Key benchmark indices trimmed losses after hitting fresh intraday low in mid-afternoon trade. The market breadth, indicating the overall health of the market was negative. The barometer index, the S&P BSE Sensex, was down 130.73 points or 0.58%, off close to 200 points from the day's high and up about 35 points from the day's low. Investor sentiment was hit adversely after the result of a survey showed that business activity in the Indian private sector fell in March 2014, after a fractional increase in February 2014.
Bank stocks fell across the board after the Reserve Bank of India (RBI) on Wednesday, 2 April 2014, clarified that as indicated in its circular dated 23 August 2013 the option for spreading the Mark to Market (MTM) losses over the three quarters has ended on 31 March 2014 and no further extension has been allowed. Aviation stocks extended Wednesday's sharp rally triggered by state-run oil marketing companies on Tuesday, 1 April 2014, announcing reduction in the price of aviation turbine fuel.
A bout of volatility was witnessed as key benchmark indices reversed gains after hitting fresh record high at the onset of the trading session. The Sensex and the 50-unit CNX Nifty, both, hit fresh record high at the onset of the trading session. The Sensex hovered in negative zone in morning trade. Key benchmark indices extended losses and hit fresh intraday low in mid-morning trade after the result of a survey showed that business activity in the Indian private sector fell in March 2014, after a fractional increase in February 2014. The Sensex further extended losses and hit fresh intraday low in early afternoon trade. Key benchmark indices hovered in negative terrain in afternoon trade. Key benchmark indices trimmed losses after hitting fresh intraday low in mid-afternoon trade.
At 14:20 IST, the S&P BSE Sensex was down 130.73 points or 0.58% to 22,420.76. The index fell 166.91 points at the day's low of 22,384.58 in mid-afternoon trade, its lowest level since 1 April 2014. The index gained 69.16 points at the day's high of 22,620.65 in early trade, a record high for the barometer index.
The CNX Nifty was down 40.25 points or 0.6% to 6,712.30. The index hit a low of 6,702.20 in intraday trade, its lowest level since 1 April 2014. The index hit a high of 6,776.75 in intraday trade, a record high for the index.
The BSE Mid-Cap index was off 30.21 points or 0.42% at 7,168.71. The BSE Small-Cap index was off 20.50 points or 0.28% at 7,199.86. Both these indices outperformed the Sensex.
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The market breadth, indicating the overall health of the market was negative. On BSE, 1,528 shares dropped and 1,146 shares rose. A total of 134 shares were unchanged.
Among the 30-share Sensex pack, 22 stocks declined and rest of them rose. Bharat Heavy Electricals (Bhel) (down 4.1%), Coal India (down 2.23%), and GAIL (India) (down 1.89%), edged lower from the Sensex pack.
Bank stocks fell across the board after the Reserve Bank of India (RBI) on Wednesday, 2 April 2014, clarified that as indicated in its circular dated 23 August 2013 the option for spreading the Mark to Market (MTM) losses over the three quarters has ended on 31 March 2014 and no further extension has been allowed. The RBI further said that as indicated in that circular, banks are permitted to exceed the limit of 25% of total investments under the Held to Maturity (HTM) category provided the excess comprises only SLR securities and the total SLR securities held in the HTM category is not more than 24.5% of their Net Demand Time Liabilities (NDTL) as on last Friday of the second preceding fortnight. The position will be reviewed based on evolving situation, the RBI said.
Among private sector banks, ICICI Bank (down 0.49%), IndusInd Bank (down 2.4%), Yes Bank (down 2.51%), Federal Bank (down 2.24%), Kotak Mahindra Bank (down 1.36%) and HDFC Bank (down 0.49%), declined.
Axis Bank dropped 1.56%. The bank announced after market hours on Wednesday, 2 April 2014, that the board of directors of the bank on 2 April 2014 has passed a resolution approving the allotment of Senior Notes aggregating to $30.6 million under the MTN Programme through its Dubai International Financial Centre (DIFC) branch.
Among other PSU bank stocks, State Bank of India (SBI) (down 2.05%), Canara Bank (down 1.73%), Union Bank of India (down 1.98%), Bank of India (down 2.14%), Bank of Baroda (down 2.17%) and Punjab National Bank (down 2.86%) dropped.
IDBI Bank declined 1.53%. The bank announced after market hours on Wednesday, 2 April 2014, that it has divested its entire equity holding of 39.9 lakh shares (18.95%) in Stock Holding Corporation of India (SHCIL) to IFCI.
IDFC shed 1.89%, with the stock reversing intraday gains. The Reserve Bank of India (RBI) has decided on Thursday to grant "in-principle" approval to two applicants viz., IDFC and Bandhan Financial Services Private, to set up banks under the Guidelines on Licensing of New Banks in the Private Sector issued on 22 February 2013 (Guidelines). These two applicants were also recommended as suitable for grant of "in-principle" approval by the High Level Advisory Committee (HLAC) set up by the RBI. The HLAC had also recommended that in the case of Department of Posts which has applied for licence, it would be desirable for the RBI to consider the application separately in consultation with the Government of India. The RBI has accepted the recommendation of the HLAC.
