A range bound movement was witnessed as key benchmark indices retained positive zone in mid-afternoon trade. The market breadth indicating the overall health of the market was negative. The Reserve Bank of India (RBI) surprised financial markets today, 4 March 2015, by announcing a reduction in its benchmark lending rate viz. the repo rate by 25 basis points in an unscheduled monetary policy review before trading hours today, 4 March 2015. The 50-unit CNX Nifty retained the psychological 9,000 level after crossing that mark at the onset of the trading session. The barometer index, the S&P BSE Sensex, failed to retain the psychological 30,000 level after an initial surge took the index to above that mark for the first time in its history. The Sensex was currently up 166.04 points or 0.56% at 29,759.77.
FMCG stocks advanced. Index heavyweight HDFC hit record high. Jaiprakash Power Ventures jumped after the company said it has entered into a further Standstill and Voting Agreement dated 3 March 2015 with some bond holders for a rescheduling of the company's redemption obligations in respect of foreign currency convertible bonds which matured on 13 February 2015.
Meanwhile, the outcome of a survey showed that India's services sector activity expanded at its fastest pace in eight months in February, boosted by a solid rise in new work.
Key indices have remained in positive zone so far during the trading session. Earlier, the Sensex and the Nifty, both, surged at the onset of the trading session as the Reserve Bank of India (RBI) surprised financial markets by announcing a cut in its benchmark lending rate viz. the repo rate by 25 basis points in an unscheduled monetary policy review just before trading hours. Both these key benchmark indices struck record high at the onset of the trading session.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 772.92 crore yesterday, 3 March 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 303.88 crore yesterday, 3 March 2015, as per provisional data.
In the foreign exchange market, the rupee edged lower against the dollar in volatile trade.
Brent crude oil futures edged lower after previous trading session's gains.
In overseas markets, European stock markets edged higher. Asian stock markets were mixed. US stocks declined yesterday, 3 March 2015, as data showing weaker-than-expected growth in monthly car sales dampened spirits.
At 14:15 IST, the S&P BSE Sensex was up 166.04 points or 0.56% at 29,759.77. The index jumped 431.01 points at the day's high of 30,024.74 at the onset of the trading session, a lifetime high for the index. The index gained 105.98 points at the day's low of 29,699.71 in early afternoon trade.
The Nifty was up 37.45 points or 0.42% at 9,033.70. The index hit a high of 9,119.20 in intraday trade, a lifetime high for the index. The index hit a low of 9,020.80 in intraday trade.
The BSE Mid-Cap index was up 34.18 points or 0.31% at 11,116.01. The BSE Small-Cap index was up 41.30 points or 0.36% at 11,570.19. Both these indices underperformed the Sensex.
The market breadth indicating the overall health of the market was negative. On BSE, 1,440 shares declined and 1,315 shares rose. A total of 114 shares were unchanged.
Index heavyweight HDFC rose 2.16% to Rs 1,393.55. The stock hit a record high of Rs 1,399.80 in intraday trade. The stock hit a low of Rs 1,384 so far during the day.
FMCG stocks advanced. Nestle India (up 3.28%), Marico (up 3.78%), Godrej Consumer Products (up 2.32%), Emami (up 2.31%), Britannia Industries (up 0.54%), and Dabur India (up 0.36%) edged higher. Hindustan Unilever (down 0.53%) and Colgate-Palmolive (India) (down 0.48%) edged lower.
Jaiprakash Power Ventures jumped after the company said it has entered into a further Standstill and Voting Agreement dated 3 March 2015 with some bond holders for a rescheduling of the company's redemption obligations in respect of foreign currency convertible bonds which matured on 13 February 2015. The stock was up 4.15% at Rs 12.79.
Convertible bonds worth $200 million, issued by Jaiprakash Power in 2010, matured on 13 February 2015. On 27 January 2015, the company announced that it was facing a cash crunch and was not in a position to repay bondholders on the due date. Hence, it entered into an interim standstill agreement on 12 February 2015 with certain holders of the bonds that collectively hold 81.04%, of the aggregate principal amount of the bonds. Pursuant to the agreement, the standstill period on bond repayment extended till 3 March 2015. The interim standstill agreement was later extended till 30 April 2015.
Meanwhile, the company announced during trading hours today, 4 March 2015, that on the basis of the standstill and voting agreement, it will issue a notice on 6 March 2015, convening a meeting of bondholders on 30 March 2015. In the meeting, the company will seek an extension of the bond maturity date to 13 February 2016.
The company will also seek an installment-based redemption during the extended tenor, including that the company will pay $25 million on the date the rescheduling becomes effective and will pay a further $75 million upon receipt of the proceeds of the sale of its Baspa-II Hydro-electric project and Karcham Wangtoo Hydro-electric project.
Balance amount is payable on or before 13 February 2016, linked to certain liquidity events in relation to the company requiring mandatory prepayment. The terms of the rescheduling remain subject to receipt of approval of the Reserve Bank of India (RBI), JP Power said.
In the foreign exchange market, the rupee edged lower against the dollar in volatile trade. The partially convertible rupee was hovering at 61.95, compared with its close of 61.92 during the previous trading session.
Brent crude oil futures edged lower after previous trading session's gains. Brent for April settlement was off 45 cents at $60.57 a barrel. The contract had advanced $1.48 a barrel or 2.48% to settle at $61.02 a barrel during the previous trading session.
