Key benchmark indices dropped in a choppy trading session after the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review. Nevertheless, the market trimmed steep intraday losses as the RBI simultaneously decided to start unwinding of the exceptional measures it had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market and after Reserve Bank of India Governor Dr. Raghuram Rajan made it a point that the marginal standing facility (MSF) rate is the effective policy rate today and this has been cut steeply. The CNX Nifty closed above the psychological 6,000 mark, having alternately moved above and below that level in intraday trade. The S&P BSE Sensex lost 382.93 points or 1.85%, up about 210 points from the day's low and off close to 410 points from the day's high. The market breadth, indicating the overall health of the market, was negative.
The Sensex snapped four-day winning streak today, 20 September 2013. The Sensex had risen 913.88 points or 4.63% in four trading days to settle at 20,646.64 on Thursday, 19 September 2013, from a recent low of 19,732.76 on 13 September 2013. The Sensex has gained 1,643.99 points or 8.82% in September 2013 so far (till 20 September 2013). The Sensex has risen 837 points or 4.3% in calendar 2013 so far (till 20 September 2013). From a 52-week high of 20,739.69 on 28 August 2013, the Sensex has declined 475.98 points or 2.29%.
Coming back to today's trade, index heavyweight and cigarette major ITC recovered in choppy trade. Interest rate sensitive auto and realty stocks dropped after the RBI's surprise decision to raise the repo rate. Bank stocks trimmed steep intraday losses after the RBI Governor said that the RBI has implemented the full liberalization of bank branching, with some safeguards to encourage inclusion. Cement stocks rose on hopes construction activity will pick up as monsoon season draws to a close.
The S&P BSE Sensex lost 382.93 points or 1.85% to settle at 20,263.71, its lowest closing level since 18 September 2013. The index slumped 595.21 points at the day's low of 20,051.43 in mid-morning trade. The index rose 31.35 points at the day's high of 20,677.99 in early trade.
The CNX Nifty shed 103.45 points or 1.69% to 6,012.10, its lowest closing level since 18 September 2013. The index hit a low of 5,932.85 and a high of 6,130.95 in intraday trade
The BSE Mid-Cap index fell 0.83% and the BSE Small-Cap index declined 1.01%. Both these indices outperformed the Sensex.
The total turnover on BSE amounted to Rs 2610 crore, lower than Rs 2848.72 crore on Thursday, 19 September 2013.
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The market breadth, indicating the overall health of the market, was negative. On BSE, 1,399 shares fell and 937 shares rose. A total of 116 shares were unchanged.
Among the 30-share Sensex pack, 26 stocks fell and rest of them rose. L&T (down 4.63%), Sesa Goa (down 3.93%) and Hindustan Unilever (down 3.8%), edged lower.
Ranbaxy Laboratories dropped 4.86% after the company said after market hours on Thursday, 19 September 2013, that Ranbaxy Laboratories Inc. (RLI), a wholly owned subsidiary of Ranbaxy Laboratories, has received a Paragraph IV Certification Notice of filing from Watson Laboratories Inc. of an Abbreviated New Drug Application (ANDA) to the US Food and Drug Administration (FDA) for a generic version of Absorica (isotretinoin capsules), a product that is licensed from Cipher Pharmaceuticals Inc. (Cipher) of Mississauga, Ontario.
RLI and Cipher intend to vigorously defend Absorica's intellectual property rights and pursue all available legal and regulatory pathways in defense of the product, RLI said in a statement. Absorica is currently protected by two issued patents listed in the FDA's Approved Drug Products List (Orange Book), which expire in September 2021. RLI shall take appropriate actions in response to the Paragraph IV notice letter, and FDA approval of the ANDA shall then be governed by the Hatch-Waxman Act, RLI said. Absorica was approved by the FDA in May 2012, and granted a three-year market exclusivity period, which expires in May 2015.
