With key benchmark indices in Japan and China reversing intraday gains in mid-morning trade, key equity benchmark indices in India followed suit. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both slipped into the red from green. The Sensex was currently off 32.47 points or 0.13% at 25,663.97. The market breadth indicating the overall health of the market was positive.
Bank stocks edged lower after the Reserve Bank of India issued draft guidelines on computation of banks' base rate based on marginal cost of funds. Shares of oil exploration & production (E&P) firms edged lower along with crude oil prices. Shares of public sector oil marketing companies (PSU OMCs) also dropped.
At 11:25 IST, the S&P BSE Sensex was down 32.47 points or 0.13% at 25,663.97. The index fell 73.39 points at the day's low of 25,623.05 in mid-morning trade. The index jumped 242.93 points at the day's high of 25,939.37 in early trade.
The CNX Nifty was down 3.50 points or 0.04% at 7,782.35. The index hit a low of 7,766.95 in intraday trade. The index hit a high of 7,862.55 in intraday trade.
The BSE Mid-Cap index was off 13.02 points or 0.12% at 10,510.81. The decline in the index was lower than Sensex's decline in percentage terms. The BSE Small-Cap index was up 31.04 points or 0.29% at 10,764.42, outperforming the Sensex.
The market breadth indicating the overall health of the market was positive. On BSE, 1,121 shares rose and 1,014 shares declined. A total of 92 shares were unchanged.
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Bank stocks edged lower after the Reserve Bank of India issued draft guidelines on computation of banks' base rate based on marginal cost of funds. Among PSU banks, Oriental Bank of Commerce (down 0.08%), IDBI Bank (down 0.18%), Bank of Baroda (down 0.67%), Punjab National Bank (down 1.04%), Union Bank of India (down 1.82%), Canara Bank (down 1.99%), Bank of India (down 2.23%), United Bank of India (down 0.93%) and State Bank of India (down 1.94%) edged lower. Andhra Bank (up 0.31%) and Syndicate Bank (up 0.24%) edged higher.
Among private sector banks, Yes Bank (down 1.41%), ICICI Bank (down 1.16%), HDFC Bank (down 0.6%), Axis Bank (down 2.24%), IndusInd Bank (down 1.49%) and Kotak Mahindra Bank (down 1.35%) edged lower.
As per RBI's draft guidelines, the components of a bank's base rate will include cost of funds, negative carry on CRR/SLR, un-allocable overhead costs and average return on net worth. Negative carry on the mandatory CRR arises because the return on CRR balances is nil. Negative carry on SLR balances may arise if the actual return thereon is less than the cost of funds. The marginal cost of funds will be arrived at by taking into consideration all sources of fund other than equity. The actual lending rates on the loans will be determined by adding the components of spread to the base rate. The base rate is the minimum lending rate charged by a bank.
The RBI has sought comments on the draft guidelines by 15 September 2015 and it intends to implement the revised methodology for calculation of base rate from 1 April 2016.
Coal India was off 0.15% at Rs 354.85. The stock hit a high of Rs 359.30 and a low of Rs 352.45 so far during the day. Coal India and its subsidiaries on provisional basis achieved 96% of targeted production at 36.21 million tonnes in August 2015. The company and its subsidiaries on provisional basis achieved 100% of targeted offtake at 40.62 million tonnes in August 2015. The company made the announcement after market hours yesterday, 1 September 2015.
Shares of oil exploration & production (E&P) firms edged lower along with crude oil prices. Oil India (down 1.27%), ONGC (down 1.58%) and Cairn India (down 2.09%) edged lower. Reliance Industries was up 1.15% at Rs 849.80. Lower crude oil prices will result in lower realization from crude sales for oil exploration firms.
Shares of public sector oil marketing companies (PSU OMCs) also edged lower. BPCL (down 0.02%), HPCL (down 3.33%) and Indian Oil Corporation (down 0.05%) edged lower.
Meanwhile, the government has announced that it has accepted the recommendation of the Justice A.P. Shah Committee not to levy minimum alternative tax (MAT) on stock market transactions of foreign institutional investors (FIIs) for the period prior to 1 April 2015. The latest announcement comes after the government in its February 2015 Budget announced that MAT will not be applicable for FIIs from 1 April 2015.
On the macro front, lower crude oil prices augur well for India. The country India imports about 80% of its crude requirements and a decline in crude eases concerns on fiscal deficit, inflation and gives more room for the government to boost growth through spending on infrastructure. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.
In the global commodities markets, Brent for October settlement was currently off $1.01 a barrel at $48.55 a barrel. The contract had tumbled $4.59 a barrel or 8.47% to settle at $49.56 a barrel during the previous trading session.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 66.295, compared with closing of 66.215 during the previous trading session.
In overseas markets, Asian stocks were mixed. Key benchmark indices in Taiwan, Singapore, South Korea and Indonesia were up 0.04% to 0.22%. Key benchmark indices in Japan, China and Hong Kong were off 0.35% to 0.86%.
Trading in US index futures indicated that the Dow could surge 143.50 points at the opening bell today, 2 September 2015. US stocks tumbled yesterday, 1 September 2015, as part of a global rout sparked by a new round of weak Chinese economic data.
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