotiate the double taxation treaty with Mauritius to check round-tripping, in which money is moved out of one country to another and brought back under the garb of foreign capital, taking advantage of tax breaks. Meanwhile, a committee appointed by the government to review the controversial general anti-avoidance rules (GAAR) early this month suggested deferring the implementation of anti-avoidance rules by three years. "Where Circular No. 789 of 2000 with respect to Mauritius is applicable, GAAR provisions shall not apply to examine the genuineness of the residency of an entity set up in Mauritius," the committee said.

The committee has also recommended that the government should abolish the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income, to both residents as well as non-residents. The panel has said the government might consider increasing the rate of Securities Transaction Tax (STT) appropriately to make the proposal tax neutral. At present, short-term capital gains on equities are taxable at the rate of 15%. Holding period of less than one year is considered as short term. There is no long term capital gains tax on sale of shares. Business income is taxed at 30%.

Distinguishing capital gains and business income depends on several factors, and disagreements have resulted in numerous litigation cases between the Revenue Department and taxpayers, the committee said in its report.

Asian stocks rose, Friday as Apple Inc.'s iPhone 5 debut boosted information technology shares and energy companies advanced on higher crude prices. Key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan rose by between 0.32% to 0.93%. But, Indonesia's Jakarta Composite fell 0.17%.

The Japanese central bank moved to ease monetary policy Wednesday, saying it would buy more government bonds and other assets, following the United States Federal Reserve in a show of resolve to shore up a shaky economic recovery. The Bank of Japan will expand its asset purchase and loan program by 10 trillion yen, or $126 billion, to 80 trillion yen, the bank announced after a two-day board meeting that ended Wednesday. The purchase program was also extended six months, to the end of 2013. The program aims to stimulate economic growth by adding to bank reserves and driving down the cost of lending, prompting more money to flow through the economy. The Bank of Japan downgraded its assessment of the country's export-driven economy, citing slower global demand and fresh uncertainties caused by anti-Japan protests this week in China, a big trading partner. As expected, the bank kept its benchmark interest rate at a range of zero to 0.1 percent.

Central banks have been stepping in with monetary-policy easing to limit weakness in the global economy, with bond-buying plans by the Federal Reserve last week and the Bank of Japan on Wednesday marking the latest efforts in this direction.

Trading in US index futures indicated that the Dow could gain 53 points at the opening bell on Friday, 21 September 2012. US stocks ended Thursday's session little changed, as investors weighed more data pointing to an ongoing slowdown in the global economy. US manufacturing ended its weakest quarter of growth in three years this month, data showed on Thursday, while the Philadelphia Federal Reserve Bank said its business activity index in the U.S. mid-Atlantic region shrank in September for a fifth straight month, though the pace of contraction lessened.

Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.

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