Key benchmark indices trimmed gains after a firm start triggered by the new central bank Governor Raghuram Rajan announcing plans late on Wednesday to bolster the financial industry and stabilize the rupee. The barometer index, the S&P BSE Sensex, slipped below the psychological 19,000 mark, after regaining that mark in early trade. The Sensex was up 413.04 points or 2.22%, up close to 125 points from the day's low and off about 135 points from the day's high. The market breadth, indicating the overall health of the market, was strong.
Firmness in Asian stocks supported the domestic bourses. The market sentiment was also boosted after the Lok Sabha on Wednesday, 4 September 2013, passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector.
Capital goods pivotals rose on renewed buying. Axis Bank jumped after the central bank withdrew restrictions placed on the purchase of the bank's shares by foreign investors. IT stocks fell on profit booking as the rupee strengthened against the dollar. Index heavyweight and cigarette maker ITC jumped.
The market surged in early trade after Mr. Raghuram Rajan after taking charge as the 23rd governor of the Reserve Bank of India (RBI) on Wednesday, 4 September 2013, announced fresh steps to stabilize the currency and sought to reassure investors. The market trimmed gains in morning trade.
In the foreign exchange market, the rupee strengthened against the dollar after the new head of the central bank on Wednesday, 4 September 2013, announced fresh steps to stabilize the currency and sought to reassure investors. The partially convertible rupee was hovering at 66.24, stronger than its close of 67.065/075 on Wednesday, 4 September 2013. Banks can swap dollars raised from foreign-currency deposits by overseas Indians for rupees with the central bank an annual interest of 3.5%, Reserve Bank of India Governor Raghuram Rajan said late on Wednesday. The RBI also doubled what banks can raise through overseas bonds and allowed them to hedge those dollars at a special rate with the RBI.
The market sentiment was boosted by data showing that foreign funds were net buyers of Indian stocks on Wednesday, 4 September 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 172.53 crore on Wednesday, 4 September 2013, as per provisional data from the stock exchanges.
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At 10:20 IST, the S&P BSE Sensex was up 413.04 points or 2.22% to 18,980.59. The index spurted 549.97 points at the day's high of 19,117.52 in early trade, its highest level since 16 August 2013. The index rose 290.05 points at the day's low of 18,857.60 in opening trade.
The CNX Nifty was up 136.95 points or 2.51% to 5,585.05. The index hit a high of 5,625.75 in intraday trade, its highest level since 16 August 2013. The index hit a low of 5,553.75 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,091 shares rose and 420 shares fell. A total of 74 shares were unchanged.
Among the 30-share Sensex pack, 24 stocks rose and rest of them fell. HDFC (up 4.76%), ICICI Bank (up 7.65%) and HDFC Bank (up 5.56%), gained.
Index heavyweight and cigarette maker ITC jumped 4.9%.
IT stocks fell on profit booking as the rupee strengthened against the dollar. IT stocks had surged recently on sharp fall in rupee against the dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
Infosys (down 1.61%) and Wipro (down 0.53%), edged lower.
HCL Technologies dropped 1.29%. The company after market hours on Wednesday, 4 September 2013, said that Direct Energy, a leading energy and energy services company in North America, has reached an agreement with the company to implement and manage its residential billing and customer care operations in the Alberta market. The underlying solution will leverage a variety of leading technologies, including multiple technologies from SAP. HCL will provide infrastructure hosting, application management and business process services.
Tata Consultancy Services (TCS) fell 2.48%. The company announced after market hours on Wednesday, 4 September 2013, that it has been selected by CTM, the leading telecom service provider in Macau, for a multi-year and multi-million agreement for an IT and business transformation project, whereby TCS will deploy a new convergent rating and billing system for CTM. Currently, CTM uses different billing systems for each of its corresponding telecom service. In order to meet its needs of next-generation integrated multimedia telecom services, CTM sought to implement an converged billing system to provide a more instantaneous response to market demands, hence further strengthening its market competitiveness. CTM chose TCS as its service partner to deliver its new convergent rating and billing system.
Capital goods pivotals rose on renewed buying. L&T (up 3.37%) and Bhel (up 3.55%), gained.
Axis Bank jumped 8.62% after the central bank withdrew restrictions placed on the purchase of the bank's shares by foreign investors. The Reserve Bank of India (RBI) made the announcement after market hours on Wednesday, 4 September 2013.
