Key benchmark indices surged and hit fresh intraday high after the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review. It was widely expected that the central bank will raise repo rate by 25 basis points after monetary policy review today, 18 December 2013, to rein in inflation after recent data showed that both consumer prices and wholesale prices accelerated last month. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both, hit their highest level in almost a week. The Sensex was up 245.78 points or 1.19%, off 59.65 points from the day's high and up 289.22 points from the day's low. The market breadth, indicating the overall health of the market, was strong.
Index heavyweight Reliance Industries (RIL) extended initial gains. Banking and realty stocks edged higher as the Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review contrary to market expectations of a 25 basis point increase. Larsen & Toubro (L&T) rose after the company said that Power Transmission & Distribution Business of L&T Construction has secured a major international EPC order worth Rs 2935 crore in Qatar.
The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both, hit their lowest level in more than 2-1/2 weeks after opening with a downward gap. A bout of volatility was witnessed in early trade as the key benchmark indices reversed initial losses. Key benchmark indices trimmed gains after hitting fresh intraday high in morning trade. Key benchmark indices surged and hit fresh intraday high after the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz. the repo rate unchanged at 7.75% after mid-quarter monetary policy review. The RBI's decision hit the market at around 11:00 IST.
Foreign institutional investors (FIIs) bought shares worth a net Rs 249.93 crore on Tuesday, 17 December 2013, as per provisional data from the stock exchanges.
At 11:20 IST, the S&P BSE Sensex was up 245.78 points or 1.19% to 20,857.92. The index jumped 305.43 points at the day's high of 20,917.57 in mid-morning trade, its highest level since 12 December 2013. The index fell 43.44 points at the day's low of 20,568.70 in opening trade, its lowest level since 29 December 2013.
The CNX Nifty was up 75.30 points or 1.23% to 6,214.35. The index hit a high of 6,236 in intraday trade, its highest level since 12 December 2013. The index hit a low of 6,129.95 in intraday trade, its lowest level since 29 December 2013.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,176 shares gained and 717 shares fell. A total of 128 shares were unchanged.
The total turnover on BSE amounted to Rs 912 crore by 11:15 IST compared to Rs 584 crore by 10:15 IST.
Among the 30-share Sensex pack, 25 stocks gained and rest of them declined.
Index heavyweight Reliance Industries (RIL) extended initial gains. The stock was up 1.75% at Rs 853.60. The stock hit high of Rs 856 and low of Rs 839 so far during the day.
RIL's subsidiary Reliance Retail on Monday, 16 December 2013, that echoing consumer sentiments, Reliance Retail has decided to discontinue its non-vegetarian food offering, 'Delight', with immediate effect. Reliance Retail has decided to focus on vegetarian offerings only, within its retail portfolio.
Bank stocks edged higher as the Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review contrary to market expectations of a 25 basis point increase.
ICICI Bank rose 1.74% at Rs 1,117.35. The stock was volatile. The scrip hit high of Rs 1,134 and low of Rs 1,082.30 so far during the day.
HDFC Bank gained in volatile trade. The stock rose 2.06% to Rs 672. The scrip hit high of Rs 680.75 and low of Rs 650 so far during the day. The stock had dropped 3.55% on Tuesday, 17 December 2013 after the Reserve Bank of India (RBI) announced a ban on further purchases of the bank's shares by foreign institutional investors (FIIs) after foreign share holding in the bank crossed the overall limit of 49% of the bank's paid-up capital.
State Bank of India rose 2.65% to Rs 1,764.50. The scrip hit high of Rs 1,777 and low of Rs 1,716 so far during the day.
Kotak Mahindra Bank (up 1.75%), Axis Bank (up 2.6%), Bank of India (up 4.03%), Punjab National Bank (up 2.96%), Bank of Baroda (up 2.57%), and Union Bank of India (up 4.17%) gained.
IndusInd Bank gained 3.4% to Rs 430.40 after two block deals were executed on the counter in early trade on BSE. The stock saw volume of 30.88 lakh shares so far during the day, higher than an average volume of 4.19 lakh shares in the past one quarter. A block deal of 18.25 lakh shares was executed on the counter at Rs 414.70 in opening trade on BSE today, 18 December 2013. A block deal of 11.50 lakh shares was executed on the counter at Rs 415.20 in opening trade on BSE today, 18 December 2013.
