Small-cap stocks rally

Amid divergent trend among various index constituents, key benchmark indices eked out miniscule gains. With small gains at close, the barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both, attained their highest closing level in almost three weeks. A rebound in late trade helped benchmark indices eke out miniscule gains. Before the rebound in late trade, benchmark indices had languished in red after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.5% after first bi-monthly Monetary Policy review for 2015-16 announced at 11:00 IST. In overseas markets, Asian and European stocks rose as the disappointing US job data announced last week spurred speculation the US Federal Reserve will keep interest rates low.

The market breadth indicating the overall health of the market was positive. The S&P BSE Sensex rose 12.13 points or 0.04% to settle at 28,516.59. The RBI vowed to keep monetary policy accommodative, but warned that it will be watching consumer inflation closely. The RBI expects increase in inflation based on the consumer price index to 5.8% by the end of the current financial year after easing to around 4% by August 2015. The BSE Small-Cap index was up 1.17%, outperforming the Sensex. Among the gainers from the constituents of the BSE Small-Cap index, gains ranged from 3% to 20% for quite a few stocks.

Steel stocks rallied. Banking and realty stocks declined after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.5% after first bi-monthly Monetary Policy for 2015-16 announced today, 7 April 2015. IT stocks edged higher on renewed buying. Index heavyweights Reliance Industries and L&T edged higher.

Meanwhile, Finance Minister Arun Jaitley yesterday, 6 April 2015, said that legitimate taxes must be paid and should not be perceived as 'tax terrorism'. Jaitley said at a Confederation of Indian Industry conference in New Delhi that while India does not practice tax terrorism, it is not a tax haven either.

Foreign portfolio investors (FPIs) bought shares worth a net Rs 1014.19 crore from secondary equity market yesterday, 6 April 2015, as per data from National Securities Depository (NSDL). Domestic institutional investors (DIIs) sold shares worth a net Rs 170.03 crore yesterday, 6 April 2015, as per provisional data released by the stock exchanges.

In the foreign exchange market, the rupee edged lower against the dollar.

Brent crude oil futures edged lower after a leading foreign investment bank said prices needed to remain low for months to achieve a slowdown in US crude oil output growth.

In overseas markets, European stocks edged higher as investors returned from the long holiday break and followed up on a rally in the US fueled by interest-rate expectations. Asian markets edged higher after overnight gains in US stocks. US stocks rose yesterday, 6 April 2015, as the disappointing job data announced last week spurred speculation the US Federal Reserve will keep interest rates low.

The S&P BSE Sensex rose 12.13 points or 0.04% to settle at 28,516.59, its highest closing level since 18 March 2015. The index lost 230.10 points at the day's low of 28,274.36 in afternoon trade. The index jumped 136.62 points at the day's high of 28,641.08 in early trade.

The CNX Nifty rose 0.40 points to settle at 8,660.30, its highest closing level since 18 March 2015. The index hit a low of 8,586.85 in intraday trade. The index hit a high of 8,693.60 in intraday trade

The BSE Mid-Cap index rose 80.72 points or 0.74% to settle at 10,950.54. The BSE Small-Cap index jumped 131.78 points or 1.17% to settle at 11,431.08. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 3292 crore, higher than turnover of Rs 2937.62 crore registered during the previous trading session.

The market breadth indicating the overall health of the market was positive. On BSE, 1,631 shares gained and 1,127 shares fell. A total of 106 shares were unchanged.

Among sectoral indices on BSE, the S&P BSE Auto index (up 0.08%), BSE Consumer Durables index (up 0.66%), BSE Capital Goods index (up 0.45%), BSE FMCG index (up 0.64%), BSE IT index (up 0.32%), BSE Metal index (up 2.2%), BSE Oil & Gas index (up 0.05%), BSE Power index (up 0.93%), and BSE Teck index (up 0.44%), outperformed the Sensex. The S&P BSE Bankex index (down 0.71%), BSE Healthcare index (down 0.19%), and BSE Realty index (down 1.62%) underperformed the Sensex.

Bank stocks declined after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.5% after first bi-monthly Monetary Policy for 2015-16 announced today, 7 April 2015. Among public sector banks, Canara Bank (down 0.58%), State Bank of India (down 0.97%), Oriental Bank of Commerce (down 1.32%), Central Bank of India (down 1.8%), Union Bank of India (down 1%), United Bank of India (down 0.68%), and Andhra Bank (down 0.38%) declined. Bank of Baroda (up 0.68%), Punjab National Bank (up 1.01%), Dena Bank (up 1.36%), and Bank of India (up 0.58%) gained.

