Banking, telecom, auto stocks and index heavyweights Infosys and ITC led losses for key benchmark indices, with the barometer index, the S&P BSE Sensex, falling below the psychologically important 25,000 level. The Sensex fell 516.06 points or 2.03% to settle at 24,883.59. The Nifty fell 155.60 points or 2.01% to settle at 7,603.20. The weakness on the domestic bourses was a part of weakness in global stocks triggered by uncertainty regarding the quantum and timing of interest rate hikes in the United States. The Sensex hit its lowest closing level in almost three weeks. The Nifty hit one-week closing low. Barring the S&P BSE Consumer Durables index, all other sectoral indices on BSE registered losses.
Meanwhile, the Reserve Bank of India's (RBI) announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) after a monetary policy review came in line with market expectations.
Telecom stocks declined after media reports suggested that GSM operators body Cellular Operators Association of India (COAI) has said in a letter to Finance Minister Arun Jaitley that the Budget proposal to impose 15% service tax on the purchase of auctioned spectrum is likely to pose an additional tax burden of about Rs 27000 crore which will have to be passed on to consumers.
Interest rate sensitive banking and auto stocks edged lower as RBI's announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) came in line with market expectations. Index heavyweight and cigarette major ITC fell 1.34% at Rs 326.50, with the stock extending losses registered in previous trading session triggered by the company announcement of temporary closure of manufacturing operations at all its cigarette factories in India with effect from 1 April 2016.
The Sensex fell 516.06 points or 2.03% to settle at 24,883.59, its lowest closing level since 17 March 2016. The index fell 562.14 points or 2.21% at the day's low of 24,837.51. The index lost 27.21 points or 0.1% at the day's high of 25,372.44.
The Nifty 50 index fell 155.60 points or 2.01% to settle at 7,603.20, its lowest closing level since 29 March 2016. The index fell 170.15 points or 2.19% at the day's low of 7,588.65. The index lost 22.50 points or 0.28% at the day's high of 7,736.30.
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The market breadth indicating the overall health of the market was weak. On BSE, 1,630 shares fell and 884 shares rose. A total of 125 shares were unchanged. The BSE Mid-Cap index fell 1.47%. The BSE Small-Cap index fell 1.4%. The losses for both these indices were lower in percentage terms than those for the Sensex.
The total turnover on BSE amounted to Rs 2814 crore, higher than turnover of Rs 2060.35 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE Telecom index (down 3.71%), the S&P BSE Bankex (down 3.21%), the S&P BSE Industrials index (down 2.83%), the S&P BSE Auto index (down 2.82%), the S&P BSE Metal index (down 2.81%), the S&P BSE Capital Goods index (down 2.64%), the S&P BSE Realty index (down 2.59%), the S&P BSE Finance index (down 2.28%) and the S&P BSE Power index (down 2.1%), underperformed the Sensex. The S&P BSE Utilities index (down 1.94%), the S&P BSE Consumer Discretionary Goods & Services index (down 1.91%), the S&P BSE Basic Materials index (down 1.9%), the S&P BSE Teck index (down 1.71%), the S&P BSE IT index (down 1.28%), the S&P BSE FMCG index (down 1.19%), the S&P BSE Energy index (down 0.91%), the S&P BSE Healthcare index (down 0.91%), the S&P BSE Oil & Gas index (down 0.66%) and the S&P BSE Consumer Durables index (up 0.26%), outperformed the Sensex.
In overseas stock markets, European markets edged lower as oil price volatility continued to weigh on markets worldwide and investors digested a raft of new data from the euro zone. New data for Germany painted a gloomy picture. Industrial orders in the euro zone's largest economy fell in February as foreign demand weakened. In a speech at Frankfurt's Goethe University, International Monetary Fund (IMF) Managing Director Christine Lagarde called on the world's economies to boost growth, warning that risks to global growth are rising. The comments come after the IMF in a report released yesterday, 4 April 2016, said emerging markets, led by China, are increasingly posing a risk to stock markets in developed countries.
