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Oil exploration shares advance as crude trades near three-week high

Capital Market/ 11:25 , Nov 22, 2013

Intraday volatility continued as key benchmark indices regained strength after trimming intraday gains in mid-morning trade. The barometer index, the S&P BSE Sensex, was up 90.22 points or 0.45%, up 72.68 points from the day's low and off 53.06 points from the day's high. The market breadth, indicating the overall health of the market, was strong. In the foreign exchange market, the rupee weakened past 63 against the dollar.

Oil exploration stocks gained as US crude oil futures traded near the highest price in three weeks after applications for unemployment benefits in the US declined, signaling a sustained economic recovery in the world's biggest oil consumer. Shares of public sector oil marketing companies (PSU OMCs) were mostly lower as crude oil futures rose. United Spirits gained after the company during market hours today, 22 November 2013, said that credit rating agency ICRA has upgraded the rating on the term loans, fund based facilities, non-fund based facilities and fixed deposits of the company.

A bout of initial volatility was witnessed as key benchmark indices edged higher on firm Asian stocks. The 50-unit CNX Nifty regained the psychological 6,000 mark. Key benchmark indices trimmed initial gains and hit fresh intraday low in morning trade. Volatility continued as key benchmark indices regained strength after trimming intraday gains in mid-morning trade.

Foreign institutional investors (FIIs) sold shares worth a net Rs 59.80 crore on Thursday, 21 November 2013, as per provisional data from the stock exchanges.

At 11:18 IST, the S&P BSE Sensex was up 90.22 points or 0.45% to 20,319.27. The index jumped 143.28 points at the day's high of 20,372.33 in early trade. The index rose 17.54 points at the day's low of 20,246.59 in mid-morning trade.

The CNX Nifty was up 31 points or 0.52% to 6,030.05. The index hit a high of 6,040.90 in intraday trade. The index hit a low of 6,003.95 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,183 shares gained and 785 shares fell. A total of 127 shares were unchanged.

The total turnover on BSE amounted to Rs 561 crore by 11:20 IST, compared to Rs 376 crore by 10:20 IST.

Among the 30-share Sensex pack, 22 stocks gained and rest of them declined.

Oil exploration stocks gained as US crude oil futures traded near the highest price in three weeks after applications for unemployment benefits in the US declined, signaling a sustained economic recovery in the world's biggest oil consumer. US crude oil futures for January delivery were at $95.21 a barrel in electronic trading on the New York Mercantile Exchange, down 23 cents. It rose $1.59, or 1.7%, to settle at $95.44 on Thursday, 21 November 2013, the highest close for a front-month contract since 31 October 2013. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

ONGC rose 2.11%. ONGC's wholly owned subsidiary ONGC Videsh (OVL) after market hours on Thursday, 21 November 2013, announced that it has on 20 November 2013 signed Memorandum of Understanding (MoU) with Petrovietnam to promote the joint cooperation in hydrocarbon sector in Vietnam, India and other countries. This MoU is in furtherance to the agreement signed between OVL and Petrovietnam on 12 October 2011. Under the MoU, Petrovietnam has offered 5 blocks to OVL. OVL would assess these blocks and if these are of interest, it would make a proposal to Petrovietnam.

ONGC said that Vietnam is one of the focus countries for OVL where it would like to acquire stakes in oil and gas assets depending on techno-commercial viability.

Cairn India advanced 2.74%. The company before market hours today, 22 November 2013, said that a meeting of the board of directors of the company will be held on 26 November 2013 to consider the proposal for buy back of equity shares of the company.

Shares of public sector oil marketing companies were mostly lower as crude oil futures rose. BPCL (down 0.33%), HPCL (down 0.4%) declined. Indian Oil Corporation rose 0.68%.

PSU OMCs suffer under recoveries on domestic sale of diesel, LPG and kerosene at controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.

Bata India gained 2.93% to Rs 1,041.95 after hitting a record high of Rs 1,049 in intraday trade.

United Spirits (USL) gained after the company during market hours today, 22 November 2013, said that credit rating agency ICRA has upgraded the rating on the term loans, fund based facilities, non-fund based facilities and fixed deposits of the company. The stock was up 1.99%.