Among private sector banks, Axis Bank (down 1.69%), IndusInd Bank (down 0.96%), ICICI Bank (down 1.2%), and Yes Bank (down 0.54%) edged lower. Federal Bank (up 0.19%) and HDFC Bank (up 0.24%) gained.

The RBI said that comfortable liquidity conditions should enable banks to transmit the reduction in the repo rate announced in January and March into their lending rates, thereby improving financing conditions for the productive sectors of the economy.

In order to improve the efficiency of monetary policy transmission, the RBI will encourage banks to move in a time-bound manner to marginal-cost-of-funds-based determination of their base rate. Detailed guidelines in this regard will be issued shortly, the RBI said. Once the Financial Benchmarks India Pvt. Ltd starts publishing various indices of market interest rates in end May this year, the RBI will explore the possibility of encouraging banks to use the indices as an external benchmark for pricing bank products.

The RBI has decided to do away with the mandatory calendar of reviews by the boards of banks and replace it with the seven critical themes prescribed by the P.J.Nayak Committee viz. business strategy, financial reports and their integrity, risk, compliance, customer protection, financial inclusion and human resources. The bank boards will determine other list of items to be deliberated and periodicity thereof, the RBI said.

The RBI has also decided to issue guidelines to private sector banks on a policy on remuneration for the non-executive directors (other than part-time Chairman) that will reflect market realities and will be within the parameters specified in the Banking Regulation Act 1949 and the Companies Act, 2013. The RBI will also discuss with the government the adoption of a similar remuneration policy for the non-executive directors of the public sector banks.

The RBI has decided to allow banks to invest in long term bonds (LTBs) issued by other banks subject to certain conditions. It may be recalled that in July 2014, the RBI had allowed banks to issue LTBs with exemptions from certain regulatory pre-emptions for lending to long-term projects in infrastructure sub-sectors and affordable housing.

Shares of Kotak Mahindra Bank fell 0.99% at Rs 1,385.40. ING Vysya Bank dropped 0.89% at Rs 995.45. Kotak Mahindra Bank after market hours yesterday, 6 April 2015, said that 17 April 2015 has been fixed as the record date for the purpose of ascertaining the shareholders of ING Vysya Bank who shall be entitled to the shares of Kotak Mahindra Bank in the ratio of 725 equity shares of Rs 5 each in Kotak Mahindra Bank for every 1,000 equity shares of Rs 10 each held in ING Vysya Bank.

Realty stocks declined after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.5% after first bi-monthly Monetary Policy for 2015-16 announced today, 7 April 2015. Sobha (down 1.89%), DLF (down 2.99%), Indiabulls Real Estate (down 2.76%), Unitech (down 2.56%), Housing Development & Infrastructure (HDIL) (down 0.23%), Phoenix Mills (down 2.2%), Anant Raj (down 1.88%), and Prestige Estates (down 2.33%) edged lower. Godrej Properties (up 1.34%) and Oberoi Realty (up 1.19%) edged higher. Purchases of both residential and commercial property are largely driven by finance.

Auto stocks were mixed after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.5% after first bi-monthly Monetary Policy review for 2015-16 announced today, 7 April 2015. Ashok Leyland (down 0.41%), Tata Motors (down 1.32%), Maruti Suzuki India (down 0.71%), and Hero MotoCorp (down 1.19%) edged lower. TVS Motor Company (up 1.27%), Bajaj Auto (up 3.03%), Mahindra & Mahindra (M&M) (up 1.92%) and Eicher Motors (up 1.18%) edged higher.

Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

Steel stocks rallied. Jindal Steel & Power (up 7.23%), Tata Steel (up 4.89%), JSW Steel (up 4.18%) and Steel Authority of India (up 4.6%) edged higher.

IT stocks edged higher on renewed buying. MindTree (up 2.02%), MphasiS (up 0.4%), CMC (up 2.48%), Oracle Financial Services Software (up 3.68%), HCL Technologies (up 0.13%) and Tech Mahindra (up 1.54%) edged higher. Infosys (down 0.73%) and Wipro (down 0.81%) edged lower.

TCS gained 1.58% at Rs 2,586.10. With respect to news titled "TCS, Others in Race to Acquire Elitecore," TCS stated during market hours today, 7 April 2015, that the company does not have any specific comment to offer with regard to the news item.

Index heavyweight Reliance Industries rose 1.07% at Rs 832.80.