Trading in US stock index futures pointed to weakness in US stocks at the opening bell. Trading in US index futures indicated that the Dow Jones Industrial Average could slide 127 points at the opening bell today, 5 April 2016. Contradictory comments from Federal Reserve policy makers have added to uncertainty about the quantum and timing of interest rate hikes in the United States. During speech at a conference on cybersecurity, Boston Fed President Eric Rosengren yesterday, 4 April 2016, said rate-hikes may come sooner than the market is expecting. Rosengren is a voting member of the Fed policy committee this year. On 1 April 2016, Federal Reserve Bank of Cleveland President Loretta Mester cautioned that waiting too long to raise rates could be a risk to the economy. She is a voting member of the Fed's rate-setting policy committee. In a speech in New York on 29 March 2016, Federal Reserve Chairwoman Janet Yellen stressed a need for a cautious stance on interest-rate increases in the backdrop of global economic slowdown.
In Asia, Japanese stocks led decline in Asian markets on uncertainty regarding the quantum and timing of interest rate hikes in the United States. The Nikkei 225 Average closed 2.42% lower.
Index heavyweight and IT major Infosys fell 2.01% to Rs 1,218.60. The stock hit a high of Rs 1,243 and a low of Rs 1,215 in intraday trade. The company will announce its Q4 March 2016 results on 15 April 2016.
Index heavyweight and cigarette major ITC fell 1.34% at Rs 326.50, with the stock extending losses registered in previous trading session triggered by the company announcement of closure of manufacturing operations at all its cigarette factories in India with effect from 1 April 2016 until clarity emerges on the quantum of mandatory pictorial health warning on cigarette packages. The stock had lost 1.5% to settle at Rs 330.95 yesterday, 4 April 2016.
Telecom stocks declined after media reports suggested that GSM operators body Cellular Operators Association of India (COAI) has said in a letter to Finance Minister Arun Jaitley that the Budget proposal to impose 15% service tax on the purchase of auctioned spectrum is likely to pose an additional tax burden of about Rs 27000 crore which will have to be passed on to consumers. Tata Teleservices (Maharashtra) (down 5.06%), Bharti Airtel (down 5.03%), Reliance Communications (down 3.61%), Idea Cellular (down 3.49%) and MTNL (down 3.33%), edged lower. According to reports, the COAI has warned the additional financial burden on the service providers would adversely impact the roll out of 3G and 4G technology.
Bank stocks edged lower as RBI's announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) came in line with market expectations. Among public sector banks, Canara Bank (down 6%), Union Bank of India (down 5.82%), Andhra Bank (down 5.54%), Bank of India (down 5.52%), State Bank of India (down 5.38%), Punjab National Bank (down 4.61%), Bank of Baroda (down 4.6%), Allahabad Bank (down 4.47%), IDBI Bank (down 4.35%), UCO Bank (down 4.21%), Punjab and Sind Bank (down 3.19%), Dena Bank (down 3.14%), Corporation Bank (down 2.98%), Indian Bank (down 2.85%), Central Bank of India (down 2.75%), United Bank of India (down 2.72%), Syndicate Bank (down 2.66%), Vijaya Bank (down 2.48%) and Bank of Maharashtra (down 1%), edged lower.
Among private sector banks, ICICI Bank (down 5.45%), Yes Bank (down 4.42%), Axis Bank (down 2.89%), Federal Bank (down 2.67%), Kotak Mahindra Bank (down 2.48%), IndusInd Bank (down 1.08%), HDFC Bank (down 1.03%) and City Union Bank (down 0.62%), edged lower.
