The market may surge in early trade after the Reserve Bank of India (RBI) on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. Trading of CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 58.50 points at the opening bell. Bank stocks may rally after the RBI on Tuesday relaxed some rules that will help banks deal with the notional or marked-to-market loss in their government bond portfolios due to a recent sharp fall in bond prices.
The RBI on Tuesday, 20 August 2013, said it would repurchase government bonds to increase the availability of cash in the banking system, a step that appears to be a partial reversal of the slew of measures it took since mid-July to tighten liquidity. In a late evening news release, the RBI said it would buy back Rs 8000-crore of government bonds on Friday, 23 August 2013. Further repurchase will depend on evolving market conditions, it said. It is important to ensure that the liquidity tightening doesn't harden long-term bond yields and impact the flow of credit to productive sectors of the economy, the central bank said, referring to its buyback plan.
The RBI on Tuesday also relaxed some rules that will help banks deal with the notional or marked-to-market loss in their government bond portfolios due to a recent sharp fall in bond prices. They now don't have to record their current marked-to-market losses immediately as the RBI has allowed them to spread the losses equally over the remaining period of this fiscal year.
The National Stock Exchange (NSE) has decided to remove five stocks viz. Chambal Fertilizers & Chemicals, Gujarat State Petronet, Opto Circuits (India), Punj Lloyd and Shree Renuka Sugars from the futures and options (F&O) segment. Contracts for new expiry months in these five securities will not be issued on expiry of existing contract months, NSE said. However, the existing unexpired contracts of expiry months August 2013, September 2013 and October 2013 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months, NSE said.
Key benchmark indices dropped for the third day in a row on Tuesday, 20 August 2013, on rising expectations that the US Federal Reserve will soon start withdrawing its monetary stimulus to the US economy. The S&P BSE Sensex shed 61.48 points or 0.34% to settle at 18,246.04 on that day, its lowest closing since 12 April 2013.
Foreign institutional investors (FIIs) sold shares worth a net Rs 1424.31 crore on Tuesday, 20 August 2013, as per provisional data from the stock exchanges.
Asian stocks fell on Wednesday, 21 August 2013, before the release of minutes of the Federal Reserve's July meeting. Key benchmark indices in China, Indonesia, Singapore, Hong Kong, Japan, South Korea and Taiwan were down by 0.01% to 1.44%.
US stocks on Tuesday, 20 August 2013, mostly climbed, with the S&P 500 halting its longest losing streak this year, as retailers including Best Buy Co. beat estimates and as Wall Street looked to clues about future US monetary policy.
The Federal Open Market Committee (FOMC) later in the global day today, 21 August 2013, will issue minutes of its recent policy meeting held on 30 and 31 July 2013. The minutes of FOMC meet may help provide clues about the future of Fed's bond-buying program.
The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.
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