The Reserve Bank of India on Tuesday, 17 December 2013, released on its website a Discussion Paper on 'Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy'. The Discussion Paper outlines a corrective action plan that will incentivize early identification of problem cases, timely restructuring of accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.
With the slowdown of the Indian economy, a number of companies/projects are under stress. As a result, the Indian banking system has seen increase in NPAs and restructured accounts during the recent years. Not only do financially distressed assets produce less than economically possible, they also deteriorate quickly in value, the central bank said in a statement. Therefore, there is a need to ensure that the banking system recognises financial distress early, takes prompt steps to resolve it, and ensures fair recovery for lenders and investors, the RBI said. 'Improving the system's ability to deal with corporate distress and financial institution distress by strengthening real and financial restructuring as well as debt recovery' has been indicated by the Governor, RBI as one of the five pillars on which Reserve Bank of India's developmental measures will be built for improving the financial system over the next few quarters. This Discussion Paper is a step in that direction, the RBI said.
Larsen & Toubro (L&T) rose 1.21%. L&T during market hours said that the Power Transmission & Distribution Business of L&T Construction has secured a major international EPC order valued at Rs 2935 crore from Qatar General Electricity & Water Corporation for the supply, construction and commissioning of 18 EHV (extra high voltage) substations and 151 km of EHV cabling in Qatar. The project is scheduled to be completed in 22 months.
This order is part of the Qatar Power Transmission System Expansion- Phase XI - Stage 1 and is the single largest order for L&T in the power transmission & distribution business, L&T said.
Asian Paints fell 0.66%. The company during market hours said that the company's chemical plant engaged in manufacturing of Penta situated at Cuddalore, Tamil Nadu, has taken temporary shut down for annual preventive maintenance. This will not have any material impact on the operations of the company, Asian Paints said.
Realty stocks edged higher as the Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review contrary to market expectations of a 25 basis point increase. Purchases of both residential and commercial property are largely driven by finance.
DLF (up 2.04%), HDIL (up 3.77%), Indiabulls Real Estate (up 2.41%), D B Realty (up 2.83%), Unitech (up 2.34%), Sobha Developers (up 1.15%) and Godrej Properties (up 1.82%) edged higher.
Bond prices surged as the Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review contrary to market expectations of a 25 basis point increase. The yield on 10-year federal paper 8.83% GS 2023 was hovering at 8.7947%, lower than its close of 8.9141% on Tuesday, 17 December 2013. Bond yield and bond prices are inversely related.
In the foreign exchange market, the rupee edged higher against the dollar as the Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review contrary to market expectations of a 25 basis point increase. The partially convertible rupee was hovering at 61.94, compared with its close of 62.01/02 on Tuesday, 17 December 2013.
The Reserve Bank of India (RBI) said that today's policy decision was a close one. Even though the RBI maintains status quo today, it can help guide market expectations through a clearer description of its policy reaction function: if the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank of India will act, including on off-policy dates if warranted, so that inflation expectations stabilise and an environment conducive to sustainable growth takes hold. The Reserve Bank's policy action on those dates will be appropriately calibrated, the central bank said in a statement.
The RBI said that current inflation is too high. However, given the wide bands of uncertainty surrounding the short term path of inflation from its high current levels, and given the weak state of the economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty, the RBI said. There are obvious risks to waiting for more data, including the possibility that tapering of quantitative easing by the US Federal Reserve may disrupt external markets and that the Reserve Bank of India may be perceived to be soft on inflation. The Reserve Bank of India will be vigilant, it said.
