Markets up as Bernanke changes stance

Thu, 11 Jul 09:30 am

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In recent times, the US central bank had hinted about a prospective pullback of its quantitative easing program. This had led to significant volatility in the global financial markets. However, Ben Bernanke appears to have changed his stance as per his most recent comments. In other words, the central banker has indicated that its monetary easing program may continue as the US Fed is still far away from achieving its employment and inflation targets. As a result of this equity markets and gold prices soared, while the US dollar declined.

In Asia, all major stock markets, barring Japan (down 0.3%), have opened the day with significant gains. Markets in Indonesia (up 2.4%), South Korea (up 2.3%), China (up 2.2%) and Hong Kong (up 2.2%) are leading the pack of gainers. The Indian equity markets indices have also opened the day on a strong note with stocks in the capital goods and banking space leading the gains.

The Sensex today is up by around 344 points (1.8%), while the NSE-Nifty is up by around 98 points (1.7%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 1% and 0.8% respectively. The rupee is trading at Rs 59.78 to the US dollar.

Finance stocks have opened the day on a firm note with Indiabulls Financial Services, Motilal Oswal and Power Finance Corporation (PFC) leading the gains. As per a leading financial daily, non-banking finance company Shriram Transport Finance Corporation (STFC) has announced its first retail non convertible debenture (NCD) issue for the financial year 2013-14. The issue base is about Rs 3,750 m. However, there is an option to retain oversubscription of up to Rs 7,500 m. The issue is set to commence on July 16, 2013 and close on July 26, 2013. The tenure of the NCD is three years and five years. The effective yield on the NCD would be 10.9 % for three years and 11.15% for five years per annum. It must be noted that 50% of the issue has been reserved for retail investors. While the share of HNIs has been capped at 30%, the share of institutions and non-institutions has been capped at 10% each. STFC's NCD issue has been rated "AA/Stable" by CRISIL and "AA+" by Care.

Auto stocks have opened the day on a firm note with Escorts, Tata Motors and Mahindra & Mahindra (M&M) leading the gains. As per a leading daily, the trade union strike at Bajaj Auto's Chakan plant in Pune has entered the third week and both the parties seem unwilling to relent. It must be noted that the trade union had gone on strike on June 25, 2013. The reason for the strike was the union's demand for higher wages as well as the allotment of 500 equity shares of the company for each of its 925 employees at Re 1 per share. However, the management has termed the strike illegal and refused to accept the demands of the trade union. The trade union, on the other hand, has gathered significant support from several trade unions in the Pune industrial cluster. Of the 1,600 workers employed at the plant, less than 500 workers are said to be reporting to work. The company has said that operations at the plant have not been significantly affected and the plant was functioning at about 80% capacity.