Post Session: Quick Review

Indian markets extended their gaining streak to the second day, and despite some choppiness in early deals managed to post decent gains, supported by short covering and value buying ahead of the crucial Fed policy meeting. Traders even overlooked CPI inflation reading, which surged to a 14-month high of 5.4 per cent in November, mainly on sharp pickup in food prices. Traders took some encouragement with global rating agency Fitch’s statement that India will continue to post good growth despite subdued prospect for the Asia Pacific region amid expected rise in US rates, dollar strength, and lower commodity prices. With investors mostly pricing in a Fed rate hike this week, now the main question hinges on how many increases will follow next year. Earlier, the Indian markets showed some downtrend led by fall in banking stocks on worries that a widely anticipated US interest rate hike by the Federal Reserve may prompt the Reserve Bank of India to keep key interest rate unchanged for longer.

On the global front, the Asian markets made mostly a positive close on Tuesday