Recent readings suggest that headline inflation, both retail and wholesale, have increased, mainly on account of food prices. While consumer price index (CPI) and wholesale price index (WPI) inflation excluding food and fuel have been stable, despite a steady and necessary increase in administered prices towards market levels, the high level of CPI inflation excluding food and fuel leaves no room for complacency. There is, however, reason to wait before determining the course of monetary policy. There are indications that vegetable prices may be turning down sharply, although trading mark-ups could impede the full pass-through into retail inflation. In addition, the disinflationary impact of recent exchange rate stability should play out into prices. The RBI also said that the negative output gap, including the recent observed slowdown in services growth, as well as the lagged effects of effective monetary tightening since July, should help contain inflation.
Retail inflation measured by the consumer price index (CPI) has risen unrelentingly through the year so far, pushed up by the unseasonal upturn in vegetable prices, double-digit housing inflation and elevated levels of inflation in the non-food and non-fuel categories. While vegetable prices seem to be adjusting downwards sharply in certain areas, the feed-through to much-too-high headline CPI inflation remains to be seen, the RBI said. Wholesale inflation has also gone up sharply from Q2 onwards, with upside pressures evident across all constituent components, the RBI said.
High inflation at both wholesale and retail levels risks entrenching inflation expectations at unacceptably elevated levels, posing a threat to growth and financial stability, the RBI said. There are also signs of a resumption of high rural wage growth, suggesting second round effects that cannot be ignored. High and persistent inflation also increases the risks of exchange rate instability.
While volatility in financial markets has receded, it could pick up again following the inevitable taper of quantitative easing in the US, given the large dependence of EMEs on external financing, the RBI said. In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical.
The RBI also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liability (NDTL) after monetary policy review today, 18 December 2013. With the normalization of exceptional monetary measures, liquidity conditions have improved, as reflected in the steady decline in the access to the MSF. Capital inflows under the Reserve Bank's swap facilities for banking capital and non-resident deposits augmented domestic liquidity significantly from the end of November. Over the first two weeks of December, banks refrained from utilising the limits under the overnight LAF repo and export credit refinance, and, in fact, excess liquidity was parked with the Reserve Bank of India through reverse repo. Liquidity is being managed with a view to ensuring that there is adequate credit flow to the productive sectors of the economy, the RBI said.
The narrowing of the trade deficit since June through November, on positive export growth and contraction in both oil and non-oil imports, should bring the current account deficit (CAD) down to a more sustainable level for the year as a whole, the RBI said.
Robust inflows into the swap windows opened by the Reserve Bank during August-November have contributed significantly to rebuilding foreign exchange reserves thus covering possible external financing requirements and providing stability to the foreign exchange market. Looking ahead, these favourable developments should help to build resilience to external shocks, the RBI said.
Asian stocks edged higher on Wednesday, 18 December 2013, as investors await a Federal Reserve decision on its stimulus program. Key benchmark indices in Hong Kong, Japan, Indonesia and South Korea rose by 0.01% to 1.41%. Key benchmark indices in China, Taiwan and Singapore fell by 0.02% to 0.14%.
China attracted $8.5 billion in foreign direct investment in November--up 2.35% on year, the Ministry of Commerce said in a statement on Wednesday. The figure was more than October's $8.42 billion which was up 1.24% on year. FDI in the January-November period rose 5.48% on year to $105.5 billion. Non-financial overseas direct investment rose 28.3% on year in the January-November period to $80.2 billion.
Japanese exports rose 18.4% from a year earlier in November 2013, data today, 18 December 2013, showed. That marked the ninth consecutive month of increase, as manufacturers benefited from a weaker yen brought about by Prime Minister Shinzo Abe's pro-growth strategies. A recovery in exports is important for the country's economy ahead of a planned sales-tax increase in April.
The Bank of Japan (BoJ), which buys more than 7 trillion yen ($67.6 billion) of Japanese Government Bonds (JGBs) every month in its bid to stoke inflation, holds a two-day monetary policy meeting which begins tomorrow, 19 December 2013.
Trading in US index futures indicated that the Dow could advance 22 points at the opening bell on Wednesday, 18 December 2013. US stocks closed a volatile session lower on Tuesday, 17 December 2013, as markets digested a slew of economic data and focused on the Federal Reserve's upcoming decision on the fate of the stimulus program.
The Federal Open Market Committee's (FOMC) two-day policy meeting on interest rates in the United States concludes today, 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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