Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade after Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan said that the central bank's focus remains on controlling inflation. The barometer index, the S&P BSE Sensex, was down 156.35 points or 0.74%, up about 5 points from the day's low and off close to 100 points from the day's high. The market breadth, indicating the overall health of the market, was negative. Weakness in Asian stocks hit sentiment on the domestic bourses adversely. In the foreign exchange market, the rupee edged lower against the dollar.
Metal stocks edged lower on profit booking after recent gains. Some pharma stocks edged lower. Auto stocks were mixed.
Asian stocks edged lower on Wednesday, 11 December 2013, on speculation a US budget agreement will boost prospects of tapering the Federal Reserve's stimulus program. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
The market edged lower in early trade on weak Asian stocks. A bout of volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday low in morning trade. Weakness continued on the bourses in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade after Reserve Bank of India (RBI) Dr. Governor Raghuram Rajan said that the central bank's focus remains on controlling inflation.
At 12:20 IST, the S&P BSE Sensex was down 156.35 points or 0.74% to 21,098.91. The index fell 160.98 points at the day's low of 21,094.28 in early afternoon trade, its lowest level since 6 December 2013. The index declined 54.75 points at the day's high of 21,200.51 in early trade.
The CNX Nifty was down 46.45 points or 0.73% to 6,286.40. The index hit a low of 6,285.55 in intraday trade, its lowest level since 6 December 2013. The index hit a high of 6,313.25 in intraday trade.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,233 shares fell and 921 shares rose. A total of 142 shares were unchanged.
From the 30-share Sensex pack, 21 stocks fell and rest rose. SBI (down 1.95%), Bhel (down 1.96%) and ONGC (down 2.97%) edged lower from the Sensex pack.
Auto stocks were mixed. Tata Motors dropped 2.69%.
M&M (up 0.42%), and Maruti Suzuki India (up 0.79%) edged higher.
Shares of two wheeler makers also were mixed. Bajaj Auto rose 0.74%.
Hero MotoCorp fell 0.87% to Rs 2184 on profit booking. The stock had hit 52-week high of Rs 2,214.70 in intraday trade on Tuesday, 10 December 2013.
Some pharma stocks edged lower. Dr Reddy's Laboratories (down 1.08%), Ranbaxy Laboratories (down 0.26%) and Sun Pharmaceutical Industries (down 0.72%) declined.
Metal stocks edged lower on profit booking after recent gains. Sail (down 1.46%), JSW Steel (down 0.89%), Tata Steel (down 0.24%), Hindalco Industries (down 0.36%), Sesa Sterlite (down 0.28%), Hindustan Zinc (down 1.82%), Hindustan Copper (down 0.71%) and National Aluminum Company (down 0.91%), declined.
SKF India rose 1.07% after a mutual fund bought 0.97% stake in the company on Tuesday, 10 December 2013. HDFC Equity Fund bought 5.10 lakh shares or 0.97% stake at Rs 664 per share in SKF India through a bulk deal on NSE on Tuesday, 10 December 2013.
In the foreign exchange market, the rupee edged lower against the dollar on speculation a US budget agreement will boost prospects of tapering the Federal Reserve's stimulus program. The partially convertible rupee was hovering at 61.35, compared with its close of 61.04/05 on Tuesday, 10 December 2013.
India's trade deficit declined sharply to $9.219 billion in November 2013, from $17.203 billion in November 2012, data released by the government today, 11 December 2013, showed. Merchandise exports rose 5.86% year-on-year (YoY) at $24.613 billion in November 2013. Imports declined 16.37% YoY at $33.833 billion in November 2013. Oil imports declined 1.1% to $12.964 billion. Non-oil imports dropped 23.69% at $20.868 billion.
The government will unveil industrial production data for October 2013 after trading hours tomorrow, 12 December 2013. Industrial output is estimated to fall 1.5% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market. Industrial production rose 2% in September 2013, showing increase in growth from 0.4% growth recorded in August 2013.
Data on inflation based on the general consumer price index (CPI) for November 2013 will also be unveiled after trading hours tomorrow, 12 December 2013. CPI (combined) for November 2013 is estimated at 10% in November 2013, as per the median estimate of a poll of economists carried out by Capital Market. The CPI inflation (combined) for October 2013 stood at 10.09% (y-o-y), higher than 9.84% (y-o-y) seen in September 2013.
The government will unveil data on inflation based on the wholesale price index (WPI) for November 2013 on 16 December 2013. WPI is seen easing a bit at 6.9% in November 2013, from 7% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market.
