Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade. The barometer index, the S&P BSE Sensex, was down 95.18 points or 0.4%, off close to 190 points from the day's high and up close to 5 points from the day's low. The market breadth, indicating the overall health of the market, was positive.
PSU bank stocks rose as a committee appointed by the Reserve Bank of India (RBI) proposed on Tuesday the government should cut its stakes in state banks to below 50% and establish "fully empowered" bank boards. Bank of Baroda extended Tuesday's gains triggered by good Q4 results. Realty stocks edged higher on renewed buying.
A bout of volatility was witnessed as key benchmark indices slipped into the red after opening higher. Intraday volatility continued as key benchmark indices slipped into the red once again after moving into positive zone from negative zone for a brief period in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade.
Foreign institutional investors (FIIs) bought shares worth a massive Rs 2026.23 crore on Tuesday, 13 May 2014, as per provisional data from the stock exchanges.
At 12:20 IST, the S&P BSE Sensex was down 95.18 points or 0.4% to 23,776.05. The index shed 102.71 points at the day's low of 23,768.52 in early afternoon trade. The index rose 93.44 points at the day's high of 23,964.67 in morning trade.
The CNX Nifty was down 21.90 points or 0.31% to 7,086.85. The index hit a low of 7,080.90 in intraday trade. The index hit a high of 7,142.25 in intraday trade.
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The BSE Mid-Cap index was up 52.89 points or 0..69% at 7,671.51. The BSE Small-Cap index was up 69.40 points or 0.89% at 7,832.32. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,359 shares gained and 1,220 shares fell. A total of 125 shares were unchanged.
Among the 30-share Sensex pack, 17 stocks declined and rest of them rose. Mahindra & Mahindra (M&M) (down 2.87%), Bharat Heavy Electricals (Bhel) (down 2.67%) and Dr. Reddy's Laboratories (down 2.62%) edged lower from the Sensex pack.
PSU bank stocks rose as a committee appointed by the Reserve Bank of India (RBI) proposed on Tuesday the government should cut its stakes in state banks to below 50% and establish "fully empowered" bank boards. State Bank of India (SBI) (up 0.57%), Canara Bank (up 4.09%), Punjab National Bank (up 2.41%), Union Bank of India (up 2.33%), and Bank of India (up 2.3%) gained.
The Committee to Review Governance of Boards of Banks in India is constituted by the RBI Governor on 20 January 2014 and is headed by ex-chairman of Axis Bank PJ Nayak. Nayak panel recommendations on governance of banks' boards was to remove external constraints on state-run banks, upgrade quality of board deliberation of state-run banks, create bank investment company to hold stakes in state-run banks, constitute bank boards bureau for selection of top management, uniform licensing regime desirable, allow profit-based commissions for non-executive directors and maximum age of whole-time directors should be 65.
The committee proposed that the Centre's holding in PSU banks be brought down to below 50%. The move is expected to help the lenders avoid constraints imposed by external vigilance by agencies such as the Central Vigilance Commission and the Right to Information Act, 2005.
The trade-off is worth grasping, as more competitive public sector banks will enhance financial returns to the government with no effective dilution of control, it said. The panel has also recommended the adoption of the model followed in countries such as Singapore where there are intermediate investment companies that hold equity in banks.
This is the model India should aspire to, and vigilance is needed to ensure that such a company is not just a bureaucratic layer in an otherwise unchanged style of the government's control of its banks, the committee said.
It added that the government should empower and also make the board of the investment company autonomous.
The committee suggested that the PSU banks should be brought under the ambit of the Companies Act.
The Expert Committee examined the working of banks' boards including whether adequate time is devoted to issues of strategy, growth, governance and risk management; to review central bank regulatory guidelines on bank ownership, ownership concentration and representation in the board; to analyse the representation on banks' boards to see whether the boards have the appropriate mix of capabilities and the necessary independence to govern the institution, and to investigate possible conflicts of interest in board representation, including among owner representatives and regulators.
Bank of Baroda rose 4.4% to Rs 916.50, with the stock extending Tuesday's gains triggered by good Q4 results. The stock 52-week high of Rs 919.60 in intraday trade. The bank's net profit rose 12.48% to Rs 1157.27 crore on 13.17% rise in total income to Rs 11614.85 crore in Q4 March 2014 over Q4 March 2013. The result was announced during market hours on Tuesday, 13 May 2014.
Bank of Baroda's (BoB) net profit rose 1.35% to Rs 4541.08 crore on 11.78% increase in total income to Rs 43402.45 crore in the year ended March 2014 over the year ended March 2013.