The "in-principle" approval granted will be valid for a period of 18 months during which the applicants have to comply with the requirements under the Guidelines and fulfil the other conditions as may be stipulated by the RBI. On being satisfied that the applicants have complied with the requisite conditions laid down by the RBI as part of in-principle approval, they would be considered for grant of a licence for commencement of banking business under Section 22(1) of the Banking Regulation Act, 1949. Until a regular licence is issued, the applicants would be barred from doing banking business.
Aviation stocks extended Wednesday's sharp rally triggered by state-run oil marketing companies on Tuesday, 1 April 2014, announcing reduction in the price of aviation turbine fuel. SpiceJet (up 0.23%) and Jet Airways (India) (up 4.23%) edged higher. The state-run oil marketing companies on Tuesday, 1 April 2014, announced reduction in the price of aviation turbine fuel (ATF), reflecting global trends. ATF price at Delhi was cut by Rs 3,025.34 per kl, or 4%, to Rs 71,800.21 per kl. In Mumbai, jet fuel costs Rs 74,105.16 per kl as against Rs 77,322.6 per kl previously. Rates at different airports vary because of difference in local Sales Tax or VAT.
Jet fuel constitutes over 40% of an airline's operating costs and the price cut will reduce the fuel cost of the cash-strapped carriers.
Tayo Rolls jumped 5.51% to Rs 46.90 after the company today, 3 April 2014, said that a Committee of the Board of Directors of the company at its meeting held on 28 March 2014 has allotted 87 lakh 8.5% non-cumulative Redeemable Preference Shares of Rs 100 to Tata Steel on preferential basis. Shares of Tata Steel were off 1.1%.
In the foreign exchange market, the rupee edged lower against the dollar on speculation the central bank will slow gains after it strengthened beyond 60 per dollar in late March 2014 for the first time since July 2013. The partially convertible rupee was hovering at 60.19, compared with its close of 59.90/91 on Wednesday, 2 April 2014.
Indian government bond prices dropped as demand for existing securities slowed before a debt auction tomorrow, 4 April 2014. The yield on 10-year benchmark federal paper, 8.83% GS 2023, was hovering at 8.9841%, higher than its close of 8.9627% on Wednesday, 2 April 2014. Bond yield and bond prices move in opposite direction.
Reserve Bank of India Governor Raghuram Rajan said in a newspaper interview published today, 3 April 2014, that the Indian rupee at 55 to the dollar would be too strong. His comments came after a sharp surge in rupee against the dollar over the past few days. "And today I would say that if we were at 55 (against the dollar), it would be too strong. In the summer of last year, I said 70 (against the dollar) would be too weak," Rajan said in the interview. On Wednesday, 2 April 2014, Rajan had said in an interview to TV channel that the rupee strengthening to 45 or 50 per dollar could hit exports and added saying the RBI was fine with a "certain amount of leeway" in the currency.
Business activity in the Indian private sector fell in March, following a fractional increase in the previous month. Adjusted for seasonal influences, the HSBC India Composite Output Index declined from 50.3 in February to 48.9 in March. Production at manufacturers rose at a weaker rate, whereas service sector output dropped again.
The headline HSBC Services Business Activity Index adjusted for seasonal factors fell from 48.8 in February to 47.5 in March. Registering below the 50 no-change level for the ninth successive month, the latest reading pointed to a moderate drop in activity that was the most pronounced since last December, Markit Economics said today, 3 April 2014. Anecdotal evidence highlighted falling new orders and a difficult economic climate. Sector data signalled lower new business in three of the six categories, namely Financial Intermediation, Renting & Business Activities and Transport & Storage.
New business received by Indian services companies decreased for the ninth month running in March. As was the case for output, the rate of contraction was the quickest in three months. Panellists commented that weaker client demand, partly linked to the forthcoming elections, led to the latest drop in new work intakes, Markit Economics said. New orders placed at manufacturing companies rose at a softer rate. Concurrently, incoming new work in the private sector as a whole decreased, although slightly.
Backlogs of work in the Indian private sector were reported to have increased during March, with both manufacturing and services companies signalling expansion. Service providers linked the latest accumulation in outstanding business to cashflow difficulties and delayed payments from clients, while manufacturers commented onraw material shortages.
March data signalled employment growth in the Indian service sector, but the rate of increase was only slight. Where job creation was reported, this was attributed to forecasts of higher levels of new work in coming months. Payroll numbers in the private sector as a whole rose, although slightly and at a broadly unchanged pace from February.
Inflationary pressures in the Indian private sector softened during March, with both input costs and output prices rising at weaker rates. Additionally, input cost and output price inflation were weak in the context of historical data. Softer increases for charges and costs were registered at both manufacturers and service providers.
Indian service providers were optimistic in March that activity would rise over the next 12 months. Growth of new business, supported by improved economic conditions and new marketing initiatives, is expected to drive the expansion in activity. Confidence strengthened in the latest month and was at its highest since last July.
Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Following some stabilization in recent months, service sector activity weakened again in March led by softer domestic demand. Meanwhile, inflation pressures eased. Looking ahead, growth is expected to remain subdued in coming months, but pick up gradually during the second half of 2014. This, however, assumes that the election outcome provides the elected government with a workable mandate".
