Key benchmark indices extended losses in morning trade. Banking and metal stocks led losses for benchmark indices. The barometer index, the S&P BSE Sensex, continued to hover below the psychological 28,000 mark after falling below that level in early trade. The Sensex hit two-week low. The 50-unit CNX Nifty hit its lowest level in almost two weeks. The market breadth indicating the overall health of the market was negative. The Sensex was currently off 175.36 points or 0.62% at 27,936.95. Investors were spooked by the Special Investigation Team (SIT) on black money on Friday, 24 July 2015, calling for identification of beneficial ownership of Participatory Notes (PNs) and restrictions on transfer of PNs. In overseas markets, Chinese stocks led decline in Asian stocks.
Realty shares slumped. Shares of public sector oil marketing companies (PSU OMCs) edged higher as global crude oil prices fell.
Foreign portfolio investors bought shares worth a net Rs 6.62 crore during the previous trading session on Friday, 24 July 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 196.38 crore during the previous trading session on Friday, 24 July 2015, as per provisional data released by the stock exchanges.
In overseas markets, Asian shares edged lower as weak Chinese manufacturing accelerated the sell-off in oil and other commodities. US stocks edged lower on Friday, 24 July 2015, after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting the US housing market may not be firing on all cylinders.
At 10:16 IST, the S&P BSE Sensex was down 299.65 points or 1.07% at 27,812.66. The index fell 326.75 points at the day's low of 27,785.56 in morning trade, its lowest level since 13 July 2015. The index rose 5.34 points at the day's high of 28,117.65 in opening trade.
The CNX Nifty was down 89.15 points or 1.05% at 8,432.40. The index hit a low of 8,425.30 in intraday trade, its lowest level since 14 July 2015. The index hit a high of 8,492.20 in intraday trade
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The BSE Mid-Cap index was down 91.64 points or 0.82% at 11,056.35. The BSE Small-Cap index was down 88.29 points or 0.76% at 11,579.83. The decline in both these indices was lower than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was negative. On BSE, 1,146 shares fell and 871 shares rose. A total of 70 shares were unchanged.
Shares of public sector oil marketing companies (PSU OMCs) edged higher as global crude oil prices fell. Indian Oil Corporation (up 1.19%) and HPCL (up 0.82%), edged higher. BPCL was down 0.05%.
Decline in crude oil prices will reduce under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at government controlled prices. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports. The government has already decontrolled pricing of petrol and diesel.
Realty shares slumped. Oberoi Realty (down 3.52%), Sobha (down 2.97%), Anant Raj (down 2.33%), Sunteck Realty (down 2.19%), Phoenix Mills (down 2.1%), Indiabulls Real Estate (down 2.07%), Prestige Estates Projects (down 2.03%), Godrej Properties (down 1.75%), Parsvnath Developers (down 1.52%), Unitech (down 1.32%), Housing Development and Infrastructure (HDIL) (down 1.26%), Peninsula Land (down 1.18%) and DLF (down 0.82%), edged lower.
Meanwhile, in the global commodities market, Brent crude oil futures edged lower. Brent for September settlement was down 16 cents at $54.46 a barrel. The contract had fallen 65 cents or 1.18% to settle at $54.62 a barrel during the previous trading session.
India imports about 80% of its crude requirements and a decline in crude eases concerns on fiscal deficit, inflation and gives more room for the government to boost growth through spending on infrastructure. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 64.045, compared with its close of 64.04 during the previous trading session.
Meanwhile, the Special Investigation Team (SIT) tasked with curbing black money has in its Third SIT Report submitted to the finance ministry has called for identification of beneficial ownership of Participatory Notes (PN). In its recommendation on PNs, SIT has said that the information of beneficial owner with the Securities and Exchange Board of India (Sebi) should be in the form of individual whose KYC information is known to Sebi. In no case should the KYC information end with name of a company. In case a company is the holder of P notes/Offshore Derivative Instruments (ODIs), Sebi should have information of its promoters/directors who exercise effective control over the company, the SIT report states. In case of companies/trusts represented by service providers like lawyers/accountants, Sebi should have information on the real owners/effective controllers of these companies/trusts.
A Participatory Note (PN) is a derivative instrument issued in foreign jurisdictions by a Foreign Institutional Investor (FII)/sub-accounts or one of its associates, against underlying Indian securities. PNs are popular among foreign investors since they allow these investors to earn returns on investment in the Indian market without undergoing the significant cost and time implications of directly investing in the India.