ICRA said that the revision in the ratings takes into account correction in the debt servicing track record of the company post infusion of equity by Relay BV (an indirect wholly owned subsidiary of Diageo Plc) during May 2013. The ratings derive comfort from the 25.02% stake acquisition and the subsequent gaining of management control in USL by Relay BV (an indirect wholly owned subsidiary of Diageo Plc -- rated A3/Stable by Moody's). ICRA believes that, with the said change in management control, USL is likely to benefit from the business synergies, improved financial flexibility and expected improvement in governance structure. Further, implementation of Diageo's global best practices, capital management measures and focus on value growth are likely to aid USL in improving its operating performance going forward. ICRA however notes that given significant repayment obligations in relation to its operating accruals, USL's ability to achieve timely refinancing would remain critical in the near term. Further, large debt-funded capital expenditure plans are likely to maintain pressure on the company's debt coverage metrics in the medium term; however, the same likely to derive support in the event of divestment of Whyte & Mackay (W&M) assets.

The ratings continue to factor USL's established position as one of the largest spirits maker globally (by volumes), its wide distribution network, the company's strong product portfolio across segments, flavors and price points supporting future growth prospects and favorable demand outlook supporting USL's long term revenue growth. While the company's margins in the past have been impacted on account of volatility in key input prices (extra neutral alcohol and glass), ICRA notes that the company's investments in backward integration are likely to aid in achieving better supply security and improvement in margins, albeit over the medium term. The ratings also take into account USL's focus on strengthening its presence in other emerging markets and premium brands which are expected to add to USL's revenues and margins going forward. However, increasing competitive intensity in the domestic market and highly regulated nature of the industry are likely to restrict the same to an extent, ICRA said. Going forward, USL's ability to ease its debt maturity profile, improve its operating accruals and enhance its debt protection metrics would remain key rating sensitivities, ICRA said.

In the foreign exchange market, the rupee weakened past 63 against the dollar. The partially convertible rupee was hovering at 63.03, compared with its close of 62.93/94 on Thursday, 21 November 2013. The rupee dropped after foreign institutional investors (FIIs) sold a net Rs 59.80-crore in shares on Thursday, 21 November 2013, to snap a 32-day buying streak.

Government bond yields rose as traders shed positions ahead of the Rs 15000-crore bond auction later in the session, which includes the sale of a new 10-year benchmark bond. The yield on most traded federal paper, 8.28% GS 2027, was hovering at 9.0874%, higher than its close of 9.0681% on Thursday 21 November 2013. The yield on 10-year benchmark federal paper, 7.16% GS 2023, was hovering at 9.0921%, higher than its close of 9.0773% on Thursday 21 November 2013. Bond yield and bond prices are inversely related.

Asian stocks edged higher on Friday, 22 November 2013, as positive political and economic news from the US supported sentiment. Key benchmark indices in Taiwan, Hong Kong, Japan, and South Korea rose by 0.21% to 0.45%. Key benchmark indices in Indonesia, China and Singapore fell 0.05% to 0.46%.

Bank of Japan (BOJ) Governor Haruhiko Kuroda said in parliament today, 22 November 2013, that the yen isn't excessively weak. Inflation will hit the BOJ's 2% target in the latter half of the central bank's two-year time frame and policy makers will adjust its bond-buying program as needed, he said. The central bank yesterday maintained its unprecedented monetary policy.

Trading in US index futures indicated that the Dow could slide 6 points at the opening bell on Friday, 22 November 2013. The Dow Jones Industrial Average achieved its first-ever close above 16,000 on Thursday, 21 November 2013, as US stocks rallied boosted by better-than-expected data on weekly jobless claims and as investors reconsidered their concerns about the Federal Reserve's potential reduction in its bond-buying program.

The Labor Department said weekly jobless claims fell by 21,000 to 323,000. In addition, wholesale prices dropped 0.2% last month. On the downside, the Philadelphia Fed's index of manufacturing conditions dropped to 6.5 in November.

The US Senate Banking Committee on Thursday, 21 November 2013, voted 14-8 to approve Janet Yellen as the next chairman of the Fed, sending the nomination to the full Senate for approval

 



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