Stocks of public sector banks, telecom companies and index heavyweights Infosys and ITC led losses for key benchmark indices. At 14:18 IST, the barometer index, the S&P BSE Sensex, was down 455.95 points or 1.8% at 24,943.70. The Nifty 50 index was currently down 136.15 points or 1.75% at 7,622.65. The Sensex was currently hovering below the psychologically important 25,000 level. The index has alternately moved above and below that mark after falling below that level in afternoon trade. The weakness on the domestic bourses was a part of weakness in global stocks triggered by uncertainty regarding the quantum and timing of interest rate hikes in the United States.
Meanwhile, the Reserve Bank of India's (RBI) announcement of a reduction in its benchmark lending rate viz. the repo rate by 25 basis points (bps) after a monetary policy review came in line with market expectations.
The Sensex hit one-week low when it fell 482.37 points or 1.89% at the day's low of 24,917.28 in mid-afternoon trade. The barometer index lost 27.21 points or 0.1% at the day's high of 25,372.44 in early trade. The Nifty, too, hit one-week low when it fell 145.95 points or 1.88% at the day's low of 7,612.85 in mid-afternoon trade. The index lost 22.50 points or 0.28% at the day's high of 7,736.30 in early trade.
In overseas stock markets, European markets edged lower as oil price volatility continued to weigh on markets worldwide and investors digested a raft of new data from the euro zone. New data for Germany painted a gloomy picture. Industrial orders in the euro zone's largest economy fell in February as foreign demand weakened. In a speech at Frankfurt's Goethe University, International Monetary Fund Managing Director Christine Lagarde called on the world's economies to boost growth, warning that risks to global growth are rising. The comments come after the IMF in a report released yesterday, 4 April 2016, said emerging markets, led by China, are increasingly posing a risk to stock markets in developed countries.
Trading in US stock index futures pointed to weakness in US stocks at the opening bell. Trading in US index futures indicated that the Dow Jones Industrial Average could slide 130 points at the opening bell today, 5 April 2016. Contradictory comments from Federal Reserve policy makers have added to uncertainty about the quantum and timing of interest rate hikes in the United States. During speech at a conference on cybersecurity, Boston Fed President Eric Rosengren yesterday, 4 April 2016, said rate-hikes may come sooner than the market is expecting. Rosengren is a voting member of the Fed policy committee this year. On 1 April 2016, Federal Reserve Bank of Cleveland President Loretta Mester cautioned that waiting too long to raise rates could be a risk to the economy. She is a voting member of the Fed's rate-setting policy committee. In a speech in New York on 29 March 2016, Federal Reserve Chairwoman Janet Yellen stressed a need for a cautious stance on interest-rate increases in the backdrop of global economic slowdown.
In Asia, Japanese stocks led decline in Asian markets on uncertainty regarding the quantum and timing of interest rate hikes in the United States. The Nikkei 225 Average closed 2.42% lower.
Closer home, the broad market depicted weakness. There were more than two losers against every gainer on BSE. 1,687 shares fell and 706 shares rose. A total of 118 shares were unchanged. The BSE Mid-Cap index was currently off 1.4%. The BSE Small-Cap index was currently off 1.35%. The losses for both these indices were lower in percentage terms than those for the Sensex.
Cement stocks edged lower. UltraTech Cement (down 1.95%), Ambuja Cements (down 2.03%), Shree Cement (down 1.54%) and ACC (down 0.81%) declined.
Grasim Industries was off 0.94%. Grasim has exposure to cement sector through its holding in UltraTech Cement.
