Key benchmark indices extended gains and hit fresh intraday high in afternoon trade. Investor sentiment was boosted after news reports said that the stock market regulator Securities and Exchange Board of India (Sebi) has relaxed the rules on trading of thinly-traded stocks. The market sentiment was also boosted by data showing that foreign funds made substantial purchases of Indian stocks on Thursday, 19 December 2013. The market breadth, indicating the overall health of the market, was strong. The barometer index, the S&P BSE Sensex, was up 228.74 points or 1.1%, up close to 190 points from the day's low and off about 15 points from the day's high.
Bank stocks rose across the board. Most capital goods stocks edged higher.
Sebi has reportedly rationalized the periodic call auction mechanism by modifying how it classifies the so-called illiquid stocks. A stock would now be classified as illiquid if its average daily turnover is less than Rs 2 lakh in the previous two quarters and if it is classified as illiquid at all the exchanges where it is traded. Earlier, a stock was classified to be illiquid if its average daily trading volume in a quarter was less than 10,000, the average daily number of trades was less than 50 in a quarter and if it was classified as illiquid by all the exchanges where it traded.
Call auctions will not apply to shares where a company is profitable in at least two of the past three years and not more than 20% of promoters' shareholding is pledged in the latest quarter and the book value is three times or more than the face value. The new rules also exclude companies with a market capitalisation of at least Rs 10 crore or which have paid a dividend in at least two of the past three years.
From now, stock exchanges will determine the number of call auction sessions for illiquid stocks. Exchanges will, however, have at least two sessions in a trading day, with one uniform closing session across the exchanges. So far, periodic call auction sessions of one hour each were conducted throughout trading hours, with the first session starting at 9:30 IST.
Key benchmark indices pared gains after a firm opening. Key benchmark indices retained positive zone in morning trade. The Sensex hovered in positive zone in mid-morning trade. Key benchmark indices surged in early afternoon trade. The Sensex extended gains and hit fresh intraday high in afternoon trade.
The market sentiment was boosted by data showing that foreign funds made substantial purchases of Indian stocks on Thursday, 19 December 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 2264.11 crore on Thursday, 19 December 2013, as per provisional data from the stock exchanges.
At 13:20 IST, the S&P BSE Sensex was up 228.74 points or 1.1% to 20,937.36. The index jumped 244.46 points at the day's high of 20,953.08 in afternoon trade. The index rose 37.32 points at the day's low of 20,745.94 in morning trade.
The CNX Nifty was up 68.10 points or 1.1% to 6,234.75. The index hit a high of 6,237.40 in intraday trade. The index hit a low of 6,170.35 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,408 shares gained and 887 shares fell. A total of 145 shares were unchanged.
Among the 30-share Sensex pack, 24 stocks gained and rest of them declined.
ONGC (up 2.39%), Maruti Suzuki India (up 2.37%) and Wipro (up 2.57%) edged higher from the Sensex pack.
Bank stocks rose across the board. ICICI Bank gained 1.25%.
HDFC Bank gained 1.29%. The bank on Wednesday, 18 December 2013, said that it has filed an application with the Foreign Investment Promotion Board (FIPB) seeking approval for increasing foreign shareholding limit in the bank in accordance with the now prevailing guidelines as the total foreign shareholding in the bank (FII and FDI) has crossed 49%.
The Reserve Bank of India had recently notified that the foreign shareholding through Foreign Institutional Investors (FIIs)/Non Resident Indians (NRI)/Persons of Indian Origin (PIO)/Foreign Direct Investment (FDI)/ADRs/GDRs in HDFC Bank has crossed the overall limit of 49% of its paid-up capital and that no further purchases of shares of HDFC Bank would be allowed through stock exchanges in India on behalf of FII/NRI/PIO/FDI/ADRs/GDRs.
Total foreign shareholding in the bank as on 13 December 2013 was 52.18% of its paid-up capital. This includes investments through the FDI route in ADRs/GDRs of 17.01% which were raised in accordance with the then applicable guidelines, and other foreign holdings made under the FII route of 35.17%. Necessary approval from the shareholders is in place for FII investments up to 49%, HDFC Bank said in a statement.
State Bank of India (SBI) rose 0.34%. A day after RBI governor Raghuram Rajan decided to hold rates, SBI on Thursday, 19 December 2013, slashed home loan rates by up to 35 basis points for new borrowers and has unveiled a further discount of 5 basis points for women customers. Loans of up to Rs 75 lakh would be available to fresh borrowers at 10.15% against the existing rate of 10.50%. For women borrowers, the rate of interest after an additional concession of 0.05% would be 10.10% for home loans of up to Rs 75 lakh. With regard to loans of above Rs 75 lakh, the new rate would be 10.30%. For women borrowers it is 10.25%.
Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank gained 1.26% to 2.45%.
