Post Session: Quick Review

After taking breather in previous trading session, Indian equity markets resumed their southbound journey on the back of disappointing July IIP data released after market hours of Friday. On the macro-front, the Index of Industrial Production (IIP) rose 0.5% in July from a year ago, slowest in four months, while the simultaneously released Consumer Price Index (CPI) inflation slowed to 7.80% in August from nearly 7.96% in the previous month. 

Although, benchmarks scaled back some of their losses in the afternoon deals post the release of five year low August WPI, was way little to trigger any reversal of trend at Dalal Street, rather benchmarks started drifting lower after the noon deals and concluded at day’s low point. Easing at five years low, India's main inflation gauge, based on monthly WPI, stood at 3.74% for the month of August as compared to 5.19% in the previous month and 6.99% during the corresponding month of the previous year. By close of trade, both Sensex and Nifty concluded just above the psychologically crucial 26,800 and 8,000 levels respectively, with losses in the range of 0.80%-1.00%. Meanwhile, broader indices outperforming larger peers, went home with gains in the range of 0.15%-0.65%. The sentiment remained downbeat right from the start of trade tracking weak global stocks on anxiety about early Fed rate hikes and China factory output.

On the global front, while Asian pacific shares settled mostly lower; European shares slumped on Monday, burdened by Chinese industrial production growth slowing to a level last seen during the thick of the global financial crisis almost six years ago. China’s value-added industrial output grew by just 6.9% in August year -over-year, down from 9.0% in July, the National Bureau of Statistics showed on Saturday, representing the weakest growth streak since December 2008 and dealing a harsh blow to companies and economies heavily dependent on China.

Closer home, market-participants failed to draw any solace from RBI’s governor, Raghuram Rajan statements. Reserve Bank of India (RBI) Governor Raghuram Rajan underscored that India's macroeconomic indicators were improving and that inflation was coming down consistent with the central bank's forecast. With across the broad selling pressure, only stocks from Realty and Healthcare counter showed some resilience, nevertheless top losers were the stocks from Metal, Oil & Gas and Capital Goods counters were the top losers of the session. Meanwhile, Tyre makers extended recent rally with shares of MRF, Goodyear India and TVS Srichakra scaling record high levels during the session. Additionally, PSU bank stocks reversed initial losses after Reserve Bank of India (RBI) Governor Raghuram Rajan that there was a need to change the management appointment process in public sector banks to make it more transparent and that the central bank is in talks with the government to improve governance in public sector banks. The market breadth on the BSE remained in the favour of advances; advancing and declining stocks were in a ratio of 1733:1362, while 91 scrips remained unchanged. (Provisional)

The BSE Sensex ended lower by 260.81 points or 0.96% at 26800.23 after trading in a range of 26798.02 and 26998.07. There were 4 stocks advancing against 26 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.13%, while Small cap index up by 0.63%. (Provisional)

The gaining sectoral indices on the BSE were Healthcare up by 0.27% and Realty up by 0.05% while, Metal down by 1.84%, Oil & Gas down by 1.07%, Capital Goods down by 0.98%, IT down by 0.93% and Consumer Durables down by 0.85% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Cipla up by 2.69%, Hero MotoCorp up by 1.67%, HDFC Bank up by 0.52% and Dr. Reddys Lab up by 0.30%. On the flip side, Hindalco down by 3.32%, Tata Steel down by 2.14%, ONGC down by 1.90%, TCS down by 1.84% and Coal India down by 1.65% were the top losers. (Provisional)

Meanwhile, clearing the way for corporates to enter differentiated banks segments, the Reserve Bank of India (RBI) is likely to issue final guidelines on small and payments banks within two-three months. The final norms will allow micro finance institutions, telecom players, non-banking finance companies (NBFCs) and public sector companies eligible to apply for bank licences once RBI invites applications for the same.

India’s central bank, which back in July floated draft guidelines for small and payment banks, had sought comments until August 28. RBI presently is in the process of examining the suggestions received and is in the process of finalising the norms for such banks.

With an objective of furthering financial inclusion, the Reserve Bank of India (RBI) floated draft guidelines for setting up of two new types of banks -payment banks and small banks. While, small banks will disburse small-ticket loans to farmers and businesses, payment banks will cater to marginalized sections of society, including migrant labourers, for collecting deposits and remitting funds.

According to the guidelines, a Payment Bank though would be able to take deposits, but cannot lend and would have to invest all the funds in government securities. On the other hand, small Bank would be allowed to lend, but with restrictions on where they can operate.

These two types of banks will have uniform capital requirement of Rs 100 crore as against Rs 500 crore required for normal commercial banks, according to the guidelines. However, of the minimum capital requirement of Rs 100 crore, the promoters’ initial minimum contribution will be at-least 40%, to be locked in for a period of five years. This shareholding would be later brought down to 40% within three years, 30% within a period of 10 years, and to 26% within 12 years from the date of commencement of business of the bank.

India VIX, a gauge for markets short term expectation of volatility rose 6.59% at 13.18 from its previous close of 12.36 on Friday. (Provisional)

The CNX Nifty edged lower by 68.95 points or 0.85% at 8036.55 after trading in a range of 8030.00 and 8077.30. There were 12 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were Lupin up by 4.19%, Cipla up by 2.86%, United Spirits up by 2.73%, PNB up by 1.55% and Hero MotoCorp up by 1.49%. On the flip side, Jindal Steel & Power down by 4.70%, Hindalco down by 2.97%, Kotak Mahindra Bank down by 2.16%, Ultratech Cement down by 1.90% and Ambuja Cement down by 1.89% were the top losers. (Provisional)

European Markets were trading mostly in the red; France’s CAC was down by 0.26%, Germany’s DAX was down by 0.01% and UK’s FTSE 100 was up by 0.25%.

Asian markets ended mostly in red on Monday, after the weakest growth in Chinese industrial output since 2008 added to evidence the world’s second-biggest economy is losing momentum. China’s factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled raising fears that world’s second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures. The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the cooling housing market increasingly drags on other sectors from cement to steel and saps consumer confidence. Industrial output rose 6.9% in August from a year earlier - the lowest since 2008 when the economy was buffeted by the global financial crisis - compared with expectations for 8.8% and slowing sharply from 9.0% in July. Chinese Retail Sales fell to an annual rate of 11.9%, from 12.2% in the preceding month.

Singaporean Unemployment Rate remained unchanged at 2.0% compared to the preceding quarter while Singaporean Retail Sales rose to a seasonally adjusted 5.5%, from 0.4% in the preceding month. Singapore home sales declined to the lowest level this year in August as developers offered fewer projects amid cooling demand from long-standing property curbs. Developers sold 432 units last month compared with a revised 509 units in July. That’s the lowest since December when 259 units were sold.