Meanwhile, the central bank announced the fine-tuning of its liquidity management framework. The central bank said in a statement that it has decided to smooth the supply of durable liquidity over the year using asset purchases and sales as needed. With a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate, the central bank raised the reverse repo rate by 25 basis points to 6% and cut the marginal standing facility (MSF) rate by 75 basis points to 7%. The central bank reduced the minimum daily maintenance of the cash reserve ratio (CRR) to 90% from 95% with effect from the fortnight beginning 16 April 2016 even as it kept the CRR unchanged at 4% of net demand and time liabilities (NDTL).
The RBI said it would continue to provide liquidity to the banking system as required. The RBI will progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality. The RBI simultaneously announced open market operations for purchases of government securities (GSec) totaling Rs 15000 crore on 7 April 2016.
The RBI also said that it will explore the possibility of licensing other differentiated banks such as custodian banks and banks concentrating on whole-sale and long-term financing. A paper in this regard will be put out for comments by September 2016.
Auto stocks edged lower as RBI's announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) came in line with market expectations. Tata Motors (down 4.52%), Eicher Motors (down 3.81%), TVS Motor Company (down 3.01%), Bajaj Auto (down 2.17%), Escorts (down 2.16%), Ashok Leyland (down 1.05%) and Hero MotoCorp (down 0.78%), edged lower. Lower interest rate may help lift demand for automobiles. Purchases of cars, utility vehicles and commercial vehicles are largely driven by finance.
Mahindra & Mahindra (M&M) fell 2.39% at Rs 1,216. The stock hit a high of Rs 1,253 and a low of Rs 1,213.30 in intraday trade. The company during market hours today, 5 April 2016, announced the launch of the Mahindra YUVO, a new age, superior technology range of tractors in the 30-45 HP category which will be added to the company's existing range of 15-57 HP tractors. The YUVO range comes in five models. It will be available in 15 states and the base variant is priced at Rs 4.99 lakh ex-showroom Hyderabad.
Maruti Suzuki India (MSIL) fell 3.66% at Rs 3,546.45. The stock hit a high of Rs 3,697 and a low of Rs 3,518 in intraday trade. The company during market hours today, 5 April 2016, announced that its total production rose 13.93% to 1.39 lakh units in March 2016 over March 2015.
Capital goods shares edged lower. BEML (down 4.22%), Jindal Saw (down 4.22%), Alstom T&D India (down 4.21%), Bharat Heavy Electricals (down 3.67%), Suzlon Energy (down 3.43%), Reliance Defence and Engineering (down 3.08%), Thermax (down 3.04%), Praj Industries (down 2.79%), Punj Lloyd (down 2.37%), ABB India (down 2.13%), Bharat Electronics (down 2.09%), Crompton Greaves (down 1.5%), Siemens (down 1.45%), Havells India (down 0.96%), SKF India (down 0.54%), Lakshmi Machine Works (down 0.12%) and AIA Engineering (down 0.11%), edged lower. ALSTOM India rose 0.29%%.
Index heavyweight and engineering & construction major L&T fell 3.30% to Rs 1,194.95. The stock hit a high of Rs 1,234.95 and a low of Rs 1,190 in intraday trade.
Adani Group stocks tumbled. Adani Ports & Special Economic Zone (down 6.23%), Adani Transmission (down 4.87%) and Adani Power (down 3.7%) edged lower.
Adani Enterprises fell 7.46% at Rs 74.45. The company after trading hours yesterday, 4 April 2016, announced that its Carmichael coalmine project in Australia has won mining lease. The company said that the granting of a mining lease helps deliver the company certainty with respect to timelines, while moving to the next phase of the project, subject to the resolution of legal challenges by politically motivated activists. Adani said it will continue to finalise second-tier approvals with the clear aim of commencing construction in calendar year 2017. In the coming months, Adani and its partners will provide additional details regarding the next steps for the logistics and labour requirements of the project, it said.
Adani Group initiated the Carmichael coal project in 2010 with plans to develop a coalmine and a rail link with Abbot Point port, but the project soon ran into opposition from environmentalists. In February 2016, Adani Group had secured the approval of the Queensland government for the $16.5 billion Carmichael mine project in the state's Galilee Basin, amid protests from environmental activists in Australia.