The Reserve Bank of India (RBI) kept its main lending rate viz. the repo rate unchanged at 7.75% after a monetary policy review on Wednesday, 18 December 2013, contrary to market expectations of a 25 basis point increase. The central bank said its decision to keep the repo rate unchanged was a close call. The RBI said while it has maintained status quo now, the central bank 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.
The Reserve Bank of India early this week 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.
HDFC gained 1.1%. The hoursing finance major on Thursday, 19 December 2013, announced a cut of up to 50 basis points in home loan rates in its "special winter bonanza". The new rates for HDFC's home loans up to Rs 75 lakh will be 10.25 per cent per annum. "This is a limited period offer and is valid for all new applications submitted before 31 January 2014 and first disbursement taken by 28 February 2014," HDFC said in a statement.
IDFC lost 0.24%. The company after market hours on Thursday, 19 December 2013, said that the Reserve Bank of India's guidelines on licensing of new banks in private sector require the eligible promoters of a bank to be 'owned and controlled by residents'. Hence, it is necessary for IDFC to bring down the foreign shareholding in the company to less than 50% if it gets a banking license. In this regard, the board of directors of the company on 19 December 2013 passed a Circular Resolution approving Postal Ballot process for seeking an enabling resolution from the shareholders of the company to authorize the board of directors to keep reducing ceiling limit of foreign shareholding in the company from existing 54% to 49.9% in various stages as and when the actual foreign shareholding goes down to get a banking license under prevailing guidelines. Total foreign shareholding in IDFC stood at 51.27% as on 6 December 2013, IDFC said. IDFC in July this year filed an application seeking banking license from the RBI.
IDFC further said that in case the company does not receive the banking license from RBI, the company will take steps to reinstate the ceiling on the foreign shareholding in the company to 74%, subject to complying with the then prevailing regulations. It may be recalled that IDFC had obtained the approval of its shareholders at the Annual General Meeting of the company held on 29 July 2013 for restricting the foreign shareholding to 54%. At the time of making application to the RBI for banking license, the then applicable ceiling limit on foreign shareholding in the company was 74% and the actual foreign shareholding in the company was around 53.17%.
Most capital goods stocks edged higher. ABB (up 2.03%), Bhel (up 1.14%), BEML (up 0.48%), Crompton Greaves (up 0.08%) and Punj Lloyd (up 1.87%) gained. L&T was flat.
UltraTech Cement gained 1.18%. The company during trading hours announced convening the meeting of the shareholders of the company to be held on 20 January 2014 for the purpose of considering, and if thought fit approving, with or without modification(s), the Scheme of Arrangement between Jaypee Cement Corporation and the company and their respective shareholders and creditors.
Asian stocks were mostly higher on Friday, 20 December 2013. Key benchmark indices in Japan, Taiwan, Singapore and South Korea rose 0.01% to 0.54%. In Indonesia, the Jakarta Composite was off 0.95%.
Chinese stocks fell amid concern funding costs for the nation's lenders will remain high even after the central bank injected cash into the financial system. Key benchmark indices in Hong Kong and China were off 0.41% to 2.02%. The Chinese central bank said at the close of market trading yesterday, 19 December 2013, that it added funding to selected lenders using short-term liquidity operations.
The Bank of Japan kept its asset-purchase levels and overall monetary policy unchanged after a monetary policy review. The central bank's statement also retained previous language on the economic outlook, saying the nation's economy "has been recovering moderately," while "inflation expectations appear to be rising on the whole."
Trading in US index futures indicated that the Dow could advance 17 points at the opening bell on Friday, 20 December 2013. US stocks on Thursday recovered most earlier losses as investors shrugged off disappointing housing, manufacturing and employment reports, sending the Dow Jones Industrial Average to a record closing.
The Federal Reserve said after a two-day monetary policy review on 18 December 2013 that it will cut its monthly bond purchases to $75 billion from $85 billion starting in January 2014 amid an improved outlook for the job market in the world's largest economy. The Fed has said it will keep buying bonds until the outlook for the labor market has "improved substantially". Federal Reserve Chairman Ben S. Bernanke said after the Fed's monetary policy review on 18 December 2013 that the program was on its way to meeting that test, as the jobless rate fell to a five-year low of 7 percent in November.
The US central bank is poised to continue winding down its stimulus measures gradually over the next year.
In Europe, the European Union lost its top credit rating from Standard & Poor's, which said the group's cohesion has weakened and its financial profile has deteriorated. S&P cut its long-term rating on the EU to AA+ from AAA and maintained its short-term rating at A-1+. The outlook is stable, the agency said in a statement today. "The downgrade reflects our view of the overall weaker creditworthiness of the EU's 28 member states," S&P said. The reduction follows ratings cuts in recent years on EU members including France, Italy and Spain, as a sovereign-debt crisis roiled the region. "We believe the financial profile of the EU has deteriorated and that cohesion among EU members has lessened," S&P said. "EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states," it said.
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