Post Session: Quick Review

Markets went through a big disappointment on Friday, when major averages losing their important support levels intraday plunged to new lows. There was across the board selling that intensified amid weakness in the Asian counterparts. Caution prevailed in the market from the very beginning, as investors looked ahead to industrial output data due out later in the day for further clues on the health of the economy. Traders were unable to get any respite with a UN report stating that India's economy is projected to grow by 7.3 percent next year and will continue to be the fastest growing economy in the world in 2016 and 2017, amid a volatile global financial condition. There was cautiousness in the market with RBI Governor Raghuram Rajan warning corporates against ill-effects of over-borrowing, saying that debt is like “dynamite” which can harm at times with its “explosive” nature. He said that it is an instrument which is very useful in right places and explosive in others. The governor also called for moderation in use of debt as there is always a temptation to over-use it. The markets came under heavy selling pressure on the back of weakness in banking stocks and offloading of positions by cautious participants was clearly visible in the latter part of the trade. Marketmen grew increasingly worried over a possible delay in the passage of the key GST bill amid weak global cues.

The global markets presented a mixed picture and while the US markets ended modestly in green, most of the Asian markets ended in red with China’s yuan slipping to its lowest level in nearly four and 1/2 years. The plunging crude prices heightened fears about receding global growth. However, the Japanese market bucked the trend on a weaker yen against the dollar ahead of the next week’s US Federal Reserve meeting at which the central bank is widely expected to hike interest rates. The European markets too made a weak start led by the commodities stock on oil slump. Meanwhile, Italian industrial production rose more than estimated in October, output increased 0.5 percent from September.

Back home, the sharp selling that started in noon session dragged the benchmarks below their crucial psychological levels, however there was some lower level buying in the final hours that supported the markets, pulling back the major indices from their intraday low, still traders risk appetite was clearly missing ahead of the crucial next week and Index of industrial production data for the month of October, slated to be announced after the market hours. Banking stocks remained under pressure, as the rating agency Fitch has said that credit growth of banking sector may moderate further in the current financial year as worsening asset quality coupled with capital constraints were acting as impediments. However, it has said that private banks are in a better position to take advantage of the economic recovery. Meanwhile, the Reserve Bank of India said that it is expecting the US Federal Reserve to raise rates next week by between one and 25 basis points and it is prepared to meet any eventuality arising out of the decision. Auto stocks too were under pressure as Delhi government announced that it will seek advancing of the rollout of Bharat Stage VI emission norms in Delhi to 2017 for countering air pollution, while the National Green Tribunal (NGT) ordered that no new diesel vehicles would be registered in Delhi. There was some buzz in the cement stocks after Competition Appellate Tribunal setting aside Rs 6,316.59 crore penalty imposed on 11 cement firms by CCI on cartelisation charges asked the fair trade regulator to hear the matter afresh. The Tribunal also allowed the cement manufacturers to withdraw the 10 per cent penalty amount already deposited with the CCI.

The BSE Sensex ended at 25053.83, down by 198.49 points or 0.79% after trading in a range of 24930.43 and 25316.14. There were 12 stocks in green against 18 stocks in red on the index. (Provisional)

The broader indices too ended in red; the BSE Mid cap index lost 1.19%, while Small cap index was down by 0.79%. (Provisional)

The gaining sectoral indices on the BSE were IT up by 0.29%, Metal up by 0.28%, FMCG up by 0.01%, while Realty down by 2.68%, Bankex down by 2.30%, Auto down by 1.63%, Consumer Durables down by 1.60%, Power down by 1.47% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Steel up by 3.54%, Hindalco up by 1.06%, Infosys up by 0.88%, Cipla up by 0.76% and Vedanta up by 0.60%. On the flip side, ICICI Bank down by 3.54%, Tata Motors down by 2.61%, Axis Bank down by 2.55%, Mahindra & Mahindra down by 2.21% and SBI down by 2.13% were the top losers. (Provisional)

Meanwhile, Reserve Bank of India (RBI) in its latest notification has permitted the banks to bring down the statutory liquidity ratio (SLR) securities under held-to-maturity (HTM) category by 1.25 per cent from 22 percent of their deposits to 20.50 per cent. It will come into effect from the fortnight beginning January 9, 2016. Thereafter, both the SLR and the HTM ceiling will be brought down by 0.25 per cent every quarter till March 31,2017.

SLR was reduced to 21.50 per cent of net demand and time liabilities (NDTL), or total deposits, with effect from February 7, 2015. In order to align them, RBI has taken this decision to bring down the ceiling on SLR securities under HTM. This move is expected to unlock funds for lending.SLR cuts will mean banks will have more money in hand for lending and the cut in HTM would mean banks have to mark to market more securities that they hold.The securities acquired by the banks with the intention of holding them till maturity are classified as HTM.

As announced in the fourth bi-monthly monetary policy statement, 2015-16, on September 29, 2015, it has been decided to progressively bring down SLR by 0.25 per cent every quarter till March 31, 2017 and concurrently reduce ceiling on SLR holdings under HTM in alignment with the SLR requirement.

SLR is the portion of deposits that banks have to necessarily maintain in assets, such as cash, gold valued at a price not exceeding the current market price, dated securities and treasury bills issued by the Government of India and State development loans of State Governments. At present, banks are permitted to hold investments under the HTM category in excess of the limit of 25 per cent of their total investments, provided the excess comprises only SLR securities and the total SLR securities held under the HTM category are not more than 22 per cent of total deposits.

The CNX Nifty ended at 7610.10, down by 73.20 points or 0.95% after trading in a range of 7575.30 and 7703.05. There were 9 stocks on gainers side against 41 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Tata Steel up by 3.56%, Hindalco up by 0.86%, Infosys up by 0.79%, Vedanta up by 0.72% and Hindustan Unilever up by 0.63%. On the flip side, PNB down by 4.69%, ICICI Bank down by 3.59%, Yes Bank down by 3.34%, Tata Motors down by 2.72% and Grasim Industries down by 2.70% were the top losers. (Provisional)

European markets were trading in red, Germany’s DAX was down by 42.08 points or 0.4% to 10,556.85, UK’s FTSE 100 lost 25.46 points or 0.42% to 6,062.59 and France’s CAC decreased by 16.79 points or 0.36% to 4,618.27.

Asian equity markets ended mostly in red on Friday as plunging crude oil prices and a tumble in China's yuan to almost 4-1/2-year lows added to worries about receding global growth. A supply glut in oil markets and cooling growth in China, the world's biggest commodities consumer, have pressured many asset markets ahead of a widely expected hike to US interest rates by the Federal Reserve next week. Chinese shares ended lower ahead of a spate of economic data scheduled to be released on Saturday, including retail sales, industrial production, and fixed asset investment. Hong Kong shares dropped to a 2-month low, capping a dismal week as investors stayed sidelined on weak China economic data. However, Japanese shares ended higher, buoyed by overnight gains on Wall Street and fresh weakness in the yen.