Key benchmark indices languished in negative zone as the Reserve Bank of India (RBI) surprised markets by raising its main lending rate viz. the repo rate by 25 basis points to 8% after Third Quarter Review of Monetary Policy for 2013-14 today, 28 January 2014, and said that it is only by bringing down inflation to a low and stable level that monetary policy can contribute to reviving consumption and investment in a sustainable way. The barometer index, the S&P BSE Sensex, was down 72.96 points or 0.35%, up 80.21 points from the day's low and off 160.86 points from the day's high. The market breadth, indicating the overall health of the market, was positive.
Reliance Industries (RIL) gained in volatile trade. IT stocks declined on weak US economic data. Just Dial tumbled after the company reported flat sequential earning in Q3 December 2013 after market hours on Monday, 27 January 2014.
Key benchmark indices edged higher in early trade on firm Asian stocks. Key benchmark indices trimmed gains after hitting fresh intraday high in morning trade. Volatility ruled the roost in mid-morning trade as the key benchmark indices reversed intraday gains after the Reserve Bank of India (RBI) raised its main lending rate viz. the repo rate by 25 basis points to 8% after Third Quarter Review of Monetary Policy for 2013-14 today, 28 January 2014. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in more than 8-1/2 weeks. The RBI made the monetary policy announcement at 11:00 IST. Key benchmark indices languished in red in afternoon trade.
The market sentiment was hit adversely by data showing that foreign funds resort to heavy selling of Indian stocks on Monday, 27 January 2014. Foreign institutional investors (FIIs) sold shares worth a net Rs 1334.21 crore on Monday, 27 January 2014, as per provisional data from the stock exchanges.
The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month January 2014 series to February 2014 series. The January 2014 F&O contracts expire on Thursday, 30 January 2014.
At 12:20 IST, the S&P BSE Sensex was down 72.96 points or 0.35% to 20,634.49. The index lost 153.17 points at the day's low of 20,554.28 in mid-morning trade, its lowest level since 28 November 2013. The index gained 87.90 points at the day's high of 20,795.35 in mid-morning trade.
The 50-unit CNX Nifty was down 24.25 points or 0.4% to 6,111.60. The index hit a low of 6,085.95 in intraday trade, its lowest level since 28 November 2013. The index hit a high of 6,163.60 in intraday trade.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,063 shares rose and 1,038 shares dropped. A total of 158 shares were unchanged.
The total turnover on BSE amounted to Rs 1469 crore by 12:15 IST, compared with Rs 1219 crore by 11:15 IST.
Among the 30-share Sensex pack, 19 stocks declined and rest of them gained.
Hindustan Unilever (down 2.11%), Axis Bank (down 2.67%) and Cipla (down 1.69%) edged lower from the Sensex pack.
Reliance Industries (RIL) gained 1.06% at Rs 851.70 in volatile trade. The scrip hit high of Rs 855 and low of Rs 845.90 so far during the day.
IT stocks declined on weak US economic data. US is the biggest outsourcing market for the Indian IT firms.
Infosys fell 1.38% to Rs 3,681. The stock had hit a record high of Rs 3,799 in intraday trade on 23 January 2014.
Tata Consultancy Services (TCS) (down 0.39%). Wipro (down 0.55%), Tech Mahindra (down 1.28%) and HCL Technologies (down 0.45%) fell.
Just Dial tumbled 13.87% to Rs 1,269, with the stock extending intraday slide. The company's net profit rose 86.4% to Rs 29.75 crore on 25.91% increase in total income from operations to Rs 119.86 crore in Q3 December 2013 over Q3 December 2012. The result was announced after market hours on Monday, 27 January 2014.
Just Dial's net profit rose 3.80% to Rs 29.75 crore on 6.39% increase in total income from operations to Rs 119.86 crore in Q3 December 2013 over Q2 September 2013.
Profit from operations before other income, finance costs and exceptional items fell 5.52% to Rs 29.09 crore in Q3 December 2013 over Q2 September 2013.
Mr. V.S.S. Mani, MD & CEO, Just Dial said: "We witnessed another quarter of good revenue growth and margin expansion. We have launched a number of new products in the 'Search Plus' services and have begun the process of engagement with our SME partners for those services. With other 'Search Plus' products in the pipeline, we intend to cover almost a whole range of day to day tasks that users conduct and provide them with a seamless search and transaction experience on a single platform."
