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Market snaps two-day winning streak

Date : 20 Mar 2017 - 16:36

 

Key benchmark indices drifted lower on first trading day of the week today, 20 March 2017, weighed by selling in index heavyweights, Infosys, Reliance Industries and ICICI Bank. The barometer index, the S&P BSE Sensex, lost 130.25 points or 0.44% to settle at 29,518.74. The Nifty 50 index fell 33.20 points or 0.36% to settle at 9,126.85. Weakness in world stocks dampened sentiment on the domestic bourses. Profit booking kicked in on the domestic bourses after the recent upmove saw Nifty hitting record high on Friday, 17 March 2017. Key indices snapped two-day winning streak today, 20 March 2017.

Key benchmark indices hovered in negative terrain throughout the session after reversing gains at the onset of the session.

The Sensex lost 130.25 points or 0.44% to settle at 29,518.74, its lowest closing level since 15 March 2017. The index rose 50.49 points or 0.17% at the day`s high of 29,699.48. The index lost 166.59 points or 0.56% at the day`s low of 29,482.40.

The Nifty 50 index fell 33.20 points or 0.36% to settle at 9,126.85, its lowest closing level since 15 March 2017. The index gained 7.55 points or 0.08% at the day`s high of 9,167.60. The index lost 43.75 points or 0.48% at the day`s low of 9,116.30.

The BSE Mid-Cap index rose 0.17%. The BSE Small-Cap index gained 0.3%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was negative. On the BSE, 1,443 shares declined and 1,354 shares rose. A total of 226 shares were unchanged.

The total turnover on BSE amounted to Rs 56818.29 crore, much higher than the turnover of Rs 4594.86 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Metal index (down 0.05%), the S&P BSE Realty index (up 0.25%), the S&P BSE Basic Materials index (down 0.02%), the S&P BSE Power index (up 0.2%), the S&P BSE Industrials index (down 0.05%), the S&P BSE Capital Goods index (down 0.36%), the S&P BSE Utilities index (up 0.2%), the S&P BSE Auto index (up 0.08%), the S&P BSE FMCG index (up 0.21%), the S&P BSE Consumer Durables index (up 1.03%), the S&P BSE Finance index (up 0.03%), the S&P BSE Bankex (down 0.42%) and the S&P BSE Healthcare index (up 0.44%), and the S&P BSE Consumer Discretionary Goods & Services index (up 0.26%) outperformed the Sensex.

The S&P BSE Oil & Gas index (down 0.52%), the S&P BSE Energy index (down 0.75%), the S&P BSE IT index (down 1.36%), the S&P BSE Telecom index (down 1.11%), and the S&P BSE Teck index (down 1.23%) underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) dropped on huge volume. The stock fell 1.564% to Rs 1,280.35 after a block deal of 3.91 crore shares was executed on the scrip in opening trade on BSE today, 20 March 2017.

Frontline IT stocks declined as the rupee continued its recent appreciation against the dollar. TCS (down 1.82%), Infosys (down 1.87%), HCL Technologies (down 0.23%), Tech Mahindra (down 0.63%), Wipro (down 1.59%) fell. Oracle Financial Services Software (up 0.38%), MindTree (up 0.03%), Hexaware Technologies (up 0.45%) and MphasiS (up 0.03%) rose.

The partially convertible rupee was hovering at 65.345 versus Friday`s close of 65.475. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion`s share of revenue from exports.

Meanwhile, media reports suggested that Cognizant may cut at least 6,000 jobs, which represents 2.3% of its total workforce, as it struggles with growth in an IT environment that is fast shifting towards new digital services. The layoffs are likely to be more this year than the routine annual exercise.

Shares of most public sector banks gained. UCO Bank (up 1.12%), Syndicate Bank (up 1.17%), Punjab National Bank (up 0.17%), Corporation Bank (up 0.95%), Allahabad Bank (up 1.42%), Bank of Baroda (up 0.39%), Canara Bank (up 0.5%), and Bank of India (up 1.5%) edged higher. State Bank of India (SBI) (down 0.04%), Union Bank of India (down 1.95%), and United Bank of India (down 1.95%) gained.

Dena Bank rose 4.18% after the bank announced after market hours on Friday, 17 March 2017, that it received a communication from Government of India informing capital allocation of Rs 600 crore as part of turnaround linked infusion plan. The board approval for raising of capital of the bank through issue of equity shares to Government of India, LIC of India and GIC of India on preferential basis, is being obtained.

Shares of private sector banks were mixed. HDFC Bank (up 0.63%), Kotak Mahindra Bank (up 0.73%), and Yes Bank (up 0.35%) edged higher. Axis Bank (down 2.41%), ICICI Bank (down 1.99%), Federal Bank (down 0.29%), and IndusInd Bank (down 0.38%) declined.

Idea Cellular fell 9.55% to Rs 97.60 on BSE after the company said its board approved merger with Vodafone India. The announcement was made before trading hours today, 20 March 2017.

The board of directors of Idea Cellular at a meeting held today, 20 March 2017, have approved the scheme of amalgamation of Vodafone India (VIL) and its wholly owned subsidiary Vodafone Mobile Services (VMSL) with the company subject to receipt of necessary approvals of shareholders, creditors, Sebi, stock exchanges, the Competition Commission of India, the Department of Telecommunications (DoT), the Foreign Investment Promotion Board, the Reserve Bank of India and other governmental authorities and third parties (as may be required).

