Post Session: Quick Review

Indian markets which revived in late morning trade on dovish RBI statement despite a status quo on interest rates, turned volatile in the second half on Tuesday, with index heavyweights such as Infosys, ITC, Reliance Industries and HDFC Bank suffering profit taking. RBI kept repo and reverse repo rates unchanged, but said that persistently low oil prices globally and government's proactive measures to rein in inflationary pressures were working well to control price rise. However, traders turned cautious with RBI stating that given that policy action was front-loaded in June, it is prudent to keep the policy rate unchanged at the current juncture while maintaining the accommodative stance of monetary policy. RBI also said US Fed rate policy and monsoon were risks to inflation shooting up again. The concerns got doubled, with the IMD expecting the southwest monsoon for the remaining two months to be below normal at 84 per cent of the long-period average (LPA) as El Niño weather conditions have strengthened in the past few months.

On the global front, while the US markets made the lower closing, the Asian markets followed the trend barring the Chinese market, which recovering from the early losses posted huge gains for the day after the regulators restricted short selling of stocks, freezing out day traders, in their latest step aimed at stabilizing the equity market. China already bans investors who buy shares from selling them until the next day and now such intraday trading restrictions have been expanded to short sellers. The European markets too made a cautious opening, after moving higher for straight five-days, as energy stocks slid and investors weighed earnings reports.

Back home, markets finally gave up after consolidating in previous session, snapping their gaining streak after RBI maintained status quo. Though, RBI's decision to keep interest rate unchanged was largely in line with investor expectations, but traders interpreting the comments made by the RBI governor went for some profit taking and across the board selling pressure was witnessed with oil and information technology leading the decline. Though the banking and auto packs moved higher but the other rate sensitive consumer durable turned weak after top public sector lender SBI ruled out any interest rate cut for its borrowers, saying that rate cut by the bank would depend on a lot many factors including credit growth even as the RBI reprimanded banks for not having passed the full benefits of the last three reduction in its policy rate. Traders were also concerned about a report stating that Mutual fund inflow in equity markets dropped by 58% to Rs 4,300 crore in July. In comparison, mutual fund reported a net inflow of nearly Rs 31,000 crore in the debt markets last month. Back on street, there was some recovery in the final hours of trade but that proved too late to put markets back in green. Metal PSU and auto were the top gainers, while Tech, IT and consumer durables were the laggards. Most significantly, the broader markets ended with good gains.

The BSE Sensex ended at 28090.34, down by 96.72 points or 0.34% after trading in a range of 27866.12 and 28264.72. There were 14 stocks in green against 16 stocks in red on the index. (Provisional)

The broader indices outperformed the benchmarks and ended in green; the BSE Mid cap index surged by 1.20%, while Small cap index ended up by 0.71%.(Provisional)

The top gaining sectoral indices on the BSE were Metal up by 3.14%, PSU up by 1.19%, Auto up by 1.12%, Bankex up by 0.58%, Power up by 0.09%, while TECK down by 0.67%, IT down by 0.60%, Consumer Durables down by 0.59%, Oil & Gas down by 0.56%, Capital Goods down by 0.43% were the losing indices on BSE.(Provisional)

The top gainers on the Sensex were Tata Steel up by 4.25%, Hindalco up by 3.31%, Coal India up by 3.06%, SBI up by 2.74% and Mahindra & Mahindra up by 2.56%. On the flip side, Hero MotoCorp down by 2.87%, GAIL India down by 2.54%, ONGC down by 2.21%, Wipro down by 2.02% and Infosys down by 1.85% were the top losers.(Provisional)

Meanwhile, industry body, Federation of Indian Chambers of Commerce and Industry (FICCI), has lauded government’s plan to recapitalise public sector banks (PSU Banks) with infusion of Rs 70,000 crore over the next four years and said that it augurs well for the banking sector and will help fuel economic growth.

FICCI President Jyotsna Suri said that “This is a positive development as it would help meet both the capital adequacy requirements of the banks as well as help build on-lending capacity to fuel growth in the economy. FICCI welcomes this move and hopes that as public sector banks get further support from the government, they would also introduce a cut in lending rates commensurate with cuts announced by RBI in the policy rate”.

She said that FICCI has been suggesting that the fiscal space created on account of savings in fuel subsidies and increased tax revenues due to better coverage and compliance should be utilised for recapitalisation of the banks.

The FICCI president also said that this four year plan announced by the government augurs well for the health of the banking sector and is another step forward in government’s concerted efforts to enhance growth of the economy.

Recently, the finance ministry announced four-year road map for infusing Rs 70,000 crore in state run banks. As part of the plan, the government would infuse Rs 25,000 crore each into PSBs in the current and the next fiscal and then follow it up with Rs 10,000 crore each in 2017-18 and 2018-19.
The CNX Nifty ended at 8524.25, down by 18.80 points or 0.22% after trading in a range of 8448.25 and 8565.15. There were 26 stocks on gainers side against 24 stocks on the losers’ side on the index.(Provisional)

The top gainers on Nifty were Tata Steel up by 4.32%, Bank Of Baroda up by 3.71%, Hindalco up by 3.64%, PNB up by 3.19% and Tech Mahindra up by 3.13%. On the flip side, Idea Cellular down by 3.83%, Cairn India down by 2.92%, Hero MotoCorp down by 2.85%, GAIL India down by 2.60% and ONGC down by 2.38% were the top losers.(Provisional)

European Markets were trading in green, UK’s FTSE 100 was up by 15.54 points or 0.23% to 6,704.16, Germany’s DAX gained 19.35 points or 0.17% to 11,463.07 and France’s CAC was lower by 15.62 points or 0.31% to 5,104.90.

Asian markets closed in red on Tuesday, barring Shanghai Composite and KOSPI Index. Shanghai stocks closed up amid a late spurt of buying after China’s two stock exchanges announced new rules to restrict short-selling. The Bank of Japan is expected to maintain its massive monetary stimulus and optimism on chances that it will hit its inflation target at a policy review later this week, even though the economy is expected to have contracted in the second quarter. BOJ is conducting simulations about how to end quantitative easing, including its purchase of exchange-traded funds, but it is too early to talk about specific strategies in public. Bank of Japan Deputy Governor Kikuo Iwata played down any risk that expected interest rate increases by the US Federal Reserve or the Bank of England could pose to financial markets, and dismissed suggestions that the BOJ should raise rates to prevent the yen from falling too fast. Japan’s Average Cash Earnings fell to a seasonally adjusted -2.4%, from 0.7% in the preceding quarter whose figure was revised up from 0.6%. South Koreans are on course to buy a record amount of gold in 2015, worried that a meltdown in China’s stock markets will destabilize South Korean equities and keen to replenish a traditional store of value in an era of low interest rates. In contrast to the weak demand in top gold buyers China and India, South Koreans are on target to buy 1 trillion won ($860 million) in bullion for the first time this year. South Korean CPI remained unchanged at a seasonally adjusted annual rate of 0.7% compared to the preceding month.