Key benchmark indices clocked decent gains as Reserve Bank of India's (RBI) indication after a policy review that interest rate cut may be announced if macroeconomic and financial developments favour rate cut and firmness in global stocks aided the upmove on the domestic bourses. The barometer index, the S&P BSE Sensex, rose 232.22 points or 0.87% at 27,009.67, as per the provisional closing data. The Nifty 50 index gained 65.40 points or 0.8% at 8,266.45, as per the provisional closing data. The Sensex regained psychologically important 27,000 mark.
Asian and European stocks edged higher after US Federal Reserve Chairwoman Janet Yellen said in a speech overnight that short-term interest rates wouldn't be raised until there was more clarity about the US economic outlook. A delay in interest rate increases from the Fed would slow capital flight from emerging markets. Investors in emerging markets have been worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies.
The Sensex rose 305.18 points or 1.13% at the day's high of 27,082.63 in mid-afternoon trade, its highest level since 29 October 2015. The index gained 52.08 points or 0.19% at the day's low of 26,829.53 at the onset of the trading session. The Nifty rose 93.90 points or 1.14% at the day's high of 8,294.95 in mid-afternoon trade, its highest level since 26 October 2015. The index rose 15.35 points or 0.18% at the day's low of 8,216.40 in morning trade.
In overseas stock markets, Asian and European stocks edged higher after US Federal Reserve Chairwoman Janet Yellen said in a speech overnight that short-term interest rates wouldn't be raised until there was more clarity about the US economic outlook. Yellen's remarks followed monthly jobs report for May 2016 that raised concerns over the ability of the economy to absorb a rate hike as early as June. The Fed chief said last month's jobs report was "disappointing" and bears watching, though she gave a largely upbeat assessment of the US economic outlook, warning against attaching too much significance to the payrolls data in isolation. The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 14-15 June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
Meanwhile, the euro zone economy grew by 0.6% in the first quarter of 2016, the highest rate for 12 months, supported by household spending and private sector investment, data from the European statistics agency Eurostat showed today, 7 June 2016. In a second revision of its figures, Eurostat said that gross domestic product (GDP) increased by 0.6% from the previous quarter and by 1.7% year-on-year.
US stocks gained yesterday, 6 June 2016, even as Federal Reserve Chairwoman Janet Yellen said a rate-hike following an ugly jobs report late last week was still a possibility.
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Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,484 shares rose and 1,130 shares declined. A total of 161 shares were unchanged. The BSE Mid-Cap index provisionally rose 0.29%, underperforming the Sensex. The BSE Small-Cap index provisionally rose 0.96%, outperforming the Sensex.
PSU bank stocks gained and private bank stocks were mixed after the Reserve Bank of India in its monetary policy meeting today, 7 June 2016, kept key policy rates steady. Among public sector banks, Punjab National Bank (up 0.91%), Bank of Baroda (up 1.47%), Union Bank of India (up 1.34%), Canara Bank (up 0.21%) and Bank of India (up 1.36%) edged higher.
State Bank of India (SBI) jumped 5.5% on reports the bank is considering a proposal to hive off its stressed-loan portfolio into a separate company. If non-performing assets (NPAs) are transferred to a separate company, it will help SBI concentrate on core banking services. Meanwhile, media reports also suggested that some sovereign wealth funds and private equity players have shown interest in acquiring stake in the so-called bad bank proposed by SBI.
Shares of private sector banks were mixed. Kotak Mahindra Bank (up 0.38%) and HDFC Bank (up 0.43 %) edged higher. Yes Bank (down 0.02%) and IndusInd Bank (down 0.87%) declined.
ICICI Bank gained after the bank decided to raise Rs 25000 crore in tranches through private placement. The stock rose 4.38%. ICICI Bank has scheduled its 22nd Annual General Meeting (AGM) of shareholders on Monday, 11 July 2016. During the AGM, the bank will seek approval from shareholders to raise up to Rs 25000 crore by way of issue of nonconvertible securities including but not limited to bonds and non-convertible debentures in one or more tranches on private placement basis during a period of one year from the date of passing of the resolution within the overall borrowing limits of the bank as approved by the members from time to time. The announcement was made after market hours yesterday, 6 June 2016.
Axis Bank fell 0.18%. Axis Bank yesterday, 6 June 2016, announced the commencement of trading of its green bond on the London Stock Exchange. The bank had raised $500 from the green bond issue. The bank has listed its entire $5 billion Medium Term Note (MTN) programme on the London Stock Exchange. The proceeds of the bond will be invested in green energy, transportation and infrastructure projects, reinforcing India's commitment to produce 175,000 megawatts (MW) of renewable power by 2022.
The RBI said that the government's reform measures on small savings rates combined with the central bank's refinements in the liquidity management framework should help the transmission of past policy rate reductions into lending rates of banks, RBI said. The central bank said it will shortly review the implementation of the Marginal Cost Lending Rate (MCLR) framework by banks. Timely capital infusions into constrained public sector banks will also aid credit flow, RBI said.
Realty stocks rose after RBI kept policy rates unchanged after the monetary policy review today, 7 June 2016. DLF (up 1.93%), Sobha (up 0.58%), Indiabulls Real Estate (up 4.09%), Housing Development & Infrastructure (HDIL) (up 1.03%), Unitech (up 1.3%), NBCC (up 0.47%), Godrej Properties (up 2.72%), and Oberoi Realty (up 1.49%) edged higher. Purchases of both residential and commercial property are largely driven by finance.
Meanwhile, the Reserve Bank of India (RBI) in its second bi-monthly monetary policy meeting today, 7 June 2016, kept its benchmark interest rate viz. the repo rate unchanged at 6.5%. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it continues to provide liquidity as required and will progressively lower the liquidity deficit in the banking system from 1% of NDTL to a position closer to neutrality.
RBI Governor Raghuram Rajan said in his monetary policy statement that the central bank will monitor macroeconomic and financial developments for scope for reduction in the repo rate. RBI has retained its March 2017 inflation projection of 7%. Rajan said that incoming data in the next few months will provide more clarity regarding RBI's March 2017 inflation target of 7%. The central bank has pointed out some upside risks to inflation such as firming international commodity prices, the implementation of the 7th Central Pay Commission awards, the upturn in inflation expectations of households and of corporates and the stickiness in inflation excluding food and fuel. Rajan said that the stance of monetary policy remains accommodative. The RBI has retained its gross value added growth projection for 2016-17 at 7.6%. It said that the risk to this number is evenly balanced.
Meanwhile, the monthly data released by Association of Mutual Funds In India (AMFI) showed that there was a net inflow Rs 4721 crore into equity mutual funds in May 2016. This was higher than inflow of Rs 4438 crore in April 2016. There was a net inflow of Rs 974 crore into balanced funds in May 2016, which was higher than inflow of Rs 366 crore in April 2016. Balanced funds invest the money in a combination of equity and debt, with majority of the investment going into equity. The funds' investments range from 65% to 80% in equity and the rest in debt.
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