Upon the amalgamation becoming effective, the entire business of VIL and VMSL (excluding VIL`s investment in Indus Towers, its international network assets and information technology platforms) will vest in Idea Cellular. The agreement contemplates the completion of the proposed amalgamation within a period of 24 months.

Vodafone India has a net worth of Rs 12855 crore and a turnover of Rs 5025 crore. Vodafone Mobile Services has a net worth of Rs 3737 crore and turnover of Rs 40378 crore. Idea Cellular has a net worth Rs 24296 crore and turnover of Rs 36000 crore.

All the entities forming part of the amalgamation are engaged in the business of cellular mobile telecommunication services pursuant to licences granted to them by the DoT. The board of directors of Idea Cellular believes that the proposed amalgamation will result in creation of largest Indian telecom operator with widest mobile network in te country and pan India 3G/4G footprint. It will provide sufficient spectrum to complete with major operators in the market while offering innovative and attractively priced mobile service to customers. The amalgamation will result in acceleration of expansion of wireless broadband networks across India to deliver the Government of India`s `Digital India” mission. It will create substantial cost and capex synergies creating value for shareholders; and leverage the customer`s affinity for both the existing brands.

On the scheme of amalgamation of VMSL with Idea Cellular becoming effective, Idea Cellular will issue an aggregate number of its equity shares to VIL equal to 47% of the post issue paid-up capital of Idea Cellular on a fully diluted basis. Immediately thereafter, on the amalgamation of VIL with Idea Cellular, the shares issued to VIL pursuant to the amalgamation of VMSL with Idea Cellular shall stand cancelled and, post such cancellation, Idea Cellular shall issue an aggregate number of equity shares of Idea Cellular (credited as fully paid-up) equal to 50% of the post issue paid up capital of Idea Cellular to the shareholder of VIL (Vodafone).

Vodafone will own 45.1% of the combined company after transferring a stake of approximately 4.9% to the promoters of Idea/their affiliates (together promoters of Idea) for Rs 3874 crore in cash concurrent with the completion of the amalgamation. The promoters of Idea will hold 26% of the company and the balance will be held by the public.

The promoters of Idea Cellular have the right to acquire up to a 9.5% additional stake from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. If Vodafone and the promoters of Idea do not have equal shareholding by the expiry of the 4th year from completion of the amalgamation, Vodafone is obliged to reduce its holding in order to equalise its ownership with that of the promoters of Idea over the following 5 year period. Until equalisation is achieved, the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the Shareholders` Agreement.

The shareholders` agreement will become effective only upon the scheme of amalgamation becoming effective. None of the above including the scheme of amalgamation, the entry into the shareholders` agreement and the entry into the implementation agreement is a related party transaction.

Meanwhile, key indices snapped two-day winning streak today, 20 March 2017. The Sensex had risen 250.88 points or 0.85% in two sessions to settle at 29,648.99 on 17 March 2017, from a close of 29,398.11 on 15 March 2017. The Sensex has risen 775.42 points or 2.69% in this month so far (till 20 March 2017). The Sensex has gained 2,892.28 points, or 10.86% in the calender year 2017 (till 20 March 2017). From a 52-week low of 24,523.20 hit on 11 April 2016, the barometer index has risen 4,995.54 points or 20.37%. From a 52-week high of 29,824.62 hit on 17 March 2017, the barometer index has fallen 305.88 points or 1.02%. The Sensex is off 506 points or 1.68% from a record high of 30,024.74 hit on 4 March 2015.

Meanwhile, the Union Cabinet chaired by the Prime Minister Narendra Modi has approved the four Goods and Services Tax (GST) related bills today, 20 March 2017, namely, the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill) and the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill).

These four Bills have been earlier approved by the GST Council after thorough, clause by clause, discussion over 12 meetings of the Council held in the last six months. The Government is committed to early introduction of GST, one of the biggest reforms, in the country as early as possible. GST Council has decided 1 July 2017 as the date of commencement of GST.

Overseas, European markets were trading lower as investors digested the potential impact that trade barriers could have on global growth. Meanwhile, inflationary pressure in Europe`s largest economy increased further in February, as prices at Germany`s factory gates recorded their strongest annual rise in over five years. Germany`s statistics office, Destatis, said that producer prices rose 0.2% from January and increased 3.1% on the year--the strongest year-over-year increase since December 2011.

Elsewhere, euro area finance ministers are set to gather for a Eurogroup meeting in order to discuss developments relating to the second review of Greece`s macroeconomic adjustment plan.

Most Asian stocks declined with markets in Japan shut for a holiday and investors watching oilfield-related shares after a bankruptcy filing by Singapore`s Ezra Holdings at the weekend. Japanese Prime Minister Shinzo Abe reportedly said on Sunday, 19 March 2017, in Germany that the European Union and Japan should soon reach an economic deal, and stressed the importance of free trade to his country.

US stocks edged lower on Friday, 17 March 2017, with investors awaiting further catalysts before jumping back into the market. In the latest economic data, industrial production was flat in February. Separately, the index of consumer sentiment rose to 97.6 in March from 96.3 in February, based on a preliminary reading by the University Michigan.

Finance ministers from twenty of the world`s biggest economies held a two-day meeting, and warned against competitive devaluations and disorderly foreign exchange markets but failed to agree on keeping global trade free and open.

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