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on Tuesday, 1 April 2014.
The next major trigger for the stock market is Q4 March 2014 and year ended 31 March 2014 (FY 2014) corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the results to see if there is any revision in their future earnings forecast of the company for the year ending 31 March 2015 (FY 2015) and/or for the year ending 31 March 2016 (FY 2016). Indian companies will start reporting their Q4 and full year results from mid-April 2014. The result season will conclude in end-May 2014.
A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. Lok Sabha elections will be held between 7 April 2014 and 12 May 2014 in nine phases. The counting of votes will take place on 16 May 2014. The term of the current Lok Sabha expires on June 1 and the new House has to be constituted by May 31. Along with the Lok Sabha election, Andhra Pradesh (AP), including the regions comprising Telangana, Odisha and Sikkim will go to polls to elect new assemblies. AP, Odisha and Sikkim assemblies come to end on June 2, June 7 and May 7 respectively.
European stocks edged lower on Thursday, 3 April 2014, before European Central Bank's (ECB) rate decision. Key benchmark indices in France and Germany were off 0.1% to 0.16%. In UK, the FTSE 100 index was up 0.08%.
Euro-area services output remained close to the highest level since 2011 in March, signaling that the economic recovery in the 18-nation euro area is on track. An index based on a survey of purchasing managers slipped to 52.2 from 52.6 in February, London-based Markit Economics said in a statement today.
A policy meeting of the Governing Council of the European Central Bank (ECB) will be held today, 3 April 2014, in Frankfurt to decide euro zone interest rates. The ECB will probably leave its benchmark interest rate unchanged at a record low 0.25% after today's monetary policy review.
Asian stocks edged higher on Thursday, 3 April 2014, after data showed US companies added workers and China outlined economic stimulus plans. Key benchmark indices in Hong Kong, Indonesia, Japan and Singapore were up 0.18% to 0.84%. Key benchmark indices in China South Korea and Taiwan were off 0.18% to 0.74%.
China yesterday, 2 April 2014, outlined a package of measures including railway spending and tax relief to support the economy and create jobs after a slowdown endangered Premier Li Keqiang's target of 7.5% growth this year.
Growth in China's services sector slowed slightly in March, data showed on Thursday, but it is still a bright spot after a string of recent weakening indicators that reinforced fears of an economic slowdown. The official services Purchasing Managers' Index (PMI) released by the National Bureau of Statistics dipped to 54.5 from February's 55, but remained well above the 50 level that is the dividing line between expansion and contraction.
The HSBC China services Purchasing Managers' Index rose to 51.9 in March from 51 in February, HSBC Holdings PLC said on Thursday. A reading above 50 indicates on-month expansion and a reading below that indicates contraction. Despite the stronger reading for services, weakness in the Manufacturing PMI suggests the economy is weakening overall, HSBC chief economist for China Qu Hongbin said in a statement.
Trading in US index futures indicated that the Dow could advance 17 points at the opening bell today, 3 April 2014. The US stock market ended a choppy session moderately higher on Wednesday, 2 April 2014, with the S&P 500 closing at a record, as data showing companies added to payrolls last month fueled optimism on growth in the economy.
Private-sector-employment gains picked up in March, with employers adding the most jobs in three months, and quicker hiring may be ahead, Automatic Data Processing Inc. reported Wednesday. ADP said private-sector employers added 191,000 jobs last month, up from 178,000 in February. A prior estimate pegged February's increase at 139,000. Separately, orders for goods produced in US factories rose 1.6% in February, the US Commerce Department said Wednesday. Orders for durable goods--products meant to last at least three years--rose 2.2% in February. Orders for nondurable goods increased 1%.
The influential US non-farms payroll data for March 2014 will be released tomorrow, 4 April 2014.
Two Federal Reserve officials speaking publicly on Wednesday offered slightly different views about the timing of the first rate hike. St. Louis Fed President James Bullard said that he expects the first rate hike to come in the first quarter of 2015, though he conceded that he's ahead of most of his colleagues. Atlanta Fed President Dennis Lockhart said that the first rate hike is not likely to be warranted until at least the last half of next year.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 said after the conclusion of a monetary policy review that it will trim its monthly bond purchases by $10 billion to $55 billion. The Federal Reserve will end its bond-buying program before the end of the year with an interest-rate increase likely to follow in "around six months," Chair Janet Yellen said on 19 March 2014. Quarterly Fed forecasts on 19 March 2014 showed more officials predicting that the benchmark interest rate, now close to zero, will rise to at least 1% by the end of 2015 and 2.25% a year later.
Brazil's central bank on Wednesday, 2 April 2014, raised interest rates for the ninth straight time, prolonging one of the world's longest-running monetary tightening cycles after a surge in food prices stoked already high inflation in an election year. The unanimous decision by the central bank's monetary policy committee raised its benchmark Selic rate by 25 basis points to 11%, its highest level in over two years. Policy makers in their statement removed language used in previous statements that had signaled the probability of additional rate increases.
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