Post Session: Quick Review

The Indian markets that showed a steady trade for first half of the day, suffered sudden profit taking after mid day that dragged the major averages considerably lower. Lack of any supportive factor amid the global slump weighed on the markets. Though, there was cautiousness from the beginning after a Crisil research report stated that four states which produce over one-third of India’s foodgrain, and five crops that add up to more than a quarter of the production of grains and oilseeds, are vulnerable to this year’s deficit monsoons. The India Meteorological Department too has predicted that the second half (August-September) of the four-month monsoon season will see a deficit of 16% of the long-term average, while the overall deficit is likely to be 12%. In the final hours there were sharp slump in some of the mid cap stocks that created panic after margin calls were triggered.

Global trend once again remained muted and after the lower ending of the US markets, the Asian markets followed the track with another weak closing amid concern that global growth isn’t strong enough to weather higher US interest rates after Kazakhstan became the latest emerging market to let its currency devalue. Meanwhile, the International Monetary Fund said it will freeze its benchmark currency basket until October 2016, giving markets more time to adjust to the possible addition of China's yuan as part of a review of global reserve currencies. The European markets too made a weak start on global growth concern, though Euro-area finance ministers signed off on a bailout program for Greece of as much as 86 billion euros ($95 billion).

Back home, there was no respite for the markets till end, once it started the southward journey, apart from concerns about the stability of Chinese economy there were sharp selling in bluechip stocks that weighed heavily on the domestic market. Traders even ignored the Reserve Bank of India (RBI) governor Raghuram Rajan’s statement that the Indian economy is showing signs of improvement, adding that a pick-up in rural demand would further improve economic growth. Though, he said that RBI continues to watch the progress of monsoon to assess the overall impact on inflation as well as global developments. Earlier there was buzz in the markets and lots of scrip specific actions were seen after the RBI gave in principle nod to 11 entities for setting up payment banks. Governor Rajan said payment banking is one of the most exciting space in the system which will reduce the cost of accessing banks. He also announced the possibility of issuing licences to smaller banks next month. Rajan, however, said that he doesn’t see payments banks transition into universal banks. The banking stocks were under pressure despite RBI governor allaying concerns that these new entities can pose any threat to existing banks. Pharma stocks too kept moving higher after government once again expressed concern over EU's ban on medicines clinically tested by GVK Biosciences, saying it could lead to ‘adverse campaign’ about clinical trials done in the country. Commerce and Industry Minister Nirmala Sitharaman said the ban has come despite India engaging with the European Union and their regulatory bodies at various levels. Back on street, the broader markets suffered most, while on sectoral front barring defensive FMCG all the sectoral indices ended with sharp cuts. 

The BSE Sensex ended at 27633.39, down by 298.25 points or 1.07% after trading in a range of 27564.16 and 27964.60. There were just 4 stocks in green against 26 stocks in red on the index. (Provisional)

The broader indices suffered even severe cuts; the BSE Mid cap index was down by 1.95%, while Small cap index lost 2.07%. (Provisional)

The lone gaining sectoral index on the BSE was FMCG up by 1.34%, while Realty down by 4.01%, Metal down by 2.50%, Bankex down by 2.18%, IT down by 2.15%, TECK down by 2.09% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Lupin up by 5.61%, ITC up by 3.73%, Dr. Reddys Lab up by 1.69% and Sun Pharma Inds. up by 1.27%. On the flip side, Vedanta down by 4.34%, Reliance Industries down by 3.51%, Axis Bank down by 3.38%, Tata Steel down by 3.28% and GAIL India down by 2.95% were the top losers. (Provisional)

Meanwhile, the Reserve Bank of India (RBI), further widening the reach of banking services and in a effort to push the government’s goal of financial inclusion has given in-principle approval to 11 entities to open payments banks. The new format of the banks will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system.

Aditya Birla Nuvo; Airtel M Commerce Services of Bharti Airtel; Cholamandalam Distribution Services; Department of Posts; FINO PayTech Ltd; National Securities Depository (NSDL); Reliance Industries (RIL); Tech Mahindra; and Vodafone m-pesa, a unit of telco Vodafone India Ltd, were the nine organizational entities given in-principle approval. Apart from this, two individuals - Dilip Shantilal Shanghvi, founder of Sun Pharmaceutical Industries and Vijay Shekhar Sharma, CEO of One97 Communications that runs Paytm, the mobile commerce and mobile payment company, have received the approval. In-principle approval will be valid for 18 months, after which the entities will be given formal licences, provided they fulfil conditions stipulated by RBI.

RBI said that it had chosen “entities with experience in different sectors and with different capabilities so that different models could be tried”. The apex bank elaborating the selection process said that first, a detailed scrutiny was undertaken by an External Advisory Committee (EAC) under the Chairmanship of Dr. Nachiket Mor, then the recommendations of the EAC were an input to an Internal Screening Committee (ISC), this Internal Screening Committee prepared a final list of recommendations for the Committee of the Central Board (CCB). In arriving at the final list, the CCB noted that it would be difficult at this stage to forecast the most successful likely model in the emerging business of payments. The CCB further noted that payments banks cannot undertake lending, and therefore believed that the payments bank would not be subject to the same risks as a full service bank.

The CNX Nifty ended at 8387.20, down by 107.95 points or 1.27% after trading in a range of 8359.75 and 8501.35. There were just 6 stocks on gainers side against 43 stocks on decliners side on the index. (Provisional)

The top gainers on Nifty were Lupin up by 5.55%, ITC up by 3.94%, BPCL up by 2.02%, Dr. Reddys Lab up by 1.65% and Sun Pharma Inds. up by 1.17%. On the flip side, Yes Bank down by 6.23%, Cairn India down by 5.67%, PNB down by 5.51%, Vedanta down by 4.10% and Reliance Industries down by 4.04% were the top losers. (Provisional)

European markets were trading in red, Germany’s DAX declined by 90.41 points or 0.85% to 10,591.74, France’s CAC was down by 38.21 points or 0.78% to 4,845.89 and UK’s FTSE 100 lost 19.04 points or 0.3% to 6,384.41.

The Asian markets, barring Taiwan Weighted, closed in red on Thursday with Shanghai Composite plunging as worries persisted over the weak economy and currency. Chinese companies that have been active raising cheap funds in global capital markets are facing increasing pressure as the yuan has come off its track of steady appreciation and is expected to fall further in coming months. The mismatch between their foreign currency liabilities and yuan-denominated revenues means interest expenses and principal payments of these loans and bonds will increase in yuan terms when the Chinese currency depreciates. China’s central bank has made $17 billion available to more than a dozen financial institutions to help boost the economy, a day after injecting nearly $100 billion into two government policy banks. Indonesia’s foreign debt grew at a slower pace in the second quarter of 2015, with the private sector reluctant to take on more debt amid rising risks stemming from sluggish economic growth and a weak currency. The country’s total foreign debt rose by 6.3% to $304.3 billion in the April-to-June period, compared to the same period a year ago. The growth was slower than the 7.9% pace the previous quarter. Japan’s All Industries Activity Index rose to a seasonally adjusted 0.3%, from -0.5% in the preceding month.