The Reserve Bank of India (RBI) announces next Mid-Quarter Review of Monetary Policy for 2013-14 on 18 December 2013. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled 28 January 2014.
The focus of the Reserve Bank of India remains on inflation, Governor Raghuram Rajan said on Wednesday, 11 December 2013, adding growth seems to be stabilising, although it is too early to call a bottom. Rajan added the rupee had stabilised "somewhat", but said there is no room for complacency. He also called on the government to continue its efforts to contain the fiscal deficit and said raising subsidised diesel prices to market levels would help. "Our effort is firmly on controlling inflation," Rajan said during a speech to the Delhi Economic Conclave organised by India's Finance Ministry. "Growth is stabilising though it is too early to say it has bottomed at this point," he also said.
Rajan also reiterated the central bank would continue to focus on developing markets, adding the RBI is also keen to strengthen debt markets and introduce more products. Rajan also said the RBI would introduce measures to improve liquidity and depth in government bonds, known widely in India as G-secs. "We will roll out more measures to improve liquidity and depth of G-sec market," he said.
Rajan also said that the Reserve Bank of India will announce next weeks steps to recognise and resolve financial stresses, including making it more expensive for so-called wilful defaulters to borrow funds. The RBI defines a wilful defaulter as a borrower who is able but unwilling to pay, or one that has diverted loan proceeds for uses other than their initially stated intention. Wilful defaulters can also refer to borrowers that overstate profits in order to obtain a loan. "For wilful defaulters, or the category that we call un-cooperative defaulters, future borrowing will become more expensive," Rajan said.
Global rating agency Standard & Poor's (S&P) today, 11 December 2013, said that India's sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms. S&P has a "negative" outlook on India's sovereign ratings, meaning any downgrade from its current "BBB-minus" would place the country's debt in so-called "junk."
Finance Minister P. Chidambaram today, 11 December 2013, said that the government will not compromise on fiscal prudence and will contain its fiscal deficit and narrow it to 3% of gross domestic product by the fiscal year ending in March 2017. The comments come a day after Fitch Ratings had warned the setback for the Congress party in recent state elections could imperil the fiscal deficit target by tempting the government to have less restraint on spending. The fiscal deficit target for the current fiscal year ending in March 2014 is set at 4.8% of GDP and Chidambaram has repeatedly pledged the country would meet the target. "There will be no compromise on the decision to walk on the path of fiscal prudence and contain the fiscal deficit step by step, year by year, until we the reach the goal of 3% of GDP in 2016/17," Chidambaram said. The finance minister also highlighted the government would do all it can to moderate inflation, given the RBI only has monetary policy as a "blunt tool" to contain rising food prices.
The Asian Development Bank (ADB) on Wednesday kept its growth forecast for India at 4.7% for this year, and sees the country growing at 5.7% in 2014. The Manila-based bank slightly raised its forecast for China this year and the next, aided by the impact of government reforms and better prospects for key trading partners. The bank lifted its 2013 forecast for China to 7.7%, from 7.6% in October. It now sees 2014 growth at 7.5% rather than 7.4%. However, the ADB lowered estimates for Southeast Asia this year and in 2014, in the wake of a strong typhoon in the Philippines and political uncertainties in Thailand. The bank kept its growth forecast for developing Asia at 6% this year and 6.2% next year.
Asian stocks edged lower on Wednesday, 11 December 2013, on speculation a US budget agreement will boost prospects of tapering the Federal Reserve's stimulus program. Key benchmark indices in Taiwan, South Korea, Indoensia, Singapore, China, Japan and Hong Kong were off 0.11% to 1.89%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
Trading in US index futures indicated a flat opening of US stocks on Wednesday, 11 December 2013. US stocks fell on Tuesday as investors weighed federal budget negotiations and better-than-estimated economic data to gauge the timing of any Federal Reserve stimulus cuts. The US budget deal, worked out between chief negotiators Senator Patty Murray and Representative Paul Ryan, would set spending at about $1.01 trillion in 2014, higher than the $967 billion required in a 2011 budget accord. A partial shutdown in October lasted for 16 days because lawmakers couldn't agree on how to fund the government.
Meanwhile, the latest data showed job openings in the US climbed to a five-year high in October, indicating employers were confident about demand even as Washington's budget impasse shuttered parts of the federal government. Another report showed wholesale trade sales and inventories increased more than economists forecast.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
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