Market remains weak

Weakness continued on the bourses in mid-morning trade. At 11:18 IST, the barometer index, the S&P BSE Sensex, was down 260.17 points or 1.01% at 25,530.05. The Nifty 50 index was currently down 72.45 points or 0.92% at 7,827.95. The trigger for the losses was data showing acceleration in consumer price inflation April 2016, which sparked concerns that the Reserve Bank of India (RBI) would hold off on cutting rates at its policy review next month. Weakness in Asian stocks also weighed on the domestic bourses.

The Sensex dropped 276.68 points or 1.07% at the day's low of 25,513.54 in mid-morning trade, its lowest level since 11 May 2016. The barometer index lost 46.53 points or 0.18% at the day's high of 25,743.69 at the onset of the trading session. The Nifty shed 81.30 points or 1.02% at the day's low of 7,819.10 in mid-morning trade, its lowest level since 11 May 2016. The index fell 19.40 points or 0.24% at the day's high of 7,881 at the onset of the trading session.

In overseas stock markets, Asian stocks dropped as decline in crude oil prices sapped risk appetite. Most US stocks fell yesterday, 12 May 2016, after poor sales numbers from the retailers and after the latest data showed an unexpected spike in weekly jobless claims last week.

Closer home, the market breadth indicating the overall health of the market was weak. On BSE, 1,227 shares fell and 800 shares rose. A total of 149 shares were unchanged. The BSE Mid-Cap index was currently down 0.01%. The BSE Small-Cap index was currently down 0.04%. The fall in both these indices was lower than the Sensex's decline in percentage terms.

Bank stocks declined after data showing acceleration in consumer price inflation April 2016 sparked concerns that the Reserve Bank of India (RBI) would hold off on cutting rates at its policy review next month. Among public sector banks, State Bank of India (SBI) (down 1.27%), and Union Bank of India (down 0.63%), edged lower.

Punjab National Bank dropped 1.01% after MSCI said the scrip will be removed from MSCI India Domestic Index from 31 May 2016. The scrip will be added in MSCI India Domestic Small Cap Index from 31 May 2016.

Canara Bank (down 0.64%) and Bank of India (down 0.34%) declined. MSCI said Canara Bank and Bank of India will be added in MSCI India Domestic Small Cap Index from 31 May 2016.

Among private sector banks, Axis Bank (down 0.25%), HDFC Bank (down 0.65%), ICICI Bank (down 1.81%), Kotak Mahindra Bank (down 0.7%), and Yes Bank (down 0.47%) dropped. IndusInd Bank (up 0.1%) and Federal Bank (up 1.56%) gained.

The Reserve Bank of India (RBI) has allowed foreign banks having branch presence in India to acquire up to 10% in a private sector bank as the central bank announced changes in the guidelines on ownership/shareholding in private sector banks in India yesterday, 12 May 2016. The RBI said that in case of exceptional circumstances, such as, restructuring of problem/weak banks or in the interest of consolidation in the banking sector, the RBI may permit a foreign bank to own more than 10% in a private sector bank. The ownership of non-regulated and non-diversified financial institutions in private sector banks will be capped at 15%. In the case of regulated, well diversified, listed entities from the financial sector and shareholding by supranational institutions or public sector undertaking or the Government of India, a uniform limit upto 40% of the paid-up capital of the private sector bank has been permitted for both promoters/promoter group and non-promoters.

The RBI said that it has revised the guidelines on ownership in private sector banks against the background of the guidelines on licensing of new banks in the private sector issued in February 2013, the need for additional capital for the banks consequent to the implementation of Basel III capital regulations and to rationalise the ownership limits.

Telecom stocks declined. Reliance Communications (down 1.28%), Bharti Airtel (down 2.01%), and Tata Teleservices (Maharashtra) (down 0.89%) declined. Idea Cellular rose 1.16%.

Hero MotoCorp declined 0.95%. The company during market hours today, 13 May 2016, announced that it has forayed into the world of motorcycle rally racing by forming a strategic partnership with Speedbrain GmbH, the German off-road racing specialist. The newly formed 'Hero MotoSports Team Rally' will make its debut at the Merzouga Rally in Morocco later this month.

On the macro front, the latest data showing acceleration in consumer price inflation April 2016 has triggered speculation that the Reserve Bank of India (RBI) would hold off on cutting rates at its policy review next month. Inflation based on consumer price index (CPI) surged to 5.39% in April 2016 from six months low of 4.8% recorded in March 2016. The core CPI inflation rose to 4.76% in April 2016 from 4.54% in March 2016.

Another data showed that the industrial production growth moderated to 0.1% in March 2016 over March 2015 compared with 2% growth recorded in February 2016. The electricity generation surged at double-digit pace of 11.3% in March 2016. However, the mining output declined 0.1% and manufacturing production dipped 1.2% contributing to the overall slower growth in industrial output in March 2016. Both, CPI and industrial production data hit the market after trading hours yesterday, 12 May 2016.

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