The Reserve Bank of India (RBI) on Wednesday, 4 September 2013, lifted restrictions placed on foreign institutional investors (FIIs) buying shares in Axis Bank as the overall foreign share holding fell below the prescribed limit of 49%. Foreign share holding in Axis Bank under the portfolio investment scheme have gone below the prescribed threshold limit stipulated under the extant FDI Policy, the RBI said in a statement. Hence, the restrictions placed on the purchase of shares of Axis Bank are withdrawn with immediate effect, the central bank said.
Total foreign holding in Axis Bank was 48.96% as at 30 June 2013, of which 40.70% was held by FIIs.
In an unexpectedly detailed and wide-ranging briefing, new RBI Governor Raghuram Rajan on Wednesday outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk. He made clear his intention to liberalise markets, including pushing for more rupee trade settlement, introducing new financial products such as overnight interest rate swaps and removing curbs on opening new branches by Indian banks. Rajan, in his remarks, outlined the plan to attract more funds from non-resident Indians (NRIs) as part of a broader push to lure inflows. Under the plan, the central bank will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians. India has the world's second-biggest diaspora, according to the Ministry of Overseas India Affairs, and the country has turned to overseas Indians for help in past financial crises. The central bank will also offer forex swap into rupees at a concessional rate below market levels for banks who raise dollar funds through overseas borrowings.
Rajan said banks should gradually be allowed to decrease their mandatory holdings of government securities, which would free up capital for lending. He also said new bank licences should be awarded on an ongoing basis. The central bank is now in the process of awarding the first new bank licences in a decade. Rajan also proposed the issue of inflation-indexed bonds linked to the consumer price index, an indication that the central bank may soon shift its inflation benchmark from the wholesale price index. Rajan also pushed back the date of the RBI's next monetary policy review by two days to 20 September 2013. That will give the central bank more time to consider the outcome of what is expected to be a pivotal two-day meeting of the US Federal Reserve, ending on 18 September 2013
The Lok Sabha on Wednesday passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector. The Bill allows 26% foreign investment in the Pension sector and gives statutory backing to the interim pension authority that had been functioning on executive authority for over a decade now. It also gives legal backing to the pensions regulator to create a social security architecture that channels savings of households into the financial sector. The PFRDA manages the New Pension System, a defined contribution scheme for the central government that many states have joined and is also now open to private individuals.
Asian stocks rose on Thursday, 5 September 2013, following gains on Wall Street overnight. Key benchmark indices in Indonesia, Hong Kong, South Korea, Singapore and Taiwan rose by 0.67% to 1.23%. Key benchmark indices in China and Japan shed by 0.07% to 0.13%.
The Bank of Japan upgraded its assessment of the economy, saying a moderate recovery is underway, reinforcing Governor Haruhiko Kuroda's message that Japan can weather a sales-tax increase due in April. The central bank will expand the monetary base at an annual pace of 60 trillion yen ($602 billion) to 70 trillion yen, it said in Tokyo today, leaving policy unchanged.
Trading in US index futures indicated that the Dow could gain 12 points at the opening bell on Thursday, 5 September 2013. US stocks jumped on Wednesday after surging US auto sales pointed to robustness in the manufacturing sector. Federal Reserve data released overnight showed that the US economy grew at a "modest to moderate" pace in July and August, according to the central banks "beige book".
The influential US nonfarm payroll report for August 2013 is due for release tomorrow, 6 September 2013. The employment numbers will be keenly watched given the implications for the timing of the Federal Reserve's plan to begin slowing the pace of its monetary stimulus.
Investors across the globe are eyeing the next policy meeting of the Federal Open Market Committee (FOMC) scheduled this month, with their focus squarely on the timing of tapering of Federal Reserve's bond purchases. The FOMC holds a two-day policy meeting on 17-18 September 2013 to decide on interest rates in the United States. The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.
Meanwhile, a summit of leaders from the Group of 20 major economies begins in St. Petersburg today, 5 September 2013.
On Wednesday, President Obama reiterated the need for a global response on Syria as a US Senate panel approved a resolution authorising US military intervention.
In Europe, the central banks in the UK and euro zone review their interest rate policies today.
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