Firmness continued on the bourses in mid-morning trade. The barometer index, the S&P BSE Sensex, was up 159.80 points or 0.78%, up about 95 points from the day's low and off close to 30 points from the day's high. The market breadth, indicating the overall health of the market, was strong. All the thirteen sectoral indices on BSE were in the green. Gains in Asian stocks and overnight upmove in US stocks boosted sentiment on the domestic bourses. The market sentiment was also boosted by data showing that foreign funds remained net buyers of Indian stocks on Thursday, 20 February 2014.
Bank stocks rose across the board. Realty stocks also gained.
The market edged higher in early trade on firm Asian stocks. The Sensex extended initial gains and hit fresh intraday high in morning trade. The Sensex trimmed gains after hitting fresh intraday high in mid-morning trade.
The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Thursday, 20 February 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 206.46 crore on Thursday, 20 February 2014, as per provisional data from the stock exchanges.
Asian stocks edged higher on Friday, 21 February 2014, after a larger-than-forecast climb in a measure of US manufacturing in February tempered concern about global growth. US economy is the world's biggest economy.
At 11:20 IST, the S&P BSE Sensex was up 159.80 points or 0.78% to 20,696.44. The index jumped 188.40 points at the day's high of 20,725.04 in mid-morning trade, its highest level since 19 February 2014. The index rose 63.27 points at the day's low of 20,599.91 in early trade.
The CNX Nifty was up 49.60 points or 0.81% to 6,141.05. The index hit a high of 6,148.60 in intraday trade, its highest level since 19 February 2014. The index hit a low of 6,108 in intraday trade.
The BSE Mid-Cap index was up 39.13 points or 0.61% at 6,416.15. The BSE Small-Cap index was up 43.39 points or 0.68% at 6,405.24. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,356 shares rose and 744 shares fell. A total of 135 shares were unchanged.
Among the 30-share Sensex pack, 24 stocks rose and rest fell. Tata Steel (up 1.58%), ITC (up 1.48%) and HDFC (up 1.17%) edged higher from the Sensex pack.
Bank stocks rose across the board. Among private sector banks, ICICI Bank (up 1.94%), Yes Bank (up 1.69%), Federal Bank (up 0.55%), HDFC Bank (up 0.91%), Kotak Mahindra Bank (up 0.67%) and AXIS Bank (up 1.89%), gained.
Among PSU bank stocks, State Bank of India, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed 0.92% to 1.32%.
The government's allocation of Rs 11200 crore for capital injection into state-run banks is credit negative as it is much smaller than estimated requirements, global credit rating agency Moody's Investors Service said on Thursday, 20 February 2014. The rating agency said in a report that it estimates lenders would need Rs 25000-36000 crore to meet a minimum Tier 1 ratio of 8% in the fiscal year ending March 2015. "Indian public-sector banks' need for significant external capital is a result of an increase in non-performing loans (NPLs) owing to the country's slowing economy and infrastructure bottlenecks, and profitability that is insufficient for internal capital generation to fund loan growth," it said. Early this week, the government unveiled its interim budget for the fiscal year starting in April, allocating Rs 11200 crore for capital injection into public-sector banks.
Realty stocks edged higher. D B Realty (up 1.3%), Sobha Developers (up 0.92%) and Unitech (up 0.65%) gained. But, DLF fell 0.25%.
In the foreign exchange market, the rupee edged higher against the dollar on global risk-on sentiment. The partially convertible rupee was hovering at 62.155, compared with its close of 62.26/27 on Thursday, 20 February 2014.
The Reserve Bank of India will need to continue raising its policy interest rate given the sticky nature of inflation, the International Monetary Fund (IMF) said on Thursday, 20 February 2014. "The ingrained nature of inflation and inflation expectations mean that reducing inflation-even over a protracted horizon-will require significant increases in policy rates, which will weigh on growth. Should high inflation expectations persist and inflation remain sticky, a more front-loaded path of interest rate increases may be needed," the IMF said.
The IMF expects India's consumer price index to remain near double digits well into next year driven by food prices. The IMF has suggested giving more emphasis to consumer prices for making policy decisions. "Headline CPI should provide the principal nominal anchor for monetary policy, as food and fuel price shocks propagate rapidly into core inflation, and inflation expectations and wage formation are closely linked to CPI inflation," the IMF said. The IMF expects India's economy to grow at 4.6% in 2013-14, picking up to 5.4% in 2014-15.
The Reserve Bank of India next undertakes monetary policy review on 1 April 2014. Citing price pressures, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.
On the political front, lawmakers passed a bill to create India's 29th state on Thursday despite mayhem in parliament, as opponents made a futile last attempt to stop the upper house carving landlocked Telangana from coastal Andhra Pradesh. Demands that the southern region be made a separate state have existed almost as long as independent India. Thursday's vote fulfils a promise made by the government in 2009, and comes just weeks before a national election in April.
The new state will have a population of around 3.5 crore people. The bill must now be signed by president to become law, a formality expected to take place in a few days.
Asian stocks edged higher on Friday, 21 February 2014, after a larger-than-forecast climb in a measure of US manufacturing in February tempered concern about global growth. US economy is the world's biggest economy. Key benchmark indices in Indonesia, Taiwan, Singapore, Japan, Hong Kong and South Korea were up 0.46% to 2.93%. China's Shanghai Composite fell 1.15%.
Minutes from the Bank of Japan's Jan. 22 policy meeting showed some board members said the central bank should provide a clearer explanation that an expected decline in second-quarter domestic growth was factored into its outlook.
Trading in US index futures indicated that the Dow could advance 53 points at the opening bell on Friday 21 February 2014. US stocks edged higher on Thursday, 20 February 2014, as investors found encouragement in a gauge of US manufacturing jumping to its highest level in almost four years, as well as in more M&A activity, this time involving Facebook. Late Wednesday, Facebook announced a $19 billion deal to acquire messaging service WhatsApp.
The Markit Economics preliminary index of US manufacturing increased to 56.7 in February, surpassing economists' estimates, while Labor Department figures indicated fewer applications for unemployment benefits last week. The Conference Board's index of US leading indicators, a gauge of the outlook for the next three to six months, rose in January in line with estimates.
Federal Reserve policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5%, according to minutes of their January meeting released on Wednesday, 19 February 2014. Federal Reserve Chair Janet Yellen last week said the economy has strengthened enough to withstand continued cuts to monetary stimulus, adding that only a notable change in the outlook for the economy would prompt the central bank to slow the pace of tapering.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 18-19 March 2014. After a monetary policy review, the FOMC on 29 January 2014 announced it will reduce monthly bond purchases by another $10 billion to $65 billion.
Sweeping reforms are urgently needed to boost productivity and lower barriers to trade if the world is to avoid a new era of slow growth and stubbornly high unemployment, the OECD warned on Friday. In its 2014 study on "Going for Growth", The Organisation for Economic Co-operation and Development said momentum on reforms had slowed in the aftermath of the global financial crisis, with much of it now piecemeal and incremental. "The widespread deceleration in productivity since the crisis could presage the beginning of a new low-growth era," warned Pier Carlo Padoan, deputy secretary-general and chief economist at the Paris-based OECD. "These concerns, already prevalent among advanced OECD countries for some time, now encompass emerging-market economies and are fuelled also by high unemployment and falling labour force participation in many countries."
Group of 20 finance ministers meet in Sydney this weekend, with US stimulus cuts and political turmoil from Ukraine to Venezuela stoking concern over emerging-market volatility.
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