Key benchmark indices extended intraday gains in early afternoon trade. The barometer index, the S&P BSE Sensex, regained the psychological 22,000 level, having alternately moved above and below that level in intraday trade so far. But, the market breadth, indicating the overall health of the market turned negative from positive in afternoon trade. The Sensex was up 274.86 points or 1.26%, off close to 20 points from the day's high and up about 200 points from the day's low.
Metal and mining stocks were mixed after latest data showed preliminary gauge of China's factory activity for March 2014 fell to an eight-month low. Pharma stocks edged lower on a firm rupee. GAIL (India) extended intraday gains.
Key benchmark indices edged higher in early trade on firm Asian stocks. Key benchmark indices extended initial gains in morning trade. The Sensex and the 50-unit CNX Nifty, both, hit record high. Firmness continued on the bourses in early afternoon trade. Key benchmark indices extended intraday gains in early afternoon trade. The Sensex regained the psychological 22,000 level, having alternately moved above and below that level in intraday trade so far.
Gains in Asian stocks underpinned sentiment on the domestic bourses. Asian stocks edged higher on Monday, 24 March 2014, shrugging off weak Chinese economic data.
Indian stocks may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near-month March 2014 series to April 2014 series. The near-month March 2014 F&O contracts expire on Thursday, 27 March 2014.
At 13:20 IST, the S&P BSE Sensex was up 274.86 points or 1.26% to 22,030.18. The index jumped 291.26 points at the day's high of 22,046.58 in morning trade, a record high for the barometer index. The index rose 72.18 points at the day's low of 21,827.50 in opening trade.
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The CNX Nifty was up 82.20 points or 1.27% to 6,577.10. The index hit a high of 6,580.90 in intraday trade, a record high. The index hit a low of 6,510.50 in intraday trade.
The BSE Mid-Cap index was up 15.88 points or 0.23% at 6,808.03. The BSE Small-Cap index was up 27.10 points or 0.4% at 6,859.09. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, turned negative from positive in afternoon trade. On BSE, 1,361 shares fell and 1,236 shares rose. A total of 155 shares were unchanged.
Among the 30-share Sensex pack, 25 stocks gained and rest of them declined.
ICICI Bank (up 3.67%), ONGC (up 3.5%) and Coal India (up 3.08%) edged higher from the Sensex pack.
GAIL (India) rose 4.34%, with the stock extending intraday gains.
Metal and mining stocks were mixed after latest data showed preliminary gauge of China's factory activity for March 2014 fell to an eight-month low. China is the world's largest consumer of copper and aluminum. Sesa Sterlite (up 0.8%), Hindustan Zinc (up 0.54%), Jindal Steel & Power (up 0.09%), Steel Authority of India (SAIL) (up 1.38%) and NMDC up 3.32%) edged higher. Hindalco Industries (down 0.29%), National Aluminum Company (down 0.84%), Hindustan Copper (down 1.02%), JSW Steel (down 0.49%) and Tata Steel (down 0.36%), declined.
Pharma stocks edged lower on a firm rupee. Higher rupee reduces export sales of pharma companies in rupee terms. Cipla (down 0.14%), Dr. Reddy's Laboratories (down 0.74%), Ranbaxy Laboratories (down 0.26%) and Sun Pharmaceutical Industries (down 0.51%) declined. Lupin rose 0.07%.
NHPC was flat. The company today, 24 March 2014, said that consequent upon successful trial run of Unit 1 and Unit 2 of Parbati-III HE Project, the project has been declared under commercial operation from 24 March 2014.
In the foreign exchange market, the rupee edged higher against the dollar, tracking gains in most other Asian units versus the greenback. The partially convertible rupee was hovering at 60.76, compared with its close of 60.895/905 on Friday, 21 March 2014.
The Reserve Bank of India will announce the First Bi-monthly Monetary Policy Statement, 2014-15 on 1 April 2014. Citing price pressures, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.
The next major 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 be 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.
Investors are watching the development of the Ukraine crisis. Leaders of the US, the European Union, China, Japan and others meet today, 24 March 2014, with US President Barack Obama seeking to mobilize opposition to Russia's incursion into Crimea.
Asian stocks edged higher on Monday, 24 March 2014, shrugging off weak Chinese economic data. Key benchmark indices in Taiwan, Hong Kong, China, Singapore, Japan, Indonesia and South Korea were up 0.47% to 1.77%.
A preliminary gauge of China's factory activity fell to an eight-month low. The "flash" edition of HSBC's China manufacturing Purchasing Managers' Index (PMI) dropped to 48.1 from February's 48.5, remaining below the 50 level separating expansion from contraction. "Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower," Qu Hongbin, Hong Kong-based chief China economist at HSBC, said in a statement.
China issued rules on 21 March 2014 for a trial program allowing companies to sell preferred stock, expanding financing options for the country's banks as they seek to address tougher capital requirements. Companies will be able to issue the shares if they are included in the Shanghai Stock Exchange 50 A-Share Index, the China Securities Regulatory Commission said in a statement on its official microblog.