Telecom stocks declined on renewed concerns over imposition of service tax on spectrum used by telecom operators announced in the Union Budget 2016-17 on 29 February 2016. Bharti Airtel (down 4.4%), Idea Cellular (down 2.91%), Reliance Communications (down 3.02%), Tata Teleservices (Maharashtra) (down 5.06%) and Mahanagar Telephone Nigam (down 3.61%) edged lower. According to media reports, GSM operators body Cellular Operators Association of India (COAI) has said in a letter to Finance Minister Arun Jaitley that the Budget proposal to impose 15% service tax on the purchase of auctioned spectrum will lead to further financial stress on the telecom industry. The COAI has reportedly said in the letter that the move is likely to pose an additional tax burden of about Rs 27000 crore, which will have to be passed on to consumers. The COAI has also warned that this would adversely impact the roll out of 3G and 4G technology.
Lupin rose 0.23% at Rs 1,464.70 after the company announced that its US subsidiary, Lupin Pharmaceuticals Inc. has launched the first product from its GAVIS pipeline, Zolpidem Sublingual Tablets, 1.75 mg & 3.5 mg in the United States with 180 days of exclusivity. Zolpidem Sublingual Tablets, 1.75 mg & 3.5 mg is a generic equivalent of Purdue Pharma L.P's Intermezzo Sublingual Tablets, 1.75 mg & 3.5 mg. It is indicated for use as needed for the treatment of insomnia when a middle-of-the-night awakening is followed by difficulty returning to sleep. Intermezzo had sales of $9.46 million in the US as per IMS MAT December 2015 data. The announcement was made during market hours today, 5 April 2016.
Lupin had announced the acquisition of privately held US based GAVIS Pharmaceuticals LLC and Novel Laboratories Inc. (GAVIS) on 23 July 2015.
On the macro front, the RBI announced reduction in repo rate by 25 basis points (bps) to 6.5% from 6.75% after a scheduled monetary policy review today, 5 April 2016. With a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate, the central bank raised the reverse repo rate by 25 basis points to 6% and cut the marginal standing facility (MSF) rate by 75 basis points to 7%. The central bank reduced the minimum daily maintenance of the cash reserve ratio (CRR) to 90% from 95% with effect from the fortnight beginning 16 April 2016 even as it kept the CRR unchanged at 4% of net demand and time liabilities (NDTL). The RBI said it would continue to provide liquidity to the banking system as required. The RBI will progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.
RBI expects inflation based on the consumer price index (CPI) to decelerate modestly and remain around 5% during 2016-17 with small inter-quarter variations. According to the central bank, a normal southwest monsoon in 2016 would work as a favourable supply shock. The central bank expects inflation to trend towards the 5% target in March 2017 under reasonable assumptions.
The uneven recovery in India's economic growth in 2015-16 is likely to strengthen gradually in 2016-17 assuming a normal monsoon, the likely boost to consumption demand from the implementation of the 7th Pay Commission recommendations, the effects of the one-rank-one-pension (OROP) award and continuing monetary policy accommodation. The RBI has pegged GVA growth projection for 2016-17 at 7.6%. While retaining the accommodative stance of the monetary policy, RBI Governor Raghuram Rajan indicated in his monetary policy that the RBI may cut the repo rate further in the coming months if macroeconomic and financial developments provide room for further rate cut.
Meanwhile, the central bank announced fine-tuning the liquidity management framework, measures for strengthening the banking structure and measures for broadening and deepening financial markets. The central bank has decided to launch futures on the money market rate. In order to broaden participation in OTC derivatives and to provide a safe trading environment, it is proposed to put in place a policy framework for authorisation of electronic platforms with linkage to an approved central counterparty for settlement. The framework will also cover forex platforms to facilitate hedging by small and retail customers. The RBI has decided to allow NRIs to participate in the Exchange Traded Currency Derivatives (ETCD), subject to limits and other conditions that are stipulated by the exchanges recognised by the Securities and Exchange Board of India (Sebi).
The central bank has decided to undertake a comprehensive review of collateralised money market segments, including introduction of tripartite repo, in consultation with market participants. The central bank has also decided to undertake a comprehensive review of exiting guidelines with the objective of strengthening disclosure requirements by issuers of Commercial Paper (CP) in the light of a spurt in the issuance of CP.
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