Post Session: Quick Review

Markets finally saw the light of the day after five straight sessions of drubbing, which lifted both Sensex and Nifty higher with gains of around one percent on Tuesday. 29-month low June Retail inflation data, which re-ignited hopes that RBI would cut rates in its third bi-monthly monetary policy on August 5, 2014, mainly cheered markets. Additionally, sentiments also were bolstered in second half of trading session after news report from Indian Meteorological Department (IMD) predicted revival of monsoon for the national capital and parts of north India from July 15 which is expected to receive good amount of rainfall.

Thus, in the extremely volatile session of trade, Sensex and Nifty settled above the psychologically crucial 25,000 and 7,500 levels respectively. Meanwhile, broader indices outperforming frontline indices went up with massive profits of over 2%. Impetus which was witnessed in second half of session that lifted benchmarks from day’s low, mainly was responsible for market’s positive close as barometer gauges after making a  gap-up start, dipped to day’s low point in afternoon deals as worries over deficient monsoon offset  early optimism seen on account of 29 month low June Retail inflation data.

On the global front, Asian shares rose on Tuesday ahead of Federal Reserve Chair Janet Yellen's testimony to a U.S. Senate committee. Additionally, European shares edged up as investors balanced accommodative signals on monetary policy against a pre-earnings season warning from the software industry. Markets also awaited German sentiment data for the region's latest economic snapshot. Meanwhile, British June inflation data showed a greater-than-expected rise to hit its fastest rate since January, picking up from a 4-1/2-year low.

Back on the home turf, amidst broad-based buying, only stocks from defensive FMCG and IT counters settled into negative territory. On the flip side, stocks from Consumer Durables Banking and Capital Goods counters were the prominent gainers. Interest rate sensitive Auto and Banking sector speed drove after the latest data showed retail inflation eased in June 2014, consequently re-igniting hopes that inflation provides space for the Reserve Bank of India (RBI) for cutting policy rates on August 5, 2014. Additionally, Metal and mining stocks gained ahead of Chinese gross domestic product (GDP) data for the second quarter due to be released on July 16. Besides, Steel stocks gained across the board as significant thrust on improving as higher outlay for housing, road, port, urban and rural housing and infrastructure development Union Budget 2014-15 would help improve steel consumption. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1837: 1082, while 101 scrips remained unchanged. (Provisional)

The BSE Sensex gained 197.62 points or 0.79% to settle at 25204.60. The index touched a high and a low of 25254.48 and 25020.32 respectively. Among the 30-share Sensex, 19 stocks gained, while 11 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 2.03% and 2.28% respectively. (Provisional) 

On the BSE sectoral front, Consumer Durables up by 2.94%, Bankex up by 2.65%, Capital Goods up by 2.37%, PSU up by 2.32% and Realty up by 2.19% were the top gainers, while FMCG down by 0.37% and IT down by 0.29% were the only losers in the space. (Provisional)

The top gainers on the Sensex were SBI up 4.39%, BHEL up by 4.24%, ICICI Bank up by 3.29%, Axis Bank up by 2.68% and Tata Steel up by 2.63%. On the flip side, the key losers were Dr Reddys down by 2.33%, Hero MotoCorp down by 1.80%, NTPC down by 1.39%, TCS down by 1.22% and HDFC down by 1.04%. (Provisional)

Meanwhile, the government has rejected P J Nayak committee recommendations of lowering government holding in banks below 50 percent. Department of Financial Services Secretary G S Sandhu has asserted that the government wants to maintain public sector character of the banks and thus want to keep shareholding of the government at minimum 51 percent in PSU banks. However, the government is considering issues related to greater autonomy to bank including raising tenure of Chairman and Managing Directors (CMDs) of banks to five years and better quality of independent directors with domain knowledge for strengthening of board. In order to comply with Basel-III norms, public sector banks requires Rs 2,40,000 crore of equity capital over next 5 years. Further, G S Sandhu added that the government would disinvest in two or three PSU banks in the current fiscal and would come out with detailed blue print for disinvestment within the next two months. 

The RBI has set-up a committee under chairmanship of former Axis Bank chairman P J Nayak to Review Governance of Boards of Banks in India. The panel’s report criticized the way in which the lenders are currently being governed and suggested the government to cut its holding in public sector banks to below 50 percent. The panel further highlighted that if the Government reduces its stake to less than 50 percent, together with certain other executive measures, all these external constraints would disappear. Further, the move would also benefit the government as it would continue to be the dominant shareholder and create a condition for its banks to compete more successfully. Further, the report added that bank Investment Company should be constituted where the government holding in all the banks should be transferred. The panel also recommended the government to take some radical reforms to improve the selection process for directors in the state run banks.

India VIX, a gauge for markets short term expectation declined 5.10% at 14.76 from its previous close of 15.56 on Monday. (Provisional)

The CNX Nifty surged 71.10 points or 0.95% and concluded at 7,525.25. The index touched high and low of 7,534.90 and 7,459.15 respectively. Out of 50 stocks in Nifty, 39 stocks ended in the green and 11 in red. (Provisional)

The major gainers of the Nifty were SBI up 4.34%, BHEL up by 4.23%, Bank of Baroda up by 4.00%, NMDC up by 3.54% and DLF up by 3.53%. On the flip side, the key losers were Dr Reddys down by 1.86%, Asian Paints down by 1.61%, Hero MotoCorp down by 1.49%, NTPC down by 1.42% and TCS down by 1.04%. (Provisional)

European markets were trading in red; UK’s FTSE 100 down by 0.11%, Germany’s DAX down by 0.47% and France’s CAC 40 was down by 0.44%.

The Asian markets concluded Tuesday’s trade in green, as investors awaited testimony from Federal Reserve Chair Janet Yellen later in the trading day. Malaysian Stock Exchange was closed today on account of ‘Malaysia - Nuzul Al-Quran’ holiday. China’s stocks rose for a third day after the nation’s broader measure of credit topped estimates, overshadowing concern new share sales will divert funds from existing equities. Beijing stepped up efforts to re-energize China’s economy in June and avert a sharper slowdown, pumping more money into the system and pressing banks to extend more loans. Chinese banks, which are used by Beijing as a policy tool, made a much stronger-than expected 1.08 trillion yuan ($173.9 billion) of new yuan loans in June, nearly 20% more than market expectations. Broad M2 money supply jumped 14.7% last month from a year earlier - the highest in 10 months.

The Bank of Japan board decided by a unanimous vote to leave the bank’s policy target unchanged as expected at its two-day monthly meeting, maintaining its medium-term recovery scenario as the drag from the April sales tax hike is easing. The BoJ will continue to increase its purchases of Japanese government bonds at an annual pace of about 50 trillion yen. The central bank also trimmed its growth forecast to 1% for the current financial year ending in March, compared with the previous forecast of a 1.1% expansion. Singaporean Retail Sales rose to a seasonally adjusted -6.0%, from -9.0% in the preceding month.