Asian Development Bank (ADB) President Takehiko Nakao today, 24 March 2014, said that China's economy may still grow around 7.5% this year despite signs of a slowdown, and there is no immediate need for the government to roll out fresh stimulus measures. Nakao said in an interview to a news agency that he expects China's economic growth to be roughly in line with the government's target. China's government has set a target of 7.5% GDP growth for 2014. ADB is revising its forecast on China's growth for 2014, currently at 7.5%, he said, but did not elaborate
Nakao said Chinese leaders face a challenge to keep the economy on an even keel while forging ahead with a long list of market-based reforms announced at a key party meeting late last year. He said that some short-term stimulus might be needed to smooth out ups and downs in the economy, but there was no immediate need as growth remains healthy due to the country's ongoing urbanisation and rising consumption. Nakao said he was impressed by Chinese leaders' commitment to market-oriented reforms to help put the economy on a more sustainable footing, but they needed time to implement them. Liberalising interest rates and the currency regime in China should "go hand in hand", and interest rate liberalisation could be carried out in a step by step manner to ward off possible banking risks, he said.
Nakao said Asian economies are more prepared to cope with any economic turbulence and the region's fundamentals are much stronger than there were during the Asian financial crisis in the late 1990s.
International Monetary Fund (IMF) Managing Director Christine Lagarde urged China to boost financial-sector competition and open its borders further to foreign financial flows as a way to bolster the country's economic prospects. Such moves would "help to better intermediate the vast pool of domestic savings to the most productive uses," she said in remarks prepared for a Monday session of the China Development Forum, an annual gathering of corporate and government leaders. "It would also prepare Chinese banks to play a bigger role globally." Ms. Lagarde said that China needs to prepare for what she called the country's "next transformation" from an economy based on exports, capital intensive industries and infrastructure spending to one that relies more on services and innovation, consumer spending and also produces less pollution. "The challenge is clear," she said, "to make the growth more inclusive, friendlier to the environment and more sustainable."
The financial sector will play an important role in the remaking of the economy, she stressed. China's banking sector is widely criticized inside and outside of China for being too dependent on massive, state-owned banks that lend primarily to other state-owned firms, while leaving smaller private companies begging for loans from so-called shadow lenders. Chinese regulators have started to approve a handful of privately owned banks as a way to bring more capital into the system and focus lending on smaller firms.
The IMF chief also urged a "gradual opening" of the capital account to allow foreigners to invest more in Chinese firms and ordinary Chinese to invest abroad. Such an opening "would also strengthen the potential role of the renminbi as a global currency," she said--a priority of the Chinese government.
On the global economy, Ms. Lagarde said that prospects for growth are strengthening. But she warned that the euro area and other wealthy economies face the "risk of prolonged low inflation," which needs to be addressed, including through "unconventional monetary policies," among other measures.
Trading in US index futures indicated that the Dow could advance 42 points at the opening bell on Monday, 24 March 2014. US stocks dropped on Friday, 21 March 2014, pressured by a sell-off in the health-care sector, but major equity indexes still posted solid weekly gains.
Federal Reserve Governor Jeremy Stein on Friday, 21 March 2014, said monetary policy should be less accommodative when bond markets are overheated even if it raises the risk of higher unemployment. "All else being equal, monetary policy should be less accommodative -- by which I mean that it should be willing to tolerate a larger forecast shortfall of the path of the unemployment rate from its full-employment level -- when estimates of risk premiums in the bond market are abnormally low," Stein said. He didn't comment on the current stance of policy. Stein said pursuing lower levels of unemployment with low interest rates may also entail costs if they raise financial instability that could affect jobs and growth at later time if yields shoot back up. "There is a cost to be weighed alongside the benefit" of an accommodative policy, Stein said at a forum on monetary policy at Georgetown University in Washington. Financial stability matters "insofar as it affects the degree of risk around the employment leg of the Federal Reserve's mandate."
As one measure of financial overheating, Stein pointed to risk premiums on longer-term debt, or the component of the bond's yield that compensates investors for owning a longer-term security as opposed to a short-term security. He said that in the spring of 2013 in the US when yields on US 10-year notes were around 1.6 percent, estimates of the term premium were around negative 0.80 percentage point. "Applied to this period, my approach would suggest a lesser willingness to use large-scale asset purchases to push yields down even further," he said. Stein said the "dark side" of collapsed risk premiums occurs if they return to normal abruptly in a way that causes "larger economic effects than the initial compression."
Minneapolis Fed President Narayana Kocherlakota, the sole dissenter on the Federal Open Market Committee (FOMC), released a statement on Friday, 21 March 2014, in which he criticized the Fed's new guidance, saying it "weakens the credibility of FOMC's commitment to target 2% inflation" and "fosters policy uncertainty and thereby suppresses economic activity."
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.
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