Markets set for a rebound on Feds dovish stance :: HDFC sec

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The markets are likely to open with sharp morning gains as the Fed communicated a dovish stance. Calming of the commodities markets and a rebound in Russian currency will also help boost the sentiments.

However, the first salvo would be fired by the short sellers. While some short covering happened yesterday, more will happen today. Short covering leads to share prices going up.
Companies such as Bank of Baroda, Godrej Industries, Federal Bank, IGL saw some active reduction in open interest as stocks moved up.

Among the upstream oil companies, ONGC saw a 7% reduction in number of shares in OI. Cairn India has not seen such a reduction. While both could do better today, ONGC is better placed.

Tech check

The Nifty has fallen 665 points from its all time high mark of 8626 seen on 4th December to 7961 on Wednesday.  One-third rebound of 221 points to 8182 is a pass?. If the Nifty closes above the 8189 mark, which is the intraday high seen on Tuesday, the Nifty can be said to be out of danger. However, hard core bears are likely to see today?s rebound as normal.

Another way to look at this is the markets have formed a new bottom at 7961 and unless it breaks, the going can be good.

Fed retains its dovish stance

The Federal Open Market Committee ( FOMC), the policy making arm of the U.S. Federal Reserve  said it  ?can be patient? about the timing of the first rate hike. While they dropped the phrase ?considerable time? the carefully crafted statement conveyed the same meaning.
The markets were worried that the Fed might change its stance to hawkish, that didn?t happen and the U.S. markets rallied further. We will witness a rally today.

During her press conference Yellen said that policy  makers thought it was ?unlikely? the economy would show enough vigor to justify the first rate increase since 2006 ?for at least the next couple of meetings.? Asked how many meetings equals a couple, Yellen emphatically said ?two?. 

The Fed?s next meeting is slated for late January. After that, the Fed does not meet again until March 17-18. The third meeting of the year takes place April 28-29, and the fourth one will happen in June.
 
Fifteen out of 17 members of the Fed?s policy committee expect the rates to go up next year vs. 14 in the September meeting

Russia may withdraw from Ukraine

This is a big if. If Russia withdraws from Ukraine, the markets could further breathe easy and so would Russia. Sanctions imposed by EU and the US will be lifted which could augur well for both the EU and Russia. Secretary of State John Kerry had suggested Tuesday  that Western sanctions could be removed quickly if Russia stepped back in Ukraine.

In the meanwhile, the U S Congress has empowered Obama to slap tough new sanctions on Russia.

This gives the U.S. President enough elbow room to negotiate. What is needed is a face saving mechanism for Putin to pull out.

Lok Sabha Passes Companies Act Amendment Bill

 The Lok Sabha on Wednesday passed the amended Companies Act that prescribes specific punishment for those who raise deposits illegally from the public. Under the new norms proposed, the paid-up capital criteria has been scrapped, while threshold limits for various transactions for getting shareholders' nod has now been stipulated.

Towards meeting a "corporate demand," an amendment proposes "prohibiting public inspection of Board resolutions filed in the registry".  The amendment also proposes to exempt corporates from the need to get shareholders' nod in the case of related party transactions valued lower than Rs 100 crore or 10% of net worth.

GST Constitution Amendment Bill gets Cabinet nod

The Union Cabinet on Wednesday approved Constitutional Amendment Bill for Goods & Services Tax (GST), paving the way for introduction of the Bill in the ongoing session of Parliament.

The Government intends to introduce GST from April 1, 2016, which will set the ball rolling for the legislative exercise for introduction of new indirect tax reforms.

The Bill needs to be approved by a two-third majority of the house. After this, it needs to be endorsed by at least half of the State Assemblies (15). Then the Centre will introduce separate legislation for GST. States, too, will be required to bring in legislations.

The Constitution does not provide for any concurrent taxation powers to the Centre as well as the States. This required the Constitution to be amended for conferring simultaneous power on Parliament as well as the State Legislatures, including every Union Territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both.

The new regime would replace a number of indirect taxes currently being levied by the Central and State Governments and is intended to remove cascading of taxes and provide a common national market for goods and services.

Canada pension fund completes Rs 1,000 cr investment in L&T

Canada Pension Plan Investment Board has completed the investment of the first tranche of Rs 1,000 crore that it had committed to invest in Larsen & Toubro's subsidiary, L&T Infrastructure Development Projects

The Canadian fund and L&T has entered into an agreement in June this year according to which the former would invest Rs 2,000 crore in two tranches into the project development arm of L&T, IDPL.

A second tranche of Rs 1,000 crore, or such higher amount as may be agreed between L&T IDPL and CPPIB's subsidiary, will be invested after 12 months from the date of the initial investment, subject to any requires regulatory approvals at such time," L&T said in the statement.

This is the first direct private investment by a Canadian pension fund in a domestic infrastructure development company. The stake sale is a part of the Indian engineering major's strategy to deleverage its investment in projects that it is developing under the public-private partnership model. The company is also in the process of getting a trust, backed by its road projects, listed in Singapore.

