Sensex extends gains, Nifty eyes 8600; banks, oil lead

Moneycontrol Bureau

10:58 am Market Update: The Sensex rose 151.97 points to 28350.26 and the Nifty gained 46.20 points at 8570. About 1364 shares have advanced, 821 shares declined, and 135 shares are unchanged on the BSE. 

10:45 am Rain deficiency?: While the official weatherman — India Meteorological Department (IMD) — has predicted a deficient monsoon with July rains slowing down by 33 percent, the relatively new weatherman Skymet has given a contrarion forecast of normal rains. They maintain it will be 104 percent of the LPA for July. Speaking to CNBC-TV18, GP Sharma, VP, Skymet said there is no need to press panic button just yet. He said as of July 15, the deficiency stood at 6 percent. Maharashtra and Gujarat may see rains by July 20, which is earlier than IMD's July 23 forecast.

He agreed El Nino is growing in strength and the effect may spill over to 2016. But there are other positive factors that can mitigate the impact of El Nino, he said.

Pranjul Bhandari of HSBC said there are three mitigating factors that can counter El Nino. "The translation from El Nino to drought to higher food prices to rural demand is not really very clear." Any step taken by the government to expedite imports, exports, release of food stocks can actually allow inflation, she said adding even the rural demand is a function of much more diversified agricultural sector. The impact of no rain does not equal no demand, she explained.

She points out sowing pattern and grain stocks as second mitigating factor. Because rains were so much better in June, sowing looks quite healthy compared to last few years. At the same time, stocks in the granaries are at decent levels and moisture in the soil is also at decent levels.

10:30 am Shares of South Indian Bank fell more than 7 percent intraday on dismal performance in the quarter ended June. Profit during the quarter dropped 48.4 percent year-on-year to Rs 65.29 crore, impacted by lower net interest income and other income. The fall in provisions & tax expenses, however, limited the profit decline.

On sequential basis, profit shot up 300.1 percent due to lower base in previous quarter. In Q4FY15, profit dropped 86.9 percent Y-o-Y to Rs 16.32 crore due to 387 percent rise in provisions.

Net interest income (the difference between interest earned and interest expended) declined to Rs 340.34 crore during April-June quarter compared to Rs 340.88 crore in the same quarter last year. Other income (non interest income) during the same period slipped to Rs 103.83 crore from Rs 121.16 crore.

Provisions dropped 16 percent year-on-year (down 42.3 percent sequentially) to Rs 79.51 crore while tax expenses declined 16.2 percent Y-o-Y (up 230.5 percent Q-o-Q) to Rs 36.09 crore.

Asset quality deteriorated as gross non performing assets (NPA) increased by 35 basis points Y-o-Y (up 14 bps Q-o-Q) to 1.85 percent and net NPA climbed 30 bps year-on-year (up 25 bps sequentially) to 1.21 percent in the quarter gone by.

10:15 am Fed rate hike soon?: Abhay Laijawala, Deutsche Bank said with the anxiety over Greece and China ebbing, expectations of a Fed liftoff will be back on the table for financial markets.

"Our US economics team believes that US Fed is on track for a September liftoff and it may emerge as the most significant event for emerging market liquidity," he added.

Laijawala said over the past 2-3 years, there has been a generally negative correlation between US 10-year bond yield and MSCI EM/MSCI India, implying that periods of rising US bond yields have led to an environment of subdued foreign inflows for emerging markets.

10:00 am Market Check

The market extended rally with the Nifty inching towards 8600 led by banking & financials, oil & gas, technology and pharma stocks. The broader markets also traded in line with benchmarks, rising 0.6 percent each.

The Sensex rose 170.84 points to 28369.13 and the Nifty gained 50.30 points at 8574.10. About 1272 shares have advanced, 555 shares declined, and 113 shares are unchanged on the BSE.

Axis Bank topped the buying list on Sensex, up 2.7 percent followed by HDFC, Reliance Industries, Bajaj Auto and Tata Steel with more than 1 percent upside. However, M&M, L&T, Hero Motocorp and GAIL fell marginally.