The SIT has also called for restrictions on transfer of PNs. PNs are transferable in nature. This makes tracing the true beneficial owner of P notes even more difficult since layering of transactions can be made so complex so as to make it impossible to track the true beneficial owner, the SIT report said. Sebi needs to examine if this provision of allowing transferring of P notes is in any way beneficial for easing foreign investment, the SIT said.
The outstanding value of Offshore Derivative Instruments (ODIs) at the end of February 2015 stood at Rs 2.715 lakh crore. The top five locations of end beneficial owner of ODIs were Cayman Islands, USA, UK, Mauritus and Bermuda contributing to 31.31%, 14.20%, 13.49%, 9.91% and 9.10% respectively of total ODIs outstanding. According to SIT, it is clear from this data provided by Sebi that a major chunk of outstanding ODIs invested in India are from Cayman Islands i.e. 31.31%. This translates to roughly Rs 85006 crore. It does not seem conceivable that a jurisdiction with a population of less than 55,000 could invest Rs 85000 crore in one country, the SIT report says.
The remarks on PNs are among a series of suggestions on how to crack down on black money. The SIT report also refers to the misuse of exemption on long term capital gains tax on shares for money laundering, use of shell companies, trade-based money laundering through mispricing of imports/exports and betting in cricket. With the collusion of promoters, some brokers arrange for price(s) with purchase of such scrips at nominal costs and sales at exorbitant prices, with a view to receiving money on sale as capital gain when the long term gain is subjected to a nil or nominal rate of tax. The advantage for manipulative taxpayer is that he can launder such sale receipts through payment of no tax, the SIT says in its report on misuse of exemption on long term capital gains tax on shares.
SIT has also suggested prescribing a reasonable threshold for holding of cash/currency notes. This would control holding of unaccounted money to a large extent. This would also control transfer of unaccounted cash from one destination to other, which at present is rampant, may be by Angadias or by other means.
Meanwhile, India's weather office, the India Meteorological Department (IMD), said in its daily monsoon update issued on Sunday, 26 July 2015, that the Southwest Monsoon was vigorous over Rajasthan and West Madhya Pradesh and active over Gangetic West Bengal, Odisha, Himachal Pradesh and Gujarat region during past 24 hours ending until 8:30 IST.
For the country as a whole, cumulative rainfall during this year's monsoon season was 5% below the Long Period Average (LPA) until 26 July 2015. Region wise, the rainfall was 15% below the LPA in South Peninsula, 7% below the LPA in Central India, 6% below the LPA in East & Northeast India and 10% above the LPA in Northwest India until 26 July 2015.
The quantum of and the spatial distribution of rainfall this month holds key; July accounts for about 33% of precipitation during the June-September monsoon season and is critical for crops. The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation.
The weekly data released by the Ministry of Agriculture after trading hours on Friday, 24 July 2015, showed a pick up in the sowing of Kharif crops. The total sown area for Kharif crops as on 24 July 2015 stood at 693.83 lakh hectares compared with 550.42 lakh hectares at this time last year.
Meanwhile, the Ministry of Water Resources announced in its weekly report issued after trading hours on Friday, 24 July 2015, that the Water storage available in 91 important reservoirs of the country as on 23 July 2015 was 58.596 BCM which is 37% of total storage capacity of these reservoirs. This storage is 115% of the storage of corresponding period of last year and 108% of storage of average of last ten years. The present storage position during current year is better than the storage position of last year and is also better than the storage of average of last ten years. States having better storage than last year for corresponding period are Himachal Pradesh, Punjab, Odisha, West Bengal, Tripura, Maharashtra, Uttar Pradesh, Uttarakhand, Madhya Pradesh, Karnataka, Kerala and Tamil Nadu. States having lesser storage than last year for corresponding period are Rajasthan, Jharkhand, Gujarat, Chhattisgarh, Andhra Pradesh and Telangana.
Asian shares edged lower today, 27 July 2015, as weak Chinese manufacturing accelerated the sell-off in oil and other commodities. Investors were also cautious ahead of the Federal Reserve's policy meeting later this week. Key benchmark indices in China, Hong Kong, Singapore, Indonesia, Japan, South Korea and Taiwan were down by 0.38% to 2.81%.
US stocks edged lower on Friday, 24 July 2015, after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting the US housing market may not be firing on all cylinders. The Commerce Department said new home sales slipped 6.8% to 482,000 in June 2015 whilst May 2015 sales were also revised lower from 546,000 to 517,000.
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