Key benchmark indices languished in the negative zone in morning trade. The barometer index, the S&P BSE Sensex, was down 113.61 points or 0.5%, up about 50 points from the day's low and off close to 40 points from the day's high. The market breadth, indicating the overall health of the market turned positive from negative in morning trade.
Tata Motors edged higher after its British luxury car unit Jaguar Land Rover (JLR) on Thursday, 10 April 2014, reported monthly sales volume data for March 2014. Bank stocks declined after a committee set up by the Reserve Bank of India (RBI) on credit pricing framework submitted a draft report on Thursday, 10 April 2014. Capital goods stocks also edged lower.
Indian stocks edged lower in early trade as Asian stocks fell after overnight steep slide in US stocks. It languished in the negative terrain in morning trade.
Foreign institutional investors (FIIs) bought shares worth a net Rs 342.75 crore on Thursday, 10 April 2014, as per provisional data from the stock exchanges.
Asian stocks edged lower on Friday, 11 April 2014, as a selloff in US biotech, Internet and other high-growth stocks on Thursday, 10 April 2014, cut demand for riskier assets.
At 10:20 IST, the S&P BSE Sensex was down 113.61 points or 0.5% to 22,601.72. The index declined 166.59 points at the day's low of 22,548.74 in early trade, its lowest level since 9 April 2014. The index fell 73.28 points at the day's high of 22,642.05 in opening trade.
The CNX Nifty was down 32.15 points or 0.47% to 6,746.25. The index hit a low of 6,743.15 in intraday trade, its lowest level since 9 April 2014. The index hit a high of 6,773.55 in intraday trade.
The BSE Mid-Cap index was up 38.68 points or 0.53% at 7,369.96. The BSE Small-Cap index was up 35.82 points or 0.48% at 7,509.70. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market turnoed positive from negative in morning trade. On BSE, 974 shares rose and 799 shares fell. A total of 92 shares were unchanged.
Sesa Sterlite (down 1.41%), GAIL (India) (down 1.39%) and HDFC (down 1.21%) edged lower from the Sensex pack.
Bank stocks declined after a committee set up by the Reserve Bank of India (RBI) on credit pricing framework submitted a draft report on Thursday, 10 April 2014. ICICI Bank (down 1.06%), Axis Bank (down 0.38%), HDFC Bank (down 0.12%) and State Bank of India (SBI) (down 0.34%) declined. Kotak Mahindra Bank rose 0.26%.
A committee set up by the Reserve Bank of India (RBI) on credit pricing framework on Thursday, 10 April 2014, suggested that commercial banks, particularly those whose weighted average maturity of deposits is on the lower side, move towards computing the Base Rate on the basis of marginal cost of funds. This may result in more transparency in pricing, reduced customer complaints, better transmission of changes in the policy rate and improved asset liability management at banks, a draft report of the committee on 'Working Group on Pricing of Credit', said. If banks use weighted average cost of funds because of their deposits profile or any other methodology that may result in differentiation between old and new customers, the boards of banks should ensure that this differentiation does not lead to any discrimination amongst borrowers, the draft report said.
Apart from factors like specific operating cost, credit risk premium and tenor premium, broad factors, such as, competition, business strategy and customer relationship are also used to determine the spread. The RBI committee suggested that bank should have a board approved policy delineating these components. The board of a bank should ensure that any price differentiation is consistent with the bank's credit pricing policy factoring Risk Adjusted Return on Capital (RAROC). Banks should be able to demonstrate to the Reserve Bank of India the rationale of the pricing policy, the draft report of the committee stated. Banks' internal policy must spell out the rationale for, and range of, the spread in the case of a given borrower, as also, the delegation of powers in respect of loan pricing, the draft report said.
The spread charged to an existing customer cannot be increased except on account of deterioration in the credit risk profile of the customer, the committee said. The customer should be informed of this at the time of contract. Further, this information should be adequately displayed by banks through notices/website, the committee said in its draft report.