Jaiprakash Associates tumbled 5.31% on reports the deal between Jaypee Cement and UltraTech Cement for the former's plant in Gujarat has run into legal trouble. According to reports, the Gujarat High Court on Thursday, 19 September 2013, ordered the deal involving transfer of a cement plant in the Kutch from Jaypee Cement to UltraTech Cement would be subject to the outcome of a public interest litigation (PIL) filed by local villagers of Abdasa taluka in the region.
A division bench of Chief Justice Bhaskar Bhattacharya and judge J B Pardiwala has issued notices to the two companies and the Gujarat government. The next hearing is on 10 October 2013.
Reports added that the villagers in their suit have asked Jaypee to resolve the problems of encroachment and pollution before selling the unit. The suit was filed by Kharai Juth gram panchayat, where Jaypee's unit is located in the Abdasa taluka of Kutch. The PIL alleges Jaypee has encroached upon grazing land, water bodies and public roads.
The suit has asked the court to intervene to get the land freed and check pollution, caused mainly by mining and dumping of alkali dust. The conflict began when Jaypee laid off local labourers. In the suit, villagers have not only complained about encroachment and pollution but also raised questions on the transfer of the lease land, reports added.
On 11 September 2013, Jaiprakash Associates announced that its wholly-owned subsidiary, Jaypee Cement Corporation (JCCL), reached an agreement to sell its 4.8 million tonnes per annum (MTPA) Gujarat Cement Plant to UltraTech Cement for an enterprise value of Rs 3800 crore, besides the actual net working capital. The Gujarat Cement Project consists of an integrated cement plant at Kutch and a 2.4 MTPA cement grinding unit at Wanakbori.
NTPC rose 0.51%. Giving a boost to the country's energy generation programme, Prime Minister Dr Manmohan Singh on Thursday dedicated NTPC's Rajiv Gandhi Sipat Super Thermal Power Station in Chhattisgarh to the nation. Dr Singh also laid the foundation stone of the Lara Super Thermal Power Project situated in Chhattisgarh's Raigarh district through remote.
Built at an estimated cost of Rs 13000 crore, NTPC has for the first time used the super critical technology in the Sipat plant. The Ministry of Power is now taking steps to encourage indigenous manufacturing of super critical technology. This is being done by inviting bulk tendering for manufacture of supercritical units. The 800 MW units of Lara thermal plant will be set up with the help of this process. Dr Singh said that in the 13th Plan, thermal plants based on only super critical technologies will be set up.
The Prime Minister disclosed that Advanced Ultra Super Critical Technology is now being developed in the country. He lauded the efforts of NTPC, Bhel and Indira Gandhi Centre for Nuclear Research for working together to develop this technology.
In his welcome address, the Minister of State for Power Shri Jyotiraditya Scindia said that power is central to the growth of any country and capacity addition is doing better year after year in the country. He said that new capacity generation in the year 2012-13 was 23,000 MW which is a record. Praising the work done by the National Thermal Power Cooperation (NTPC) Shri Scindia said that it is not only a Maharatna in the country but also in the world. The minister further added that Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGVY) under the leadership of the Prime Minister is a visionary plan which will bring light to every village and every household in the country.
Sri Scindia also stated that in the coming years Chhattisgarh will become the country's electricity hub as the Government is planning to make investment of Rs 62,000 crore in the power sector in the state in various projects of generation, transmission etc.
IT stocks were mixed after the rupee dropped 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. HCL Technologies advanced 2.71%.
Wipro rose 0.83%. Wipro becomes a part of the 50-unit CNX Nifty with effect from 27 September 2013. The IT major replaces Reliance Infrastructure in Nifty.
TCS fell 0.53%. Infosys shed 0.79%.
Tech Mahindra rose 0.48% after the company announced its entry into the higher education sector with the inauguration of a premier engineering institution named Mahindra Ecole Centrale. The announcement was made during trading hours today, 20 September 2013.
Mahindra Ecole Centrale (MEC) is the maiden venture of Tech Mahindra's 100% subsidiary Mahindra Educational institutions. Tech Mahindra said that its new premier engineering institute will be in collaboration with Ecole Centrale Paris, one of the oldest and most prestigious engineering institutions in France, and Jawaharlal Nehru Technological University (JNTU) Hyderabad, a premier institution with academic and research oriented courses.