BoB's ratio of net non-performing assets (NPAs) to net advances stood at 1.52% as on 31 March 2014, compared with 1.88% as on 31 December 2013 and 1.28% as on 31 March 2013.
The bank's ratio of gross NPAs to gross advances stood at 2.94% as on 31 March 2014, compared with 3.32% as on 31 December 2013 and 2.40% as on 31 March 2013.
Among private sector banks, Axis Bank (down 0.2%) and ICICI Bank (down 0.43%) declined. Kotak Mahindra Bank shed 0.07% to Rs 860, with the stocks reversing direction after hitting a record high of Rs 884 in intraday trade.
HDFC Bank rose 0.1%. IndusInd Bank rose 0.39%.
Realty stocks edged higher. Housing Development and Infrastructure (up 6.02%), D B Realty (up 2.78%), DLF (up 2.27%), Sobha Developers (up 0.42%) and Unitech (up 4.91%) gained.
IL&FS Transportation Networks fell 2.4% after consolidated net profit dropped 34.2% to Rs 117.42 crore on 5.24% fall in total income from operations (net) to Rs 1829.31 crore in Q4 March 2014 over Q4 March 2013. The Q4 result was announced after market hours on Tuesday, 13 May 2014. IL&FS Transportation Networks (ITNL)'s consolidated net profit dropped 10.98% to Rs 463.05 crore on 0.87% fall in total income from operations (net) to Rs 6587.04 crore in Q4 March 2014 over Q4 March 2013. ITNL's Board of Directors at its meeting held on Tuesday, 13 May 2014, has recommended dividend of Rs 4 per share for the year ended 31 March 2014.
The next major trigger for the market is outcome of Lok Sabha elections. The counting of votes will take place on Friday, 16 May 2014, and the results are expected on the same day. Various exit polls on Monday, 12 May 2014, predicted that the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) would win a majority in the Lok Sabha elections which concluded on Monday, 12 May 2014. If exit polls prove correct, NDA's prime ministerial candidate Narendra Modi will become India's next Prime Minister. The term of the current Lok Sabha ends on 1 June and the new House has to be constituted by 31 May.
Modi is perceived as being more business-friendly and decisive by the business community. As chief minister for the fast-growing state of Gujarat, Modi has built a reputation for getting things done. While campaigning for the Lok Sabha elections, Modi has pledged to reinvigorate the country's manufacturing sector, create more jobs and overhaul the country's inadequate infrastructure. Investors are hoping that the BJP-led government will be better at getting things done and more business-friendly than the current Congress-party-led coalition government.
Investors are hoping that when the results of the Lok Sabha elections are out on Friday, 16 May 2014, a stable government which will complete its full term of five years in office comes to power. A party or a pre-poll alliance will need 272 MPs to form government at the Centre, which is a simple majority in 543-member Lok Sabha. Investors are expecting measures for revival of the economy, business-friendly policies and good governance from the new government that comes to power after the elections. Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis.
The BJP in its Lok Sabha polls manifesto has promised more business-friendly policies if the party comes to power after elections. The BJP has said that measures for the revival of the economy are its priority if the party comes to power after elections. India's GDP growth has slowed to a decade low of below 5%. The GDP grew 4.7% in Q3 December 2013.
The rate of inflation based on the wholesale price index is expected to remain at 5.7% in April 2014, at the same level it was in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government will unveil data on inflation based on the wholesale price index (WPI) for April 2014 at about 12:00 noon tomorrow, 15 May 2014.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.
Asian stocks rose on Wednesday, 14 May 2014, as US equity gauges held at record highs on Tuesday, 13 May 2014. Key benchmark indices in Indonesia, South Korea, Taiwan, Singapore and Hong Kong were up 0.65% to 1.12%. Key benchmark indices in China and Japan were off 0.1% to 0.14%.
China's central bank called on the nation's biggest lenders to accelerate the granting of mortgages, a sign that developers' price cuts and incentives alone won't boost a slumping housing market and economy. The People's Bank of China told 15 banks yesterday to improve efficiency of service, give timely approval and distribution of mortgages to qualified buyers. It also urged lenders to give priority to families buying their first homes and strengthen their monitoring of credit risks.
Trading in US index futures indicated that the Dow could gain 12 points at the opening bell on Wednesday, 14 May 2014. US stocks ended mostly higher Tuesday, with the Dow Jones Industrial Average and the S&P 500 index ending at record highs.
US retail sales increased 0.1% in April following a revised 1.5% jump in March that marked the biggest gain in four years, Commerce Department figures showed in Washington.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.
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