PSU Bank stocks edge higher

Key benchmark indices continued to trade in a narrow range near the flat line in mid-afternoon trade. The barometer index, the S&P BSE Sensex, was unchanged at 20,376.23, up close to 40 points from the day's low and off close to 60 points from the day's high. The market breadth, indicating the overall health of the market, was positive.

PSU bank stocks gained. United Bank of India tumbled after poor Q3 earnings. Corporation Bank dropped on poor Q3 results.

The market edged higher in early trade. The 50-unit CNX Nifty hit highest level in over one-week. It reversed initial gains and hit fresh intraday low in morning trade. It swung between gains and losses in mid-morning trade. It was hovering around the flat line in early afternoon trade. Key benchmark indices were almost flat in afternoon trade. It continued to trade in a narrow range near the flat line in mid-afternoon trade.

Foreign institutional investors (FIIs) sold shares worth a net Rs 267.26 crore on Friday, 7 February 2014, as per provisional data from the stock exchanges.

At 14:29 IST, the S&P BSE Sensex was unchanged at 20,376.23. The index fell 40.41 points at the day's low of 20,336.15 in morning trade. The index rose 57.94 points at the day's high of 20,434.50 in early trade.

The CNX Nifty was flat at 6,063.50. The index hit a low of 6,051.30 in intraday trade. The index hit a high of 6,083.05 in intraday trade, its highest level since 31 January 2014.

The BSE Mid-Cap index was up 15.30 points or 0.34% at 6,352.18. The BSE Small-Cap index was up 22.45 points or 0.35% at 6,351.11. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,267 shares rose and 1,112 shares fell. A total of 142 shares were unchanged.

Among the 30-share Sensex pack, 16 stocks rose and rest fell. Hindustan Unilever (down 2.39%), TCS (down 2.01%), and Bharti Airtel (down 1.81%), edged lower from the Sensex pack.

Private bank stocks were mixed. ICICI Bank rose 0.15%. HDFC Bank (down 0.45%) and AXIS Bank (down 0.02%) declined.

PSU Bank stocks gained. State Bank of India, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank rose 0.02% to 0.92%.

Corporation Bank declined 0.58% on poor Q3 results. The company's net profit declined 58.2% to Rs 126.69 crore on 16.2% growth in total income to Rs 4947.34 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Friday, 7 February 2014.

Corporation Bank's provisions and contingencies jumped 103.5% to Rs 826.33 crore in Q3 December 2013 over Q3 December 2012. Provision Coverage ratio works out to 53.59% as on 31 December 2013.

The bank's ratio of gross non-performing assets (NPAs) to gross advances stood at 3.08% as on 31 December 2013 as against 3.17% as on 30 September 2013 and 2.18% as on 31 December 2012. The ratio of net NPAs to net advances stood at 2.15% as on 31 December 2013 as against 2.2% as on 30 September 2013 and 1.63% as on 31 December 2012.

Corporation Bank's Capital Adequacy Ratio (CAR) as per Basel III norms stood at 11.89% as on 31 December 2013 as against 10.55% as on 30 September 2013.

The RBI vide its circular dated 20 December 2013 has advised banks to create a Deferred Tax Liability (DTL) on outstanding amount in Special Reserve created under Section 36(1)(viii) of the Income Tax Act, 1961 as a matter of prudence. Accordingly, during Q3 December 2013, the bank has created a DTL of Rs 364.46 crore on Special Reserve outstanding as at 31 March 2013 by reducing the General Reserves, Corporation Bank said.

United Bank of India lost 5.77% after the bank reported a net loss of Rs 1238.08 crore in Q3 December 2013 as against net profit of Rs 42.20 crore in Q3 December 2012. Total income rose 14.9% to Rs 2986.80 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Friday, 7 February 2014.

The Reserve Bank of India (RBI) on Friday, 7 February 2014, said that as a countercyclical measure, banks may utilise up to 33% of countercyclical provisioning buffer/floating provisions held by them as on 31 March 2013 for making specific provisions for non-performing assets as per the policy approved by the bank's board of directors. RBI also said that the utilisation of countercyclical provisioning buffer/floating provisions under this measure may be over and above the utilisation of countercyclical provisioning buffer/floating provisions for the purpose of making accelerated/additional provisions as proposed in the RBI's press release dated 30 January 2014 on "Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy".

As per RBI's Discussion Paper on Introduction of Dynamic Loan Loss Provisioning Framework for Banks in India dated 30 March 2012, banks are required to build up 'Dynamic Provisioning Account' during good times and utilise the same during downturn. Under the proposed framework, banks are expected to either compute parameters such as probability of default, loss given default, etc. for different asset classes to arrive at long term average annual expected loss or use the standardised parameters prescribed by Reserve Bank of India towards computation of Dynamic Provisioning requirement. Dynamic loan loss provisioning framework is expected to be in place with improvement in the system, the RBI said. Meanwhile, banks should develop necessary capabilities to compute their long term average annual expected loss for different asset classes, for switching over to the dynamic provisioning framework, the central bank said.

In the foreign exchange market, the rupee reversed intraday gains against the dollar. The partially convertible rupee was hovering at 62.31, lower than its close of 62.28 on Friday, 7 February 2014.