Another index heavyweight L&T rose 0.79% at Rs 1,769.60.

Rural Electrification Corporation (REC) lost 4.16% at Rs 321.65. The Government of India (GoI), the promoter of Rural Electrification Corporation (REC) after market hours yesterday, 6 April 2015, issued a notice for offer for sale (OFS) of upto 4.93 crore equity shares of the face value of Rs 10 each, representing 5% of the total paid up equity share capital of REC through a sale on the separate window provided by the stock exchanges. The government will declare the floor price for the OFS latest by 17:00 IST today, 7 April 2015. Retail investors will be allocated offer shares at a discount of 5% to the bid price. The offer shall take place during trading hours on a separate window of the stock exchanges and shall commence tomorrow, 8 April 2015 at 9:15 IST and close on the same date at 15:30 IST. The GoI currently holds 65.64% stake in REC (as per the shareholding pattern as on 31 December 2014).

Aditya Birla Nuvo rose 2% at Rs 1,701.30. With respect to news titled "Aditya Birla group plans mega retail merger via share swap," Aditya Birla Nuvo stated during market hours that in the ordinary course of the business, the company keeps on evaluating growth and re-structuring opportunities across the businesses of the Aditya Birla Group (ABG). The company confirmed that presently there is no proposal which has reached the stage which would trigger Clause 36 of the Listing Agreement.

Glenmark Pharmaceuticals fell 0.42% at Rs 844.40. The stock hit a high of Rs 861 and a low of Rs 835. Glenmark Generics USA, a subsidiary of Glenmark Generics has been granted final abbreviated new drug approval (ANDA) from the United States Food & Drug administration (USFDA) for Norethindrone Acetate and Ethinyl Estradiol Tablets USP, 0.5 mg/2.5 mcg and 1mg/mcg. Glenmark will commence distribution of the product immediately. These tablets are Glenmark's generic version of Warner Chilcott's FemHRT. The company made announcement during market hours. For the twelve months ended February 2015, the FemHRT market garnered annual sales of $38.6 million in the US, according to the IMS Health.

The Sensex edged higher for the third straight trading session today, 7 April 2015. The Sensex has risen 559.10 points or 1.99% in three trading sessions from a recent low of 27,957.49 on 31 March 2015. The Sensex has risen 559.10 points or 1.99% in this month so far (till 7 April 2015).

The Sensex has risen 1,017.17 points or 3.69% in this calendar year so far (till 7 April 2015). From a 52-week low of 22,247.39 on 16 April 2014, the Sensex has risen 6,269.20 points or 28.17%. The Sensex is off 1,508.15 points or 5.02% from a record high of 30,024.74 hit on 4 March 2015.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 62.2825, compared with its close of 62.19 during the previous trading session.

Brent crude oil futures edged lower after a leading foreign investment bank said prices needed to remain low for months to achieve a slowdown in US crude oil output growth. Brent for May settlement was down 45 cents at $57.67 a barrel.

The Reserve Bank of India (RBI) today, 7 April 2015, kept its benchmark lending rate viz. the repo rate unchanged after first bi-monthly Monetary Policy review for 2015-16. The RBI also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liability (NDTL).

The RBI said that going forward, the accommodative stance of monetary policy will be maintained and monetary policy actions will be conditioned by incoming data. The RBI said it will await the transmission by banks of its front-loaded rate reductions in January and March into their lending rates. The RBI said that developments in sectoral prices, especially those of food, will be monitored, as will the effects of recent weather disturbances and the likely strength of the monsoon, as the central bank stays vigilant to any threats to the disinflation that is underway. The RBI will look to a continuation and even acceleration of policy efforts to unclog the supply response so as to make available key inputs such as power and land. Further progress on repurposing of public spending from poorly targeted subsidies towards public investment and on reducing the pipeline of stalled investment will also be helpful in containing supply constraints and creating room for monetary accommodation, the RBI said. The RBI will also watch for signs of normalisation of the US monetary policy, though it anticipates India is better buffered against likely volatility than in the past.

The RBI said that the central bank will stay focussed on ensuring that the economy disinflates gradually and durably, with CPI inflation targeted at 6% by January 2016 and at 4% by the end of 2017-18. Although the target for end-2017-18 and thereafter is defined in terms of a tolerance band of plus/minus 2% around the mid-point, it will be the RBI's endeavour to keep inflation at or close to this mid-point of 4%. The RBI's intent is to allow the disinflationary momentum to spread through the economy.

According to RBI, CPI inflation is projected at its current levels in the first quarter of 2015-16 and is expected to ease thereafter to around 4% by August. The CPI inflation is expected to rise thereafter to reach 5.8% by the end of the current financial year.

Assuming a normal monsoon, continuation of the cyclical upturn in a supportive policy environment and no major structural change or supply shocks, GDP growth for 2015-16 is projected at 7.8%, higher by 30 basis points from 7.5% in 2014-15, but with a downward bias to reflect the still subdued indicators of economic activity.

The central bank said that comfortable liquidity conditions should enable banks to transmit the reduction in the repo rate announced in January and March into their lending rates, thereby improving financing conditions for the productive sectors of the economy.

With regard to measures for the financial markets, the RBI intends to expand, in consultation with the Government of India, the scope of issue of rupee bonds in overseas markets by the international financial institutions and also to permit Indian corporates eligible to raise external commercial borrowing (ECB) through issuance of rupee bonds in overseas centers with an appropriate regulatory framework.

Meanwhile, with a view to encourage hedging of forex exposures and enhancing the liquidity of the currency options market, the RBI has decided to allow Indian exporters and importers to write covered options on the basis of actual contracted forex exposure, subject to conditions. The RBI will announce detailed operating instruction in this regard.

The RBI has decided to allow NBFC-IDFs to provide take-out finance for infrastructure projects that have completed one year of operation in the Public Private Partnership (PPP) segment without a tripartite agreement and to the non-PPP segment, subject to certain conditions. These NBFCs have been hitherto allowed only to provide take-out finance for infrastructure projects in the PPP segment under a tripartite agreement involving, among others, the project authority.

Meanwhile, Finance Minister Arun Jaitley yesterday, 6 April 2015, said that legitimate taxes must be paid and should not be perceived as 'tax terrorism'. Jaitley said at a Confederation of Indian Industry conference in New Delhi that while India does not practice tax terrorism, it is not a tax haven either. Jaitley said that the aim of the government is to create a conducive business environment by addressing the challenges faced, especially with respect to taxation, the Land Acquisition and Rehabilitation and Resettlement bill, and corruption. To facilitate ease of doing business, the government is focusing on tax reforms with the aim of pushing for the implementation of the Goods and Services Tax (GST) and lowering the corporate tax rate.

With respect to the land law, which is commonly perceived as anti-farmer and detrimental to the cause of rural India, Jaitley said the government was cognizant of the large population that would get impacted, but was also aware of the potential of this to unleash productivity and employment. Amendments in the Land Acquisition and Rehabilitation and Resettlement bill are required to support building of rural infrastructure including roads, irrigation and industrial corridors, Jaitley said.

The Finance Minister said that the government will do its share by creating a policy framework that enables economic growth. The time now, he said, is to slog to implement the changes at the ground level. Jaitley sought the industry's support in implementing these changes.

In overseas markets, European stocks edged higher today, 7 April 2015, as investors returned from the long holiday break and followed up on a rally in the US fueled by interest-rate expectations. Key benchmark indices in Germany, UK, and France were up 1.1% to 1.52%.

Markit Economics said today, 7 April 2015, that the growth rate of the eurozone economy continued to improve in March. At 54, up from 53.3 in February, the final Markit Eurozone PMI Composite Output Index rose to an 11-month high and its joint-highest level for almost four years.

Markit Economics said today, 7 April 2015, March data signalled a further rise in service sector activity in Germany, with the rate of expansion the strongest in six months. This was highlighted by the seasonally adjusted final Markit Germany Services Business Activity Index rising from February's 54.7 to 55.4. The final Markit Germany Composite Output Index -which measures the combined output of the manufacturing and service sectors -meanwhile rose from February's 53.8 to an eight-month high of 55.4 in March.

Growth of activity in the French service sector was recorded for a second consecutive month during March. However, the rate of expansion was modest and slower than in February. The final seasonally adjusted headline Markit France Services Business Activity Index-registered 52.4 in March down slightly from 53.4 in February.

Asian markets rose today, 7 April 2015, after overnight gains in US stocks. Key indices in Indonesia, South Korea, Japan, China, Singapore, and Taiwan rose by 0.03% to 2.51%.

Stock markets in Hong Kong were closed today, 7 April 2015, for Ching Ming Festival.

Trading in US index futures indicates that the Dow Jones industrial average could gain 32.50 points at the opening bell today, 7 April 2015. US stocks rose yesterday, 6 April 2015, as the disappointing job data announced last week spurred speculation the US Federal Reserve will keep interest rates low.

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