Benchmarks end slightly in red on rate cut pause jitters

Indian equity benchmarks ended the volatile day of trade in red terrain on Tuesday with marginal losses, as higher-than-expected consumer price inflation (CPI) data for June dampened the hopes of a rate-cut by the Reserve Bank of India (RBI). CPI inflation rate for June rose to 5.4 per cent, higher than the estimated 5.1 per cent. Sentiments also remained down-beat with India Ratings calling for continuous government interventions to fill the deficits in physical and social infrastructure spaces for long-term higher growth, despite retaining its 7.7 per cent growth forecast for this year. It also warned that full-blown investment recovery is still some 12-18 months away primarily because of the low capacity utilisation in the manufacturing sector.

However, losses remained capped after the wholesale price index-(WPI) based inflation fell to -2.4 percent lower than previous month’s number of -2.35 percent and 5.66 percent during the corresponding month of the previous year. Some support also came with report that Iran and six major powers have clinched a historic nuclear deal, which includes a compromise between Washington and Tehran that would allow UN inspectors to press for visits to Iranian military sites as part of their monitoring duties, the deal could eventually reshape global oil markets. Iranian Oil Minister Bijan Namdar Zanganeh has said that the country can increase exports by 500,000 barrels a day as soon as sanctions are lifted.

On the global front, European counters were trading in red as investors shifted their focus to central banks and weighed whether the Greek parliament will pass the reforms necessary for a new bailout. Asian markets ended mostly in green after Greece and its creditors reached an agreement for a third bailout program, averting a potential 'Grexit'.

Back home, foreign portfolio investors (FPIs) bought shares worth a net Rs 527.98 crore yesterday, 13 July 2015, as per provisional data released by the stock exchanges. Appreciation in Indian rupee too aided sentiment. The partially convertible rupee was trading at 63.45 per dollar at the time of equity market closing against the Monday’s close of 63.50 on the Interbank Foreign Exchange. Shares related to public sector oil marketing companies (PSU OMCs) edged higher as crude oil prices edged lower. However, rate sensitive counters viz. banking, auto and realty remained under pressure on rate cut pause jitters.

The NSE’s 50-share broadly followed index Nifty declined marginally but managed to hold its psychological 8,450 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around thirty points but ended comfortably above the psychological 27,900 mark. Broader markets, however, traded with traction and ended the session with a gain of around quarter of a percent. The market breadth remained in favor of advances, as there were 1,558 shares on the gaining side against 1,276 shares on the losing side while 119 shares remain unchanged.

Finally, the BSE Sensex declined by 28.29 points or 0.10% to 27932.90, while the CNX Nifty lost 5.55 points or 0.07% to 8454.10.

The BSE Sensex touched a high and a low 28018.59 and 27853.96, respectively. The BSE Mid cap index was up by 0.14%, while Small cap index up by 0.36%.

The top gaining sectoral indices on the BSE were IT up by 0.89%, Metal up by 0.70%, TECK up by 0.68%, PSU up by 0.65% and Oil & Gas up by 0.64%, while Auto down by 0.93%, Realty down by 0.56%, Bankex down by 0.55% were the losing indices on BSE.

The top gainers on the Sensex were Coal India up by 3.33%, Infosys up by 2.11%, Hindustan Unilever up by 1.91%, Hero MotoCorp up by 1.52% and BHEL up by 1.35%. On the flip side, Tata Motors down by 4.10%, Hindalco down by 1.83%, SBI down by 1.81%, Vedanta down by 1.63% and Tata Steel down by 0.97% were the top losers.

Meanwhile, the Finance Ministry is reportedly planning to give Rs 12,000 crore to state-owned banks overloaded with bad loans. This new money will be an addition to the Rs 7940 core that was assigned in the budget for capitalization.

The ministry has said that the initiative was to support the banks that were struggling on account of rising bad loans, restructuring of accounts and also to help them grow their balance sheet. The ministry has sought details from all public sector banks (BSBs) on capital infused in the last decade and dividends they granted to the government. The government is likely to infuse the money in two parts. Out of the total Rs 20,000 crore, a portion will be given to banks that have urgent requirements, while the rest will only be allocated by March 2016.

Beneficiaries in the first infusion will include Syndicate Bank, Central Bank of India and Allahabad Bank.  As per the finance ministry, the PSBs will require Rs 2.40 lakh crore as equity by 2018 to conform to Basel III norms.

Earlier, Reserve Bank of India governor Raghuram Rajan had stated that banks should have enough capital so that they can use a part of it for cleaning up their balance sheets. He had also said that the way to get out of financial stress was to address the problem early... and some of the banks might need some capital to do that.

The CNX Nifty touched a high and low 8,480.25 and 8,424.10 respectively.

The top gainers on Nifty were Coal India up by 3.14%, Infosys up by 2.09%, BPCL up by 1.92%, Hindustan Unilever up by 1.76% and Lupin up by 1.72%. On the flip side, Tata Motors down by 4.24%, SBI down by 2.06%, Hindalco down by 2.02%, Vedanta down by 1.73% and Cairn down by 1.31% were the top losers.

European Markets were trading in the red; UK's FTSE was down by 0.37%, Germany’s DAX was down by 0.54% and France’s CAC was down by 0.26%.

Asian markets closed mostly in green on Tuesday, while Shanghai stocks ended lower in volatile trade after rallying in the previous three sessions on government support. China’s central bank will fine-tune its policy to provide ample and appropriate liquidity for the economy.  According to a transcript of a PBOC, the recent bank reserve requirement and interest rate cuts helped boost M2 growth, a broad measure of money supply. Ample liquidity in China’s interbank market and falling interest rates have lowered financing costs in the real economy, with companies’ general cost of financing falling to 6.32 percent at the end of June from 7.0 percent at the end of 2014. Singapore economy unexpectedly contracted in the second quarter as sluggish global demand knocked the city-state’s manufacturing sector, dimming the outlook as growth in key trade partner China continues to cool. Advance estimates from the Ministry of Trade and Industry (MTI) showed that gross domestic product shrank 4.6 percent in the second quarter from the previous three months on an annualized and seasonally adjusted basis, pressured by the manufacturing sector contracting 14 percent on quarter.