The Union Cabinet on Friday, 7 February 2014 cleared the Bill for the creation of Telangana. The Bill will be introduced in the Parliament on 11 or 12 February 2014. The Bill will be presented in the Rajya Sabha in the present form and the government will move 32 amendments when it is taken up for consideration. The Bill will be tabled along with a summary of 30-odd pages on the proceedings in the Andhra Pradesh Assembly and Council, along with a number of amendments proposed by the State legislators.

The Indian economy is expected to continue to expand at a pace of less than 5% in the year ending 31 March 2014, according to a government forecast released after trading hours on Friday, 7 February 2014. In the latest official forecast for the fiscal year ending next month, the Ministry of Statistics & Programme Implementation projected a 4.9% expansion for 2013-14. The weak growth projection underscores the severity of the slowdown in the south Asian economy which grew close to 9% as recently as in the year ended 31 March 2011. The statistics ministry's estimates show that the manufacturing output is expected to contract 0.2% during the current fiscal year while mining output is expected to fall 1.9%. However, farm output growth is expected to be much better this year on the back of higher-than-usual rainfall. The ministry estimates a 4.6% expansion in farm output, compared with the 1.4% increase in the last fiscal year. Output of services, which contribute about 60% to India's GDP, is expected to grow 6.9% this year, almost the same as the 7% expansion last fiscal year.

On 31 January 2014, the statistics ministry revised down GDP growth for the previous fiscal year to 4.5%, from an earlier estimate of 5%.

Finance Minister P Chidambaram will present the Vote-on-Account or interim budget on 17 February 2014. The objective of a Vote-on-Account is to get Parliament's nod for expenditure to be incurred in the months prior to elections. The next full-fledged budget will be presented by the new government which comes to power after the Lok Sabha polls in April-May 2014.

The government will unveil data on inflation based on the combined consumer price index (CPI) for urban and rural India for the month of January 2014 on Wednesday, 12 February 2014. The CPI inflation slowed to 9.87% in December 2013, from 11.16% in November 2013.

The government will unveil data on inflation based on the wholesale price index (WPI) for the month of January 2014 on Friday, 14 February 2014. The WPI inflation eased to 6.16% in December 2013, from 7.52% in November 2013.

Data on industrial production for December 2013 will be out on Wednesday, 12 February 2014. Industrial output declined 2.1% in November 2013, recording decline for second consecutive month after 1.6% dip in October 2013.

The Reserve Bank of India next undertakes monetary policy review on 1 April 2014. Sighting elevated consumer price inflation, 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.

European stocks rose on Monday as optimism grew the Federal Reserve will delay a third cut in bond purchases. Key benchmark indices in France, Germany and UK rose 0.13% to 0.33%.

Asian stocks rose on Monday after US jobs data spurred the biggest two-day rally for US equities since October. Key benchmark indices in China, South Korea, Japan, and Taiwan rose 0.04% to 2.03%. Key benchmark indices in Indonesia, Hong Kong and Singapore fell 0.11% to 0.27%.

China's central bank signaled volatility in money-market interest rates will persist and borrowing costs will rise, underscoring the risk of defaults that could weigh on confidence and drag down growth.

Japan's current-account deficit widened to a record in December on soaring imports, adding to Prime Minister Shinzo Abe's challenges as he tries to drive a recovery in the world's third-biggest economy. The 638.6 billion yen ($6.2 billion) shortfall surpassed November's gap of 592.8 billion yen, the finance ministry said in Tokyo today.

Business activity across emerging markets expanded in January at the slowest pace in four months, dragged down by sluggish services sectors in the BRIC quartet of big developing countries, a survey showed on Monday. HSBC's composite emerging markets index of manufacturing and services purchasing managers' surveys slipped for the second month running to 51.4 in January. It stayed under the 2013 average of 51.7 and well below the score of 64.1 posted last January.

But the monthly index remained above the 50 threshold which marks the difference between expansion and contraction. Based on data from purchasing managers at about 8,000 firms in 17 countries, the survey showed signs of manufacturing and export revival in some countries but Chinese factory output fell below the 50 mark, Brazilian manufacturing growth slowed and output fell in Russia and Indonesia. Growth was stronger in India, Poland, Taiwan and Mexico. January services activity in the biggest emerging markets was at a six-month low. India and Brazil both posted declines, while growth rates in China and Russia were weak, HSBC said.

Trading in US index futures indicated that the Dow could fall 27 points at the opening bell on Monday, 10 February 2014. US stocks surged on Friday amid optimism economic growth is robust enough to weather stimulus cuts even as data showed weaker-than-forecast hiring.

Payrolls rose less than projected in January and the jobless rate unexpectedly dropped to the lowest level in more than five years, clouding the outlook for the US economy and Federal Reserve. The 113,000 gain in hiring fell short of the estimates and followed a 75,000 increase the prior month, Labor Department data showed in Washington. Unemployment declined to 6.6%, the least since October 2008, from 6.7% in December.

Federal Reserve chairman Janet Yellen takes center stage on Capitol Hill tomorrow, delivering her first semi-annual monetary testimony as markets weigh how mixed economic reports last week will affect the central bank's plan for reducing stimulus.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 18-19 March 2014. After a monetary policy review, the FOMC on 29 January 2014 announced it will reduce monthly bond purchases by another $10 billion to $65 billion. The Fed also signaled that it is likely to keep reducing bond purchases in the coming months, citing a pickup in US economic activity and improvement in the US labor market.

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