PORTUGUESE CONCERNS PULL WORLD EQUITIES LOWER; INFY, IIP IN FOCUS TODAY
WORLD MARKETS
US indices, after plunging nearly a percent in the initial trade on the back of Portuguese concerns, recouped half of the losses through the session to end with cuts in the vicinity of half a percent.
The trouble started when Espirito Santo International (ESI), parent of Portugal's Banco Espirito Santo (BES), delayed coupon payments relating to short-term debt securities, sending BES shares plunging 17%. A suspension in the stock of the bank's controlling shareholder, Luxembourg-listed Espirito Santo Financial, due to difficulties with ESI also contributed to worries.
Back in the US, applications for jobless benefits last week fell by 11,000 to a better-than-expected 304,000. Wholesale inventories climbed 0.5% in May, pointing to a rebound in second-quarter GDP.
European markets tumbled, losing between 0.7%-2% with peripheral stocks leading the declines, as Portugal's PSI 20 Index fell over 4%. Italy's industrial output showed an unexpected monthly drop of 1.2% in May. French industrial production plunged in May and inflation rose by just 0.6%, its lowest level since November 2009.
Investors sought safety in US Treasuries and gold, with the yield on the benchmark 10-year note falling 2 bps to 2.536% and gold climbing 1.1% to $1339 an ounce.
AT HOME
Having experienced wild swings before, during and after the budget presentation, benchmark indices finally ended lower by about a fourth of a percent, extending the losing streak to third day. Sensex settled at 25373, down 72 points while Nifty finished at 7568, down 17 points. BSE mid-cap and small-cap indices however managed to gain 0.6% and 0.8% respectively. BSE Realty index soared 5%, becoming top gainer among the sectoral indices, followed by 1.1% rise in Power index.
FIIs net bought stocks and stock futures worth Rs 162 cr and 1013 cr respectively but net sold index futures worth Rs 257 cr. DIIs were net buyers to the tune of Rs 5 cr,
Rupee depreciated 44 paise to close at 60.19/$.
Presenting his maiden budget, Arun Jaitley pegged the FY15 fiscal deficit target at 4.5% but added that he will try to meet the 4.1% target set by his predecessor. He pegged the FY16 and FY17 fiscal deficit target at 3.6% and 3% respectively. He said the govt aims to achieve 7-8% economic growth rate in next 3-4 years. Other key proposals included hike in composite cap of FDI in Defence and Insurance to 49%, tax incentive for Real Estate Investment Trusts, extension of 10-year tax holiday to companies that start power generation by 3 years to March 31, 2017, allowing banks to give long-term loans to infrastructure sector without restrictions on CRR/SLR, increase in income tax exemption limit to 2.5 lac from 2 lac and hike in tax exemption limit under 80C to 1.5 lac from 1 lac.
Assuring investors that retrospective amendments to tax laws will be undertaken with extreme caution, Jaitley said all fresh cases arising out of the 2012 amendment of Income Tax Act will be looked into by a high level CBDT committee.
Addressing the tax concerns of Foreign Portfolio Investors (FPIs), Jaitley proposed that income arising to this class of investors from transaction in securities will be treated as capital gain instead of business income.
Committing to expeditiously rolling out Goods and Services Tax (GST), he said a solution to the issues relating to the comprehensive indirect tax regime may be finalised in the current year itself.
OUTLOOK
Today morning Asian markets are trading mixed with modest changes and SGX Nifty is suggesting a flattish start for our market.
In yesterday's report we had mentioned that 34 DMA, placed around 7540, is the immediate support below which 7441, the immediate previous bottom on the weekly chart would be the key support to eye.
Nifty breached the 7540 support and plunged all the way to 7479 in the morning trade from where it rebounded sharply to 7731, only to fall back again to close at 7567.
7441 continues to be a key support to watch on the way down. On the way up, 7731, the top made yesterday, is the immediate resistance, a crossover of which is required for generating a buy signal on the hourly chart.
India's IIP for May would be released today and is expected to show a growth of 3.76%, up from 3.4% in April.
Software major Infosys will report its quarterly earnings today and is expected to post 2.3% q-o-q growth in dollar revenues at $2140 mn. In rupee terms revenues are expected to dip 0.4% to Rs 12814 cr and profit is estimated to fall 10.8% to Rs 2667 cr. The company is expected to maintain its FY15 dollar revenue guidance at 7-9%.
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