Shares of Reliance Anil Dhirubhai Ambani Group companies declined. Reliance Capital (down 4.93%), Reliance Power (down 3.93%), Reliance Communications (down 3.61%) and Reliance Infrastructure (down 3.3%), edged lower.
Metal stocks edged lower. Vedanta (down 5.24%), Jindal Steel & Power (down 5.13%), Hindalco Industries (down 4.71%), Hindustan Copper (down 3.47%), National Aluminium Company (down 3.17%), Steel Authority of India (down 2.86%), Tata Steel (down 2.53%), Bhushan Steel (down 2.11%), NMDC (down 0.66%), Hindustan Zinc (down 0.64%) and JSW Steel (down 0.54%) edged lower.
Copper edged lower in the global commodities markets. High Grade Copper for May 2016 delivery was currently down 0.16% at $2.137 per pound on the COMEX.
On the macro front, the RBI announced reduction in repo rate by 25 basis points (bps) to 6.5% from 6.75% after a scheduled monetary policy review today, 5 April 2016. With a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate, the central bank raised the reverse repo rate by 25 basis points to 6% and cut the marginal standing facility (MSF) rate by 75 basis points to 7%. The central bank reduced the minimum daily maintenance of the cash reserve ratio (CRR) to 90% from 95% with effect from the fortnight beginning 16 April 2016 even as it kept the CRR unchanged at 4% of net demand and time liabilities (NDTL). The RBI said it would continue to provide liquidity to the banking system as required. The RBI will progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.
RBI expects inflation based on the consumer price index (CPI) to decelerate modestly and remain around 5% during 2016-17 with small inter-quarter variations. According to the central bank, a normal southwest monsoon in 2016 would work as a favourable supply shock. The central bank expects inflation to trend towards the 5% target in March 2017 under reasonable assumptions.
The uneven recovery in India's economic growth in 2015-16 is likely to strengthen gradually in 2016-17 assuming a normal monsoon, the likely boost to consumption demand from the implementation of the 7th Pay Commission recommendations, the effects of the one-rank-one-pension (OROP) award and continuing monetary policy accommodation. The RBI has pegged GVA growth projection for 2016-17 at 7.6%. While retaining the accommodative stance of the monetary policy, RBI Governor Raghuram Rajan indicated in his monetary policy statement that the RBI may cut the repo rate further in the coming months if macroeconomic and financial developments provide room for further rate cut.
Meanwhile, the central bank announced fine-tuning the liquidity management framework, measures for strengthening the banking structure and measures for broadening and deepening financial markets. The central bank has decided to launch futures on the money market rate. In order to broaden participation in OTC derivatives and to provide a safe trading environment, it is proposed to put in place a policy framework for authorisation of electronic platforms with linkage to an approved central counterparty for settlement. The framework will also cover forex platforms to facilitate hedging by small and retail customers. The RBI has decided to allow NRIs to participate in the Exchange Traded Currency Derivatives (ETCD), subject to limits and other conditions that are stipulated by the exchanges recognised by the Securities and Exchange Board of India (Sebi).
The central bank has decided to undertake a comprehensive review of collateralised money market segments, including introduction of tripartite repo, in consultation with market participants. The central bank has also decided to undertake a comprehensive review of exiting guidelines with the objective of strengthening disclosure requirements by issuers of Commercial Paper (CP) in the light of a spurt in the issuance of CP.
The Sensex has fallen 1,229.95 points or 4.71% in calendar year 2016 so far (till 5 April 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the Sensex has risen 2,390.98 points or 10.63%. The Sensex is off 4,210.02 points or 14.47% from a 52-week high of 29,094.61 hit on 15 April 2015. The Sensex is off 5,141.15 points or 17.12% from a record high of 30,024.74 hit on 4 March 2015.
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