The floating rate loan covenant may have interest rate reset periodicity and the resets may be done on those dates only, irrespective of changes made to the Base Rate within the reset period, the committee said. There may be a sunset clause for Benchmark Prime Lending Rate (BPLR) contracts so that all the contracts thereafter are linked to the Base Rate. Banks may ensure that these customers who shift from BPLR linked loans to Base Rate loans are not charged any additional interest rate or any processing fee for such switch-over, the draft report stated.
The IBA may develop a new benchmark for floating interest rate products, namely, the Indian Banks Base Rate (IBBR), which may be collated and published by IBA on a periodic basis. Banks may consider offering floating rate products linked to the Base Rate, IBBR or any other floating rate benchmark ensuring that at the time of sanction, the lending rates should be equal to or above the Base Rate of bank. To begin with, IBBR may be used for home loans. By design, the IBBR should meet the standards for benchmarks set by the Committee on Financial Benchmarks. The Working Group has also made several recommendations to bring in greater transparency enabling comparability across banks and informed decision making by customers.
The benefit of interest reduction on the principal on account of pre-payments should be given on the day the money is received by the bank without waiting for the next EMI cycle date to effect the credit, the draft report said. For retail loans, the customers should have a choice of "with exit" and "sans exit" options at the time of entering the contract. The exit option can be priced differentially but reasonably. The exit option should be easily exercisable by the customer with minimum notice period and without impediments. This would address issues of borrowers being locked into contracts, serve as a consumer protection measure and also help enhance competition. Further, IBA should evolve a set of guidelines for easier and quicker transfer of loans, particularly mortgage/housing loans. There could also be penalties for banks which do not cooperate with borrowers in this regard.
Despite the policy efforts to usher in transparency and fairness to the credit pricing framework, there have been certain concerns from the customer service perspective, the RBI said. These mainly relate to the downward stickiness of the interest rates, discriminatory treatment of old borrowers vis-vis new borrowers, and arbitrary changes in spreads, etc. The mandate of the RBI's 'Working Group on Pricing of Credit' is to examine the issues related to discrimination in pricing of credit and recommend measures for transparent and appropriate pricing of credit under a floating rate regime.
Induslnd Bank dropped 1.62%. The Reserve Bank of India on Thursday, 10 April 2014, notified that the foreign share holding through foreign institutional investors (FIIs)/non-resident Indians (NRIs)/persons of Indian origin (PIOs)/foreign direct investment (FDI)/American depository receipts (ADRs)/global depository receipts (GDRs) in IndusInd Bank has reached the trigger limit. Hence, further purchases of equity shares of IndusInd Bank would be allowed only after obtaining prior approval of the Reserve Bank of India.
The ceiling on total foreign holding in IndusInd Bank is 49%.
Capital goods stocks edged lower. ABB India (down 1.01%), Bharat Heavy Electricals (Bhel) (down 1.21%), Crompton Greaves (down 0.39%), L&T (down 1.27%), and Siemens (down 0.93%) declined.
Tata Motors rose 1.31% to Rs 436.45. The stock hit a record high of Rs 437.70 in intraday trade. The company's British luxury car unit Jaguar Land Rover (JLR) on Thursday, 10 April 2014, said its sales rose 3% to 55,183 units in March 2014 over March 2013. Jaguar sales jumped 19% to 11,731 units in March 2014 over March 2013. In March, Land Rover sold 43,452 vehicles, in line with prior year, with strong performances across the range, JLR said in a statement.
JLR's sales rose 8% to 124,776 vehicles in Q1 March 2014 over Q1 March 2013. Jaguar sales rose 19% to 24,031 vehicles in the Q1 March 2014 over Q1 March 2013. Land Rover sales rose 6% to 100,745 vehicles in Q1 March 2014 over Q1 March 2013.
Commenting on the quarterly performance, Andy Goss, Jaguar Land Rover Group Sales Operations Director said: "This has been a strong start to the year for both brands thanks to continued global demand for our latest model offerings. The F-TYPE Coupe has just been launched to the world's media to critical acclaim and Land Rover is set to reveal a Discovery Vision Concept car at the New York International Auto Show, to showcase Land Rover's design vision for a new family of Discovery vehicles".