The Reserve Bank of India (RBI) surprised financial markets today, 4 March 2015, by announcing a reduction in its benchmark lending rate viz. the repo rate by 25 basis points in an unscheduled monetary policy review. The repo rate has been cut to 7.5% from 7.75%, with immediate effect. RBI Governor Raghuram Rajan cited relatively benign inflation and structural reforms embedded in Union Budget 2015-16 for the decision to cut the repo rate.
The RBI said that further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment.
The RBI said disinflation is evolving at a faster pace than earlier envisaged. RBI Governor Raghuram Rajan said in a statement that softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6% in the second half. The government's fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the RBI to be pre-emptive in its policy action to utilise available space for monetary accommodation, Rajan said. The RBI governor also pointed out to disinflationary impulses arising from a firm rupee.
The RBI governor said that there are many important and valuable structural reforms embedded in Union Budget 2015-16 which will help improve supply over the medium term. There is a welcome intent to shift from spending on subsidies to spending on infrastructure, and to better target and further reduce subsidies through direct transfers, Rajan said commenting on the Union Budget 2015-16 tabled by Finance Minister Arun Jaitley in parliament on 28 February 2015. The central government is transferring a significantly larger amount to the states, without entirely devolving responsibility for funding central programmes. To the extent that state budget deficits narrow, the general fiscal deficit will be lower, according to the RBI governor. The realised net fiscal impulse will depend on both central and state government actions going forward. Jaitley announced postponement of fiscal consolidation to the 3% target by one year while presenting Union Budget 2015-16 on 28 February 2015. Jaitley deferred the target of achieving 3% fiscal deficit by a year till FY 2018 from FY 2017 set earlier. Jaitley has set fiscal deficit target of 3.9% for 2015-16, 3.5% for 2016-17 and 3% for 2017-18.
The RBI said that uncertainties surrounding inflation projection are not insignificant. Oil prices have firmed up in recent weeks, and significant further strengthening, perhaps as a result of unanticipated geo-political events, will alter the inflation outlook, the RBI said. Other international commodity prices are expected to remain benign, given still-sluggish global demand conditions. Food prices will be affected by the seasonal upturn that typically occurs ahead of the south-west monsoon and, therefore, steps the government takes on food management will be critical in determining the inflation outlook, the RBI said. The possible spill over of volatility from international financial markets through exchange rate and asset prices channels is also still a significant risk, the RBI said.
The central government, last month, signed a memorandum with the Reserve Bank of India, setting out clear inflation objectives for the RBI. Rajai said this makes explicit what was implicit before. Rajan said that the government and the Reserve Bank of India have common objectives and said that fiscal and monetary policy will work in a complementary way. Going forward, the RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in the agreement, i.e., to 4 per cent by the end of a two year period starting fiscal year 2016-17.
Rajan said that the RBI does not target a level for the exchange rate, nor does it have an overall target for foreign exchange reserves. It does intervene on occasion, in both directions, to reduce avoidable volatility in the exchange rate. Any reserve build-up is a residual consequence of such actions rather than a direct objective, Rajan said.
Meanwhile, the outcome of a survey showed that India's services sector activity expanded at its fastest pace in eight months in February, boosted by a solid rise in new work. The HSBC Services Purchasing Managers' Index rose to 53.9 in February from 52.4, its highest since June 2014. Strong new business growth was the primary factor cited by survey respondents for the increase in activity. Rising output was recorded in four of the six broad areas of the service economy, the exceptions being Financial Intermediation and Transport & Storage. Nonetheless, the latest improvement in economic prospects across the services sector is yet to feed through to the labour market, as employment was little-changed over the month. Reflecting lower fuel prices, overall costs faced by services firms rose at a softer rate last month, according to the survey.
In overseas markets, European stock markets edged higher. Key indices in Germany, France, and UK were up 0.22% to 0.6%.
A monthly monetary policy review from the European Central Bank is scheduled tomorrow, 5 March 2015.
Asian stock markets were mixed today, 4 March 2015. Key indices in Hong Kong, South Korea, Japan and Indonesia were off 0.15% to 1.1%. Key indices in China, Taiwan and Singapore were up 0.1% to 0.53%.
China's services sector strengthened by a fraction in February, according to HSBC. The monthly purchasing managers' index for the services sector was 52, a slight increase from the six-month low of 51.8 in January, latest data showed today, 4 March 2015. Any level above 50 reflects growth in the survey by HSBC and compiled by Markit.
Japan's services sector shrank last month, halting a three-month trend of meagre growth. Markit's monthly index of the services sector fell from 51.3 in January to 48.5, the lowest reading since April, latest data showed today, 4 March 2015. A score above 50 is needed to indicate growth.
Australia's gross domestic product (GDP) grew at an annual pace of 2.5%, matching estimates, data showed today, 4 March 2015. This is the slowest year-to-year pace in four quarters. Quarterly GDP grew just 0.5%, missing the consensus estimate at 0.6%, though rising from an upwardly revised 0.4% pace in the prior quarter.
Trading in US index futures indicated that the Dow could fall 21 points at the opening bell today, 4 March 2015. US stock markets pulled back from recent highs to close lower yesterday, 3 March 2015, in light volume trade as investors weighed soft auto sales and looked ahead to domestic data.
The US government is scheduled to announce US nonfarm payroll data for February 2015 on Friday, 6 March 2015.
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