Vineet Nayyar, Executive Vice Chairman, Tech Mahindra said, "It is a proud moment for us to have launched Mahindra Ecole Centrale today. Tech Mahindra enjoys a leadership position and operates in various industry segments. We recognize the critical need to transform engineering talent into business leadership, in a globalized world. Mahindra Ecole Centrale will provide apprenticeship with collaboration from the industry, focus on humanities, international exposure and allied education to develop a 'whole-brain-approach' to business."
Tata Steel lost 3.22%. The company after market hours on Thursday, 19 September 2013, announced a new leadership structure and a series of executive appointments, as part of its drive to accomplish its strategic business objectives. The board of Tata Steel has appointed Mr. T V Narendran as MD Designate, India and South East Asia and has inducted him as Additional Director on the Board. On reaching superannuation on 31 October 2013, Mr. H M Nerurkar, MD Tata Steel India and South East Asia will step down from the Board of Tata Steel and will be succeeded by Mr. T V Narendran from 1 November 2013. Mr. Narendran is currently VP (Safety & Flat Products) Tata Steel.
The board has also appointed Mr. Koushik Chatterjee, ED and Group CFO as the Group Executive Director (Finance and Corporate). In addition to maintaining responsibility for the company's finance function, Mr. Chatterjee will be responsible for the Tata Steel Group Corporate functions including Legal and Regulatory Affairs, Corporate Communications, Strategic Procurement, Information Systems, Group Investments, Global Mining Projects and Assurance.
The Board has put in place appropriate governance process to ensure a smooth transition of leadership. With effect from 1 November 2013, Dr Karl Koehler, MD & CEO, Tata Steel Europe, Mr. TV Narendran, MD Tata Steel India and South East Asia, and Mr. Koushik Chatterjee Group, Executive Director (Finance and Corporate), will report to the Chairman and the Board of Tata Steel. The new leadership team will be responsible for defining the overall direction and strategy for Tata Steel across both its emerging and developed markets.
Index heavyweight and cigarette major ITC rose 0.48% to Rs 357.10. The stock hit high of Rs 358.60 and low of Rs 346.50.
GAIL (India) rose 3.63%. The stock was the biggest gainer from the Sensex pack.
Coal India gained 0.87%, with the stock reversing intraday losses.
Interest rate sensitive realty stocks dropped after the Reserve Bank of India (RBI) increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 7.5% from 7.25% with immediate effect after mid-quarter monetary policy review today, 20 September 2013. Purchases of both residential and commercial property are largely driven by finance. HDIL (down 8.47%), Unitech (down 6.25%), D B Realty (down 3.71%) and DLF (down 11.55%), declined.
Interest rate sensitive auto stocks declined after the Reserve Bank of India (RBI) increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 7.5% from 7.25% with immediate effect after mid-quarter monetary policy review today, 20 September 2013. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.
Maruti Suzuki India (down 1.67%), Hero MotoCorp (down 3.03%) and Bajaj Auto (down 2.07%), declined.
Tata Motors fell 1.89% to Rs 342. The stock reversed direction after hitting record high of Rs 354.90 in intraday trade. The stock hit low of Rs 333 in intraday trade.
M&M rose 0.66%, with the stock reversing intraday losses.
Bank stocks trimmed steep intraday lows after Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, said in a statement that the calibrated withdrawal of the exceptional measures that the RBI had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market will provide a boost to growth, reduce the financing distortions that are emerging in the market and reduce the strain on corporate and bank balance sheets. On net, the RBI's latest measures will reduce the cost of bank financing substantially while allowing the RBI to take an appropriately precautionary stance on inflation, he said. "Over the next few weeks, together with the government, we will take a close look at corporate distress and bank NPAs to see how we can accelerate the process of resolution", Dr. Rajan said. The RBI Governor said that the RBI has implemented the full liberalization of bank branching, with some safeguards to encourage inclusion.
The minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said after a monetary policy review. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.
State Bank of India lost 3.44% to Rs 1746.55, off the day's low of Rs 1,695. The state-run bank on Wednesday, 18 September 2013, said it has raised the base rate by 10 basis points (bps) to 9.8% per annum (pa) from 9.7% and the benchmark prime lending rate by 10 bps to 14.55% from 14.45% with effect from 19 September 2013. The bank has also raised interest rates for retail term deposits.
Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed 4.28% to 7.89%.
ICICI Bank fell 4.78% to Rs 987.30, off the day's low of Rs 960.90.
HDFC Bank declined 3.63% to Rs 659.05, off the day's low of Rs 631.50.
Shares of private sector bank Yes Bank dropped 7.9% after jumping by a staggering 22.54% on Thursday. The bank early this week said it has successfully closed equivalent to $255 million by way of dual currency, multi-tenor syndicated loan facility which will be utilized for general corporate purposes and trade finance. The facility has a maturity of 1 and 2 years with majority commitments coming in the 2 year tenure bucket. The loan has been widely distributed with commitments from 11 banks representing 8 countries across US, Europe, Middle East and Australia, Yes Bank said.
The recent RBI guidelines on offering swap facility to banks for the foreign currency borrowings at 100 basis points below the market rate will further make the landed rupee cost of these funds extremely competitive vis-vis rupee funds of equivalent maturity, Yes Bank said early this week.
Shares of Dena Bank fell 7.59%. Vijaya Bank declined 5.35%. The National Stock Exchange said it will exclude Dena Bank and Vijaya Bank from the futures and options (F&O) segment. NSE said F&O contracts for new expiry months in Dena Bank and Vijaya Bank will not be issued on expiry of existing contract months. However, the existing unexpired contracts of expiry months September 2013, October 2013 and November 2013 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months. Accordingly, no contracts shall be available for trading in the above mentioned securities with effect from 29 November 2013.
Cement stocks rose on hopes construction activity will pick up as monsoon season draws to a close. Ambuja Cement (up 3.12%), ACC (up 2.13%) and UltraTech Cement (up 4.5%), gained.
Foreign funds made heavy purchases of Indian stocks on Thursday, 19 September 2013, when Indian stocks rallied mirroring gains in world stocks after the US Federal Reserve after a monetary policy review on Wednesday, 18 September 2013, decided to maintain stimulus to the US economy through monthly bond purchases of $85 billion. Foreign institutional investors (FIIs) bought shares worth a net Rs 3561.10 crore from the secondary equity markets on 19 September 2013, as per data from Securities & Exchange Board of India.
The RBI said after mid-quarter monetary policy review that WPI inflation which had eased in Q1 June 2013, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. The negative output gap will exercise downward pressure on inflation, and the process will be aided as supply side constraints, especially relating to food and infrastructure, ease. However, the current assessment is that in the absence of an appropriate policy response, WPI inflation will be higher than initially projected over the rest of the year, the RBI said. What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence, the RBI said. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency, the central bank said in a statement.
As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap, the RBI said. The need to anchor inflation and inflation expectations has to be set against the fragile state of the industrial sector and urban demand, the RBI said. Keeping all this in view, bringing down inflation to more tolerable levels warrants raising repo rate under the liquidity adjustment facility (LAF) by 25 basis points immediately, the RBI said. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.
The RBI has also simultaneously decided to start unwinding of the exceptional measures it had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market. As a first step, the RBI has decided to reduce the marginal standing facility (MSF) rate by 75 basis points with immediate effect. Furthermore, the minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said. Further actions need not be announced only on policy dates, the RBI said. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said.
The Reserve Bank of India said it will closely and continuously monitor the evolving growth-inflation dynamics with a readiness to act pre-emptively, as necessary. The RBI said that policy stance and measures set out in this review begins the process of cautious unwinding of the exceptional measures, which will restore normalcy to financial flows. They are also intended to address inflationary pressures so as to provide a stable nominal anchor for the economy, thereby mitigating exchange market pressures and creating a conducive environment for the revitalisation of sustainable growth, the RBI said.
Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, said in a statement that the calibrated withdrawal of the exceptional measures that the RBI had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market will provide a boost to growth, reduce the financing distortions that are emerging in the market and reduce the strain on corporate and bank balance sheets. Dr. Rajan made it a point that the MFS rate is the effective policy rate today and this has been cut steeply. He said that easing the exceptional liquidity measures was warranted given that the external environment has improved and given that the Government and the RBI have used the time since the measures were put in place to narrow the current account deficit and to ease its financing. The RBI has also announced an intention to return to normal monetary operations where the repo rate will return to being the effective policy rate and liquidity conditions need not be as tight as they currently are, Dr. Rajan said adding that the difference between the MSF and repo rate will be brought down to 100 basis points. Once the repo rate becomes the effective policy rate, it should be consistent with inflationary conditions in the economy, Dr. Rajan said. On net, the RBI's latest measures will reduce the cost of bank financing substantially while allowing the RBI to take an appropriately precautionary stance on inflation, he said.
"Over the next few weeks, together with the government, we will take a close look at corporate distress and bank NPAs to see how we can accelerate the process of resolution", Dr. Rajan said.
The RBI Governor said that the RBI has implemented the full liberalization of bank branching, with some safeguards to encourage inclusion.
Bond prices fell sharply after the RBI's surprise decision to raise repo rate. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.5777%, sharply higher than its close of 8.1926% on Thursday, 19 September 2013. Bond yield and bond prices are inversely related.
In the foreign exchange market, the rupee fell against the dollar in choppy trade. The partially convertible rupee was hovering at 62.27, weaker than its close of 61.77/78 on Thursday, 19 September 2013. The rupee had surged on Thursday boosted by the US Federal Reserve's surprise decision to keep its $85-billion-a-month in bond purchases intact.
Fitch Ratings on Thursday, 19 September 2013, sharply lowered its forecast on India's GDP growth this fiscal year to 4.8% from its forecast of 5.7% made in June. At this rate, growth will be slower than last fiscal year's decade-low pace of 5%. Just a year ago, the ratings firm had predicted India's gross domestic product to grow 7% in the year ending March 2014. The steep cut underlines "the severity of the growth shock" that India is facing, Fitch said in a report on the global economic outlook released late on Thursday. Fitch also cut its forecast on India's growth next fiscal year to 5.8% from its June projection of 6.5%. Fitch has a BBB-minus rating on India, which places the country's sovereign debt at the lowest investment-grade level. Fitch and another global rating agency Moody's Investor Service have a "stable" outlook on their ratings on India, which means they don't see any immediate scope for a rating upgrade or downgrade. The latest Fitch report didn't say whether it is considering any rating action.
European stock markets edged higher in choppy trade on Friday, 20 September 2013, with the indices extending multiyear highs reached the prior day when investors celebrated the US Federal Reserve's decision to keep its bond purchases intact. Key benchmark indices in France and Germany were up 0.07% to 0.09%. UK's FTSE 100 fell 0.05%. However, investors in Europe were wary of placing any big positions ahead of the German federal election on Sunday, 22 September 2013.
Asian stocks edged lower on Friday, 20 September 2013, after their strong gains in the previous session. Key benchmark indices in Japan, Indonesia and Singapore were off 0.16% to 1.86%. Stock markets in Mainland China, Hong Kong, Taiwan and South Korea were closed for a holiday. Asian stocks had surged on Thursday, 19 September 2013, after the Federal Reserve unexpectedly refrained from reducing stimulus measures after a monetary policy review on Wednesday, 18 September 2013, saying it wants more evidence of an economic recovery before paring its $85 billion-a-month in bond purchases.
Trading in US index futures indicated a flat opening of US stocks on Friday, 20 September 2013. US stocks on Thursday mostly fell, with benchmark indexes retreating from record highs that came with the Federal Reserve's unexpected decision not to begin cutting stimulus.
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