Banking stocks led losses as key benchmark indices slumped after Minister for Earth Sciences Dr Harsh Vardhan said the India Meteorological Department (IMD) has prepared the 2nd stage long range forecast of monsoon which indicates that rainfall for the country as a whole is likely to be deficient this year. The barometer index, the S&P BSE Sensex, hit its lowest level in almost three weeks and the 50-unit CNX Nifty hit 2-1/2-week low as these two key benchmark indices extended intraday losses in late trade. The Sensex was provisionally off 682.96 points or 2.45% to 27,166.03.
Dr Harsh Vardhan said that the IMD has downgraded this year's monsoon forecast to 88% of the long period average with a model error of plus/minus 4%, from April forecast of 93% of the long period average with a model error of plus/minus 5%. His comments came shortly after the Reserve Bank of India (RBI) Governor Dr. Raghuram G. Rajan said the RBI decided to front-load a rate cut at today's policy and wait for more certainty on both the monsoon outturn as well as the effects of government responses if it turns out to be weak. The RBI cut its benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review today, 2 June 2015. The RBI's announcement came at 11:00 IST.
Today's decline on the domestic bourses was broad based, with more than two losers against every gainer on BSE. The BSE Mid-Cap index was off 2.26%. The BSE Small-Cap index was off 2.11%. A number of stocks which are the constituents of the BSE Small-Cap index fell 2% to 20%.
Shares of two-wheeler makers and tractor major Mahindra & Mahindra edged lower after the downgrade in monsoon forecast. Bank stocks edged lower after the Reserve Bank of India (RBI) cut its benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review today, 2 June 2015, matching market expectations.
Foreign portfolio investors bought shares worth a net Rs 113.47 crore yesterday, 1 June 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 49.34 crore yesterday, 1 June 2015, as per provisional data released by the stock exchanges.
In overseas markets, European stocks edged lower amid ongoing uncertainty over Greece's debt situation. Asian stocks edged lower after an encouraging reading on US manufacturing activity in May increased the likelihood that the US Federal Reserve will raise interest rates this year. US stocks ended with modest gains yesterday, 1 June 2015, recovering part of last week's losses in a session marked by cautious trading as investors reacted to mixed economic data.
As per provisional closing, the S&P BSE Sensex was down 682.96 points or 2.45% to 27,166.03. The index lost 702.31 points at the day's low of 27,146.68 in late trade, its lowest level since 14 May 2015. The index rose 53.54 points at the day's high of 27,902.53 in early trade.
The 50-unit CNX Nifty was down 196.95 points or 2.34% at 8,236.45, as per provisional closing. The index hit a low of 8,226.05 in intraday trade, its lowest level since 15 May 2015. The index hit a high of 8,445.35 in intraday trade.
The BSE Mid-Cap index was down 242.09 points or 2.26% at 10,470.34. The BSE Small-Cap index was down 237.88 points or 2.11% at 11,041.90. The fall 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 quite weak, with more than two losers against every gainer on BSE. 1,858 shares fell and 823 shares rose. A total of 102 shares were unchanged.
The total turnover on BSE amounted to Rs 3076 crore, higher than turnover of Rs 2699.25 crore registered during the previous trading session.
Shares of tractor major Mahindra & Mahindra edged lower after the downgrade in monsoon forecast. The stock fell 2.37% to Rs 1,225.80.
Shares of two-wheeler makers edged lower after the downgrade in monsoon forecast. Bajaj Auto fell 2.81% to Rs 2,270.60 after total sales fell 2% to 3.45 lakh units in May 2015 over May 2014. The announcement was made during market hours today, 2 June 2015. Bajaj Auto's motorcycle sales dropped 4% to 3.01 lakh units in May 2015 over May 2014. Commercial vehicles sales rose 13% to 43,576 units in May 2015 over May 2014. Exports rose 2% to 1.58 lakh units in May 2015 over May 2014.
Hero MotoCorp fell 3.72% to Rs 2,609 after the company said its total two-wheeler sales fell 5.41% to 5.69 lakh units in May 2015 over May 2014. The announcement was made after trading hours yesterday, 1 June 2015.
TVS Motor Company's (TVS Motor) fell 3.09% to Rs 228.70. The company's total sales rose 6% to 2.20 lakh units in May 2015 over May 2014. The announcement was made after market hours yesterday, 1 June 2015.
Bank stocks edged lower after the Reserve Bank of India (RBI) cut its benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review today, 2 June 2015, matching market expectations.
Among private sector banks, Axis Bank (down 4.24%), IndusInd Bank (down 3.86%), ICICI Bank (down 3.71%), Yes Bank (down 3.57%), HDFC Bank (down 2.67%), Federal Bank (down 2.63%), Kotak Mahindra Bank (down 2.33%) and City Union Bank (down 0.83%) edged lower.
The RBI said that commercial banks have started passing through some of the past rate cuts into their lending rates. The growth in bank credit remains subdued. The central bank said that banks should pass through the sequence of rate cuts into lending rates.
Among PSU banks, Union Bank of India (down 8.03%), Andhra Bank (down 5.45%), UCO Bank (down 5.03%), IDBI Bank (down 4.72%), Canara Bank (down 4.59%), State Bank of India (down 4.39%), Syndicate Bank (down 3.86%), Bank of India (down 3.72%), Bank of Baroda (down 3.33%), Bank of Maharashtra (down 2.82%), Vijaya Bank (down 2.8%), United Bank of India (down 2.57%), Punjab and Sind Bank (down 2.46%), Indian Bank (down 2.43%), Corporation Bank (down 2.29%), Punjab National Bank (down 1.92%), Dena Bank (down 1.34%) and Central Bank of India (down 1.33%) edged lower.
The RBI suggested that a targeted infusion of bank capital into scheduled public sector commercial banks is required so that adequate credit flows to the productive sectors of the economy as investment picks up.
Allahabad Bank fell 6.95% to Rs 99.15. Allahabad Bank during market hours today, 2 June 2015, announced that the bank has decided to cut its base rate and benchmark prime lending rate (BPLR) by 30 basis points each, effective from 8 June 2015. Consequently, the base rate will be reduced to 9.95% from existing 10.25% and BPLR of the bank will be reduced to 14.2% from existing 14.5% with effect from 8 June 2015.
Meanwhile, Minister for Earth Sciences Dr Harsh Vardhan today, 2 June 2015, said the India Meteorological Department (IMD) has prepared the 2nd stage long range forecast of monsoon which indicates that rainfall for the country as a whole is likely to be deficient this year. He made these comments at the time of dedicating the country's high performance computing (HPC) facility named "Bhaskara" at the National Centre for Medium Range Forecasting (NCMRWF) in Noida. Dr Harsh Vardhan said that the IMD has downgraded this year's monsoon forecast to 88% of the long period average with a model error of plus/minus 4%, from April forecast of 93% of the long period average with a model error of plus/minus 5%. While pointing out that global agencies have predicted that drought conditions might grip especially the western states Dr Harsh Vardhan said that the government is seized of the situation and is putting in place adequate measures.
The IMD will announce the official second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 at 16:30 IST today, 2 June 2015.
The onset of monsoon in Kerala has been delayed. The IMD yesterday, 1 June 2015, said that conditions are becoming favourable for the onset of southwest monsoon over Kerala around 5 June, four days after the scheduled onset date of 1 June.
Meanwhile, the Reserve Bank of India (RBI) cut its benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review today, 2 June 2015. The RBI kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL).
The RBI has raised inflation forecast while trimming growth forecast for the current fiscal year. Inflation based on the consumer price index (CPI) is expected to be pulled down by base effects till August 2015 and will start rising thereafter to about 6% by January 2016, which is slightly higher than the RBI's projections in its April policy review. In its April policy review, the RBI had said that CPI inflation is expected to ease to around 4% by August 2015 and rise therefore to reach 5.8% by the end of the current financial year. The central bank has trimmed its forecast of GDP growth for the current fiscal year to 7.6%, with a downward bias. At its policy review on 7 April 2015, the RBI had forecast GDP growth at 7.8% for the current fiscal year assuming a normal monsoon this year.
India's merchandise export growth has weakened steadily since July 2014 and entered into contraction from January 2015 through April, with a recent shrinking of even volumes exported. Net exports are, therefore, unlikely to contribute as much to growth going forward as they did in the past financial year, according to the central bank. Consequently growth will depend more on a strengthening of domestic final demand.
RBI Governor Dr. Raghuram G. Rajan said in a statement that the RBI decided to front-load a rate cut at today's policy and wait for data that clarify uncertainty. With still weak investment and the need to reduce supply constraints over the medium term to stay on the proposed disinflationary path, a more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty, Rajan said. The agricultural activity was adversely affected by unseasonal rains and hailstorms in north India during March 2015, impinging on an estimated 94 lakh hectares of area sown under the Rabi crop. Successive estimates have been pointing to a worsening of the situation, with the damage to crops like pulses and oilseeds -- where buffer foodstocks are not available in the central pool -- posing an upside risk to food inflation. For the Kharif season, the outlook is clouded by the first estimates of the India Meteorological Department (IMD), predicting that the southwest monsoon will be 7% below the long period average. This has been exacerbated by the confirmation of the onset of El Nino by the Australian Bureau of Meteorology.
Among other risks to inflation, crude prices have been firming amidst considerable volatility and geo-political risks are ever present. The RBI also said that volatility in the external environment could impact inflation. Therefore, a conservative strategy would be to wait, especially for more certainty on both the monsoon outturn as well as the effects of government responses if it turns out to be weak.
India's foreign exchange reserves are currently placed at around $350 billion, providing a strong second line of defence to good macroeconomic policies if external markets turn significantly volatile.
Meanwhile, data released by the government after trading hours yesterday, 1 June 2015, showed that the output of eight core infrastructure sector, carrying 38% weight in the Index of Industrial Production, declined 0.4% in April 2015.
In global commodity markets, Brent crude oil futures edged higher today, 2 June 2015. Brent for July settlement was up 45 cents at $65.33 a barrel. The contract had lost 68 cents or 1.03% to settle at $64.88 a barrel during the previous trading session.
Oil cartel OPEC is expected to keep its production target of 30 million barrels of oil per day unchanged at a meeting scheduled in Vienna on Friday, 5 June 2015. The OPEC meeting is being closely watched for clues about the organization's next moves.
In overseas markets, European stocks edged lower today, 2 June 2015, amid ongoing uncertainty over Greece's debt situation. Key indices in Germany, UK and France were off 0.61% to 0.90%.
Investors continue to monitor developments in Greece's debt talks. The country has to repay 300 million euros ($329 million) to the International Monetary Fund (IMF) by Friday, 5 June 2015. Greece's lenders held an emergency mini-summit yesterday, 1 June 2015 and are preparing a draft text for an agreement, according to reports. According to reports, this will be the final offer to Greece from the lenders.
Greece is scheduled to repay a total of euro 1.6 billion ($1.76 billion) to the International Monetary Fund (IMF) over the period between June 5-19.
Asian stocks edged lower today, 2 June 2015, after an encouraging reading on US manufacturing activity in May increased the likelihood that the US Federal Reserve will raise interest rates this year. Key indices in Taiwan, Singapore, Japan, Hong Kong and South Korea were off 0.05% to 1.51%. China's Shanghai Composite was up 1.69%.
US stocks ended with modest gains yesterday, 1 June 2015, recovering part of last week's losses in a session marked by cautious trading as investors reacted to mixed economic data. Among macro data in US, a report from ISM showed the pace of manufacturing growth rose in May. Other data showed construction spending surged in April but consumer spending was unexpectedly flat in April.
Powered by Capital Market - Live News