In the foreign exchange market, the rupee edged lower against the dollar on global risk-off sentiment. The partially convertible rupee was hovering at 60.28, compared with its close of 60.07/08 on Thursday, 10 April 2014.
Reserve Bank of India Governor Raghuram Rajan on Thursday, 10 April 2014, said in a media interiview in Washington that India is prepared for potential financial fallout if the US Federal Reserve increases interest rates before April 2015. "Nobody is prepared for every eventuality, but for most eventualities, we are prepared. For us, the specific timing matters less than that it should happen when US growth is strong," Rajan said. The Fed is "mostly" right in how it is managing monetary policy, Rajan said during a panel discussion at George Washington University, adding the central bank needs to improve communications because measures it's taking now will affect what emerging markets do in the future. Still, he said he doesn't expect a US. rate increase by April 2015.
Rajan, in Washington to attend the spring meetings of the International Monetary Fund and the World Bank, also said the IMF needs to play a larger role in promoting global stability and offering liquidity to emerging markets, which often face "substantial stigma" when they approach the lender. If emerging markets are again pushed to a sustained bout of exchange-rate intervention and reserve accumulation, that will be detrimental to global demand, said Rajan, a former chief economist of the IMF.
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.
The next major trigger for the stock market is Q4 March 2014 and year ended 31 March 2014 (FY 2014) corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the results to see if there is any revision in their future earnings forecast of the company for the year ending 31 March 2015 (FY 2015) and/or for the year ending 31 March 2016 (FY 2016). Indian companies will start reporting their Q4 and full year results from mid-April 2014, with Infosys announcing its results on 15 April 2014. The results season will conclude in end-May 2014.
A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. Voting for the lone Lok Sabha constituency and an Assembly by-poll in Mizoram began today, 11 April 2014. The 36 days long voting process began on 7 April 2014 and will conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.
Asian stocks edged lower on Friday, 11 April 2014, as a selloff in US biotech, Internet and other high-growth stocks on Thursday, 10 April 2014, cut demand for riskier assets. Key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan were off 0.14% to 2.05%. In Indonesia, the Jakarta Composite index was up 0.68%.
A report today, 11 April 2014, showed Chinese consumer prices rose 2.4% in March from a year earlier, after gaining 2% in February. The nation's producer price index retreated 2.3% following the previous month's 2% drop.
China will ease restrictions on overseas investments by local firms and deals below $1 billion will no longer need approval, the country's economic planner said in another step to cut red-tape and facilitate the growth of private investment. Starting from May 8, Chinese firms planning to invest less than $1 billion will only need to register with authorities rather than seek approvals from the National Development and Reform Commission (NDRC), the commission said in a statement late on Thursday. 10 April 2014.
The NDRC said the new rules do not apply to investment projects in "sensitive countries, regions or sectors."
Currently, overseas resource-related investments above $300 million are subject to approvals by the NDRC, while the threshold for deals in other sectors is capped at $100 million.
Deals of above $1 billion will still need the approval by the NDRC, while those valued at $2 billion and above will need the approval of the State Council, China's cabinet, according to the new regulations.
Trading in US index futures indicated that the Dow could advance 16 points at the opening bell on Friday, 11 April 2014. US stocks tumbled on Thursday, 10 April 2014, with the Nasdaq Composite Index falling the most since 2011, as a technology selloff resumed amid concern valuations may be too high at the start of earnings season.
A government report on Thursday showed the fewest number of Americans since before the last recession filed applications for unemployment benefits last week, pointing to more progress in the labor market.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 decided after the conclusion of a monetary policy review to trim its monthly bond purchases by $10 billion to $55 billion.
In Europe, the Bank of England kept its key interest rate at a record low after a monetary policy review on Thursday, 10 April 2014, as policy makers try to gauge the amount of spare capacity in the economy. The Monetary Policy Committee (MPC) also kept its asset-purchase program on hold at 375 billion pounds ($629 billion), according to a statement released in London by the central bank.
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