Cash and investments totaled to Rs 608 crore as at 31 December 2013 as compared to Rs 476 crore as at 31 December 2012.
The services agreement dated 29 March 2011, between the company and Just Dial Global Private (JDGPL), under which the company provides support services, including infrastructure facilities and functional workstations, to JDGPL is due for expiry on 14 February 2014. The board of directors considered and approved renewal of the services agreement between the company and JDGPL, subject to prior approval of the Central Government.
Munjal Auto Industries spurted 10.2% after net profit jumped 49.6% to Rs 13.49 crore on 24.5% growth in net sales to Rs 216.13 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Monday, 27 January 2014.
Lanco Industries surged 3.59% after the company reported a net profit of Rs 8.83 crore in Q3 December 2013 as against net loss of Rs 9.11 crore in Q3 December 2012. Lanco Industries' net sales rose 23.4% to Rs 256.76 crore in Q3 December 2013 over Q3 December 2012. The Q3 result was announced after market hours on Monday, 27 January 2014.
In the foreign exchange market, the rupee edged higher against the dollar the Reserve Bank of India (RBI) said that the recent resumption of portfolio flows, both equity and debt, alongside the pick-up in FDI and external commercial borrowings that is underway should help finance the current account deficit comfortably during the current financial year. The partially convertible rupee was hovering at 62.89, compared with its close of 63.10/11 on Monday, 27 January 2014. The RBI said that foreign exchange reserves have been rebuilt since September 2013 and that oil marketing companies have been buying foreign exchange in the market to repay the Reserve Bank of India when their swaps come due. Despite a significantly more comfortable external position than in the summer of 2013, both fiscal and monetary authorities need to continue their efforts at macroeconomic stabilisation, the RBI said.
The Reserve Bank of India (RBI) surprised markets by raising its main lending rate viz. the repo rate by 25 basis points to 8% after Third Quarter Review of Monetary Policy for 2013-14 today, 28 January 2014. Consequently, the reverse repo rate under the LAF stands adjusted at 7% and the marginal standing facility (MSF) rate and the Bank Rate at 9%, the RBI said. The central bank kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liability (NDTL).
While retail inflation measured by the consumer price index (CPI) declined significantly on account of the anticipated disinflation in vegetable and fruit prices, it remains elevated at close to double digits, the RBI said. Moreover, inflation excluding food and fuel has also been high, especially in respect of services, indicative of wage pressures and other second round effects. In terms of the wholesale price index (WPI), headline inflation eased to a four-month low in December on the back of a sharp decline in vegetable and fruit prices. Non-food manufactured products (NFMP) inflation, however, rose in December on an uptick in prices of chemicals, non-metallic minerals and paper products. Hardening prices of services and key intermediates seen in conjunction with rising bank credit, increase in order books, pick-up in capacity utilisation and the decline in inventories of raw materials and finished goods in relation to sales suggests that aggregate demand pressures are still imparting an upside to overall inflation. The RBI said that it is critical to address these risks to the inflation outlook resolutely in order to stabilise and anchor inflation expectations, even while recognizing that the economy is weak and substantial fiscal tightening is likely in Q4 March 2014.
In the Mid-Quarter Review on 18 December 2013, the policy decision was to wait for more data before acting. With the subsequent substantial fall in food prices, especially of vegetables, headline inflation has fallen significantly. Some of these effects will continue into the next round of data readings, the RBI said. CPI inflation excluding food and fuel has, however, remained flat and WPI inflation excluding food and fuel has risen, the central bank said in a statement.
The Dr. Urjit Patel Committee has indicated a "glide path" for disinflation that sets an objective of below 8% CPI inflation by January 2015 and below 6% CPI inflation by January 2016. The Reserve Bank of India's baseline projections set out in the accompanying Review of Macroeconomic and Monetary Developments for Q3 of 2013-14 indicate that over the ensuing 12-month horizon, and with the current policy stance, there are upside risks to the central forecast of 8%, the RBI said. An increase in the policy rate will not only be consistent with the guidance given in the Mid-Quarter Review but also will set the economy securely on the recommended disinflationary path, the RBI said. The extent and direction of further policy steps will be data dependent, though if the disinflationary process evolves according to this baseline projection, further policy tightening in the near term is not anticipated at this juncture, the central bank said in a statement. RBI Governor Dr. Raghuram Rajan said in a statement that if inflation eases at a pace that is faster than the RBI currently anticipates and if that reduction is expected to be sustained, the Reserve Bank of India will have room to become more accommodative.
If policy actions succeed in delivering the desired inflation outcome, real GDP growth can be expected to firm up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15, with risks balanced around the central estimate of 5.5 per cent, the RBI said. A pick-up in investment in an environment in which external demand continues to be supportive of export performance could impart an upside to this forecast, the RBI said.
The Reserve Bank is engaged in active management of liquidity to offset frictional and structural pressures so that there is adequate credit flow to the supply side of the economy, the central bank said.
Despite a significantly more comfortable external position than in the summer of 2013, both fiscal and monetary authorities need to continue their efforts at macroeconomic stabilisation, the RBI said.
Since the Mid-Quarter Review of December 2013, the global recovery is gaining traction, led by the strengthening of the US economy, but it is still uneven and subdued in the Euro area and Japan, and a slowdown in China seems to be underway, the RBI said. Notwithstanding the boost from stronger external demand, uncertainty continues to surround the prospects for some emerging economies, with domestic fragilities getting accentuated. Financial market contagion is a clear potential risk, the RBI said.
The RBI said that some loss of momentum of growth in India is expected in Q3 December 2013, despite a strong pick-up in rabi sowing. Industrial activity remains in contractionary mode, mainly on account of manufacturing, which declined for the second month in succession during Q3. Consumption demand continues to weaken and lacklustre capital goods production points to stalled investment demand. Fiscal tightening through Q3 and Q4 is likely to exacerbate the weakness in aggregate demand. Lead indicators of services suggest a subdued outlook, barring some pick-up in transport and communication activity.
Governor Dr. Rajan said that elevated levels of inflation erode household budgets and constrict the purchasing power of consumers. This, in turn, discourages investment and weakens growth. High inflation weakens the rupee, he said. Inflation is also a tax that is grossly inequitable, falling hardest on the very poor, Dr. Rajan said. It is only by bringing down inflation to a low and stable level that monetary policy can contribute to reviving consumption and investment in a sustainable way, Dr. Rajan said. The so-called trade-off between inflation and growth is a false trade-off in the long run, he said. "It is possible to bring inflation under control without a substantial sacrifice of short term growth, provided we do what is necessary, and are patient," Dr. Rajan said in a statement.
Asian stocks rose on Tuesday, 28 January 2014, before the Federal Reserve meets to discuss a further reduction in stimulus. Key benchmark indices in Taiwan, Hong Kong, Indonesia, Singapore, South Korea and China rose by 0.08% to 0.63%. Key benchmark indices in Japan and Taiwan fell 0.17% to 1.58%.
Profit at China's industrial companies increased 6 percent in December from a year earlier, after rising 9.7 percent in the previous month, the National Bureau of Statistics said today, 28 January 2014.
Thailand's manufacturing production decreased 6.2 percent in December from a year earlier, according to a report today, 28 January 2014.
Trading in US index futures indicated that the Dow could advance 49 points at the opening bell on Tuesday, 28 January 2014. US stocks edged lower in a volatile session on Monday, 27 January 2014, as worries over emerging-markets currencies unsettled investors. Stocks began the day on a higher note following upbeat results from Caterpillar, but fell after home sales data showed a larger drop in December than anticipated.
Sales of new single-family homes fell in December, but the whole of 2013 saw the highest sales level in five years, the US government reported Monday, 27 January 2014. Sales of new single-family homes dropped 7% in December due to harsh winter weather. The median price of new homes ticked up in December and for 2013, the median price hit $265,800, up 8.4% from the prior year, the strongest annual growth since 2005.
A two-day monetary policy meeting of the Federal Open Market Committee (FOMC) begins today, 28 January 2014. Federal Reserve officials have been scrutinizing US economic data to determine the timing and pace of reductions to asset purchases. The central bank decided at its December gathering to begin cutting its monthly bond buying by $10 billion to $75 billion.
In Turkey, the country's central bank on Monday, 27 January 2014, said it will "take the necessary policy measures for price stability" at a meeting on Tuesday, 28 January 2014. The announcement came after the currency's decline.
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