On the macro front, data released by the government after market hours yesterday, 13 June 2016 showed that the all-India general consumer prices index (CPI) inflation increased to 21-months high of 5.76% in May 2016 (new base 2012=100), while recording rise for second straight month. The CPI inflation had stood at 5.47% in April 2016. The corresponding provisional inflation rate for rural area was 6.45% and urban area 4.89% in May 2016 as against 6.17% and 4.68% in April 2016. However, the core CPI inflation declined to 4.49% in May 2016 from 4.71% in April 2016.
Meanwhile, the inflation based on wholesale price index (WPI) for the month of May 2016 is scheduled to be released by the government today, 14 June 2016. WPI inflation came in at 0.3% in April 2016. WPI turned positive following 17 consecutive months of negative growth.
In overseas markets, most Asian stocks declined following a lower finish in US stocks as investors looked ahead to central bank meetings in the US and Japan. The US Federal Open Market Committee will begin its two-day meeting today, 14 June 2016 while the Bank of Japan will start its two-day meeting tomorrow, 15 June 2016. US stocks declined yesterday, 13 June 2016 as investors turned increasingly jittery ahead of a Federal Reserve policy meeting and a looming vote on 23 June 2016 on Britain's membership in the European Union.
Closer home, foreign portfolio investors (FPIs) bought shares worth a net Rs 212.24 crore yesterday, 13 June 2016, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 597.83 crore yesterday, 13 June 2016, as per provisional data.
Coal India announced after market hours yesterday, 13 June 2016, that the board of directors of Western Coalfields (WCL), a company's subsidiary, at its meeting held on 13 June 2016 approved buyback of 7.42 lakh fully paid equity shares, or 25% equity, of face value of Rs 1000 each from the members of WCL for an aggregate amount not exceeding Rs 789.30 crore. The shares will be purchased at Rs 10,626.73 each.
Banks stocks will be in focus as the Reserve Bank of India (RBI) yesterday, 13 June 2016, issued guidelines on a 'Scheme for Sustainable Structuring of Stressed Assets'.
A resolution of large borrowal accounts which are facing severe financial difficulties may require co-ordinated deep financial restructuring which often involves a substantial write-down of debt/making large provisions. Often such high write-downs act as a disincentive to lenders to effect a sustainable change in the liability structure of borrows facing stress. Banks have also represented for a regulatory framework which would facilitate lenders taking up the exercise of reworking of the liability structure of companies to which they have significant exposures, in the context of asset quality stress currently faced by them, RBI said in a statement.
Accordingly, RBI, after due consultation with lenders, has formulated the 'Scheme for Sustainable Structuring of Stressed Assets' (S4A) as an optional framework for the resolution of large stressed accounts. The S4A envisages determination of the sustainable debt level for a stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide upside to the lenders when the borrower turns around, RBI said.
In order to make sure that that the entire exercise is carried out in a transparent and prudent manner, S4A envisages that the resolution plan will be prepared by credible professional agencies, while an Overseeing Committee, set up by the Indian Banks Association, in consultation with the RBI, comprising of eminent experts will independently review the processes involved in preparation of the resolution plan, under the S4A, for reasonableness and adherence to the provisions of these guidelines, and opine on it, it added.
Weakness in global stocks and anemic domestic industrial production data for April 2016 triggered a fresh slide of key benchmark indices yesterday, 13 June 2016. The Sensex lost 238.98 points or 0.9% to settle at 26,396.77, its lowest closing level since 26 May 2016.
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