The market surged in mid-afternoon trade after the government clarified on tussle with the Reserve Bank of India and said that it respects and nurtures central bank's autonomy. At 14:21 IST, the barometer index, the S&P BSE Sensex, was up 343.12 points or 1.01% at 34,234.25. The Nifty 50 index was up 117.05 points or 1.15% at 10,315.45. Positive global cues also boosted sentiment.
Among secondary barometers, the BSE Mid-Cap index was up 1.17%. The BSE Small-Cap index was up 1.04%. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1428 shares rose and 992 shares fell. A total of 141 shares were unchanged.
Housing finance stocks rallied after PNB Housing Finance announced raising Rs 2450 crore through commercial papers. Dewan Housing Finance Corporation (up 7.86%), Indiabulls Housing Finance (up 7.55%), HDFC (up 5.12%), Can Fin Homes (up 4.34%), GIC Housing Finance (up 3.16%), GRUH Finance (up 2.64%) and LIC Housing Finance (up 0.07%), edged higher.
PNB Housing Finance was up 12.14%. The company announced during trading hours today, 31 October 2018, that it has successfully raised Rs 2450 crore through Commercial Papers (CP). This is in addition to Rs 1,775 crore raised earlier in October totalling to Rs 4,225 crore of CPs raised in October 2018. The CPs were placed with various mutual funds and banks.
Auto shares were mixed. Maruti Suzuki India (down 1.87%), Ashok Leyland (down 1.69%), Hero MotoCorp (down 1.69%), Bajaj Auto (down 1.06%) and Tata Motors (down 0.73%), edged lower. Mahindra & Mahindra (up 0.31%), TVS Motor Company (up 0.76%), Escorts (up 1.75%) and Eicher Motors (up 2.25%), edged higher.
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Meanwhile, the government has invoked never-before-used powers under the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.
Media reports suggested that Section 7 of the RBI Act empowers the government to consult and give instructions to the governor to act on certain issues that the government considers serious and in public interest. This Section had never been used in independent India till now, reports added.
The Ministry of Finance issued a clarification today, 31 October 2018, which said that the autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this. Both the Government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy. For the purpose, extensive consultations on several issues take place between the government and the RBI from time to time. This is equally true of all other regulators. Government of India has never made public the subject matter of those consultations. Only the final decisions taken are communicated. The Government, through these consultations, places its assessment on issues and suggests possible solutions. The Government will continue to do so, it added.
India's finance minister Arun Jaitley criticised the Reserve Bank of India (RBI) for failing to prevent lending excess in a speech on Tuesday, 30 October 2018. The central bank looked the other way when banks gave loans indiscriminately during 2008 to 2014, Jaitley reportedly said while speaking at an event in New Delhi. According to media reports, tensions between the finance ministry and the RBI have risen since the bank's deputy governor said in a speech on Friday that undermining a central bank's independence could be "potentially catastrophic", in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers.
Overseas, stocks in Europe rallied on Wednesday as investors took note of a rebound on Wall Street and digested further corporate earnings.
Most stocks in Asia rose on Wednesday. Chinese official manufacturing Purchasing Managers' Index (PMI) was 50.2. The official manufacturing PMI had been 50.8 in September. China's official non-manufacturing purchasing managers index dropped to 53.9 from September's 54.9, the National Bureau of Statistics said on Wednesday. A reading above 50 indicates expansion, while a reading below that signals contraction.
US stocks closed higher Tuesday as President Donald Trump signaled that the US is ready to reach a deal to ease trade tensions with China, giving the market some much-needed relief. Markets were also digesting a raft of quarterly corporate results with several big-name companies set to report earnings this week.
On the US data front, home-price gains are slowing, as the Case-Shiller 10-city composite index showed a 0.6% increase from last month's reading, or a 5.5% annual increase. The 20-city composite index rose a seasonally adjusted 0.1% and was 5.5% higher compared to its level a year ago, the lowest annual increase in nearly two years.
Consumer sentiment hit an 18-year high, according to the Conference Board's consumer confidence index, which rose to 137.9, from 135.3 in September.
The residential vacancy rate fell 0.4% points from a year earlier to 7.1%, according to the Census Bureau report, which also showed that the US homeownership rate was virtually unchanged at 64.4%.
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