RBI fines ICICI Bank, BoB for KYC violations

The Reserve Bank of India (RBI) has slapped a penalty of Rs 50 lakh on ICICI Bank and Rs 25 lakh on Bank of Baroda for lapses in adhering to know-your-customer (KYC) norms. Further, the RBI has cautioned State Bank of India, Axis Bank and State Bank of Patiala to put in place appropriate measures and ensure strict compliance of KYC requirements in future.

Coal India: Union serves strike notice

A five-day strike of its employees next month is likely to put Coal India, already under pressure to meet the ballooning demand, on a sticky wicket.

All the five trade unions of Coal India Limited (CIL) - which has a work force of 3,50,000 - have served a notice declaring their intention to go on strike from January 6 through January 10.
 
Adani-POCSCO enter JV to construct terminal in Australia

Adani Groups Australian subsidiary today said it has signed an MOU with a South Korean steel giant for the construction of a new strategic terminal at Abbot Point coal port to export high-quality coal globally at competitive rates.

Terminal Zero (T0) will be constructed at the port of Abbot Point near Bowen town, Queensland, as per the Memorandum of Understanding inked between the company and Korea's POSCO.

PNB to quote ex-split today

PNB will quote ex-split today. The Rs 10 face value share will be converted into 5 shares of Rs 2 each. If an investor had 100 shares of Rs 10 each, he will now have 500 shares of Rs 2 each.
 
Wall Street Rallies as Fed Shows Patience

Key U.S. Indices were in a rally mode Wednesday as the U.S. Fed painted a dovish picture.

The Dow Jones Industrial Average surged 288 points or 1.69% to 17,357. This was the best performance of the blue-chip Index this calendar year.  The benchmark was helped by Chevron and Exxon Mobil that rose 4.3% and 3% respectively.

The S&P 500 put on a 40 point or 2.04% gain to close to recapture the 2000 mark, closing at 2,013. The energy sector jumped by 4.2%, as oil prices reversed earlier losses. All 10 main sectors of the S&P 500 closed with solid gains.

The Nasdaq Composite rallied the most, 2.11% (96 points) to close at 4,644. Both the S&P 500 and the Nasdaq were helped by Apple that rose 2.5%.

The indices were in a recovery mode ahead of the Fed Statement  as the currency and the commodity markets calmed down.

The Indices surged after the Fed said that it ?can be patient? about the timing of the first rate hike. While the dropped the phrase ?considerable time? the carefully crafted statement conveyed the same meaning.

The markets were worried that the Fed might change its stance to hawkish, That didn?t happen and the markets rallied further. The Fed kept its previous phrase "considerable time" in the statement but only in saying that its new phrasing is "consistent" with previous language, noting the change was to better reflect an improving economy and tightening labor market. "

The statement comes at a time of increased volatility in the marketplace against a backdrop of plunging oil prices, softer domestic housing data, weaker economic figures coming out of China, and the Russian economy in freefall.

Crude prices recovered from deep losses suffered earlier after Russian officials said 2015 output would be similar to this year's at 10.6 million barrels a day. West Texas Intermediate was up 0.3% to $56.11, though remaining at nearly half of the mid-summer peak.

U.S. consumer prices fell in November the most in six years, a bonanza stemming from plunging oil prices that also boosted inflation-adjusted worker pay. The consumer price index declined by a seasonally adjusted 0.3% in November, the largest drop since December 2008. Economists had expected the CPI to drop 0.1% because of a sharp reduction in the cost of oil. Energy prices retreated for the fifth straight month, led by a 6.6% decrease in the gasoline index, the Labor Department said Wednesday.

In fresh political development, President Obama said the U.S. will restore diplomatic relations with Cuba and open an embassy in Havana for the first time in half a century. Earlier, American contractor Alan Gross was released from Cuban prison after being held captive for five years.
Herzfeld Caribbean Basin Fund , which invests in companies in countries within the Caribbean Basin including Cuba, rocketed around 26% higher at volume more than 900 times its daily average.

Volcano exploded 55% after Phillips announced it was acquiring the medical equipment developer for $18 a share, a 57% premium to Tuesday's close. Tesla bucked earlier losses after Morgan Stanley reduced its price target to $290 and cut the company's estimated unit deliveries through to 2020. Shares were 4.1% higher.

FedEx shares were down more than 3% after missing second-quarter earnings and revenue expectations. The company reiterated its previous full-year forecast and said it expects a "modest" boost from lower fuel prices. Competitor UPS moved lower in sympathy.

On Wednesday, the ruble strengthened after Russia?s central bank announced measures to shore up the country?s banks. Gold finished the day flat at $1,194.30 an ounce as the dollar USDJPY muscled back somewhat against the yen, amid a small rebound for the Nikkei 225 index.  Most of the other Asian markets gained as well.