Key benchmark indices languished in negative zone in mid-morning trade. At 11:15 IST, the barometer index, the S&P BSE Sensex was down 223.16 points or 0.87% at 25,550.45. The Nifty 50 index was currently down 65.65 points or 0.83% at 7,825.10. Weakness in global stocks weighed on the domestic bourses. Prospects of higher interest rates in the United States pulled global markets lower after the latest data showed that US consumer prices rose in April at their fastest pace in three years. Additionally, hawkish comments from US Federal Reserve officials yesterday, 17 May 2016, increased expectations that the US central bank will pick up the pace of rate rises during the current calendar year.
Investors in emerging markets, including India are worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies.
The Sensex dropped 267.50 points or 1.03% at the day's low of 25,506.11 in morning trade, its lowest level since 16 May 2016. The barometer index fell 102.13 points or 0.39% at the day's high of 25,671.48 in morning trade. The Nifty lost 79.25 points or 1% at the day's low of 7,811.50 in morning trade, its lowest level since 16 May 2016. The index fell 38.25 points or 0.48% at the day's high of 7,852.50 in morning trade.
In overseas markets, Chinese stocks led decline in Asian stocks after a top Chinese official made no mention of a stock trading link between Hong Kong and Shenzhen. In mainland China, the Shanghai Composite index was currently down 1.72%. In Hong Kong, the Hang Seng index was currently down 1.54%. US stocks dropped yesterday, 17 May 2016, after Federal Reserve officials implied that interest rates could be raised as early as next month. Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams, both, yesterday, 17 May 2016, said the Fed's decision on whether to raise rates at the June 14-15 meeting hinges on the data. Lockhart said that June certainly could be a meeting at which action could be taken. Dallas Fed President Robert Kaplan, seen as a hawk, said he will push for an interest rate hike in June or July.
The consumer-price index increased a seasonally adjusted 0.4% in April from the prior month after rising 0.1% in March. That was the largest one-month increase since February 2013. A measure of underlying price pressures, which excludes the often-volatile categories of food and energy, rose 0.2% last month after ticking up 0.1% in March. Core prices were up 2.1% from a year earlier, a fifth consecutive month of annual growth above 2%the longest such streak in four years.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,159 shares fell and 925 shares rose. A total of 114 shares were unchanged. The BSE Mid-Cap index was currently off 0.36%. The fall in this index was lower than Sensex's decline in percentage terms. The BSE Small-Cap index was currently up 0.01%, outperforming the Sensex.
Stocks of private sector bank declined. HDFC Bank (down 1.55%), Federal Bank (down 0.79%), Kotak Mahindra Bank (down 0.85%), ICICI Bank (down 1.24%) and Yes Bank (down 0.23%) declined.
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Axis Bank fell 1.29%. The bank has kept its lending rates based on marginal cost of funds unchanged effective from 18 May 2016. The bank's Marginal Cost of Funds based Lending Rate (MCLR) for overnight loans will be 8.95%, the rate for one month will be 9.05% and for three months it will be 9.25%. The MCLR on 6-month loans will be 9.3% and for one-year loans the rate will be 9.35%, the bank said. MCLR on two-year loans will be 9.45% and for three-year loans the rate will be 9.5%. The announcement was made after market hours yesterday, 17 May 2016.
All rupee loans sanctioned and credit limits renewed with effect from 1 April 2016 are priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which is the internal benchmark of the concerned bank. Actual lending rates are determined by adding the components of spread to the MCLR.
IndusInd Bank fell 1.23%. IndusInd Bank and Honda Motorcycle & Scooter India today, 18 May 2016, signed a Memorandum of Understanding (MoU) with IndusInd Bank whereby the latter will offer retail finance at an attractive rate of interest for Honda's two wheeler models. The announcement was made during market hours today, 18 May 2016.
PSU bank stocks were mixed. Union Bank of India (up 0.83%), IDBI Bank (up 0.62%), Canara Bank (up 0.77%) rose. Bank of Baroda (down 0.09%) and Bank of India (down 0.06%) fell.
Reserve Bank of India (RBI) Deputy Governor R. Gandhi was quoted as saying yesterday, 17 May 2016, that the RBI will continue reviewing the asset quality at commercial lenders this financial year as part of a continuous process aimed at avoiding an increase in levels of distressed debt. Reviewing asset quality is a permanent process of supervisory action, he said. As part of an asset quality review (AQR) of the banking sector, the RBI has directed lenders to make additional provisions on certain loans in Q3 December 2015 and Q4 March 2016. The purpose of this exercise is to have cleaner balance sheet of the lenders.
State Bank of India (SBI) after the state-run bank said it is considering merger of five associate banks with itself. The stock was up 0.96% at Rs 178.75. The stock hit a high of Rs 179.25 and a low of Rs 173.65 so far during the day. State Bank of Bikaner and Jaipur slipped 0.18%. State Bank of Mysore jumped 8.04%. State Bank of Travancore advanced 3.92%. SBI after trading hours yesterday, 17 May 2016, announced that it is seeking in principle sanction of the Government of India (GoI) to enter into negotiation with its 5 subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore to acquire their businesses including assets and liabilities. The decision is purely exploratory at this stage and there is no certainty in relation to SBI completing the acquisitions, SBI said. SBI's board of directors will take a final call after evaluating all the relevant considerations. SBI also said that it is considering acquisition of Bharatiya Mahila Bank.
Punjab National Bank rose 1.63% ahead of its Q4 March 2016 results today, 18 May 2016.
United Bank of India fell 3.91% after the bank reported net loss of Rs 413.04 crore in Q4 March 2016 compared with net profit of Rs 104.52 crore in Q4 March 2015. The result was announced after market hours yesterday, 17 May 2016.
The bank's gross non-performing assets (NPAs) stood at Rs 9471.01 crore as on 31 March 2016 as against Rs 6721.53 crore as on 31 December 2015 and Rs 6552.91 crore as on 31 March 2015. The ratio of gross NPAs to gross advances stood at 13.26% as on 31 March 2016 as against 9.57% as on 31 December 2015 and 9.49% as on 31 March 2015. The ratio of net NPAs to net advances stood at 9.04% as on 31 March 2016 as against 5.91% as on 31 December 2015 and 6.22% as on 31 March 2015. The increase in slippages on sequential basis is due to economic slowdown and also as a part of Assets Quality Review (AQR) as advised by the Reserve Bank of India (RBI). The central bank has advised banks to revise asset classification/provision in respect of certain advances over two quarters ending Q4 March 2016.
The bank's provisions and contingencies rose 73.6% to Rs 1173.43 crore in Q4 March 2016 over Q4 March 2015. The provision coverage ratio stood at 53.36% as on 31 March 2016.
United Bank of India announced that it has allotted 23.24 crore equity shares of Rs 10 each for cash at an issue price of Rs 20.65 per equity share to Government of India on preferential basis against capital infusion of Rs 480 crore.
Telecom stocks fell. Bharti Airtel (down 1.03%), Idea Cellular (down 0.95%), MTNL (down 0.56%), and Reliance Communications (down 0.68%) declined. Tata Teleservices (Maharashtra) was currently trading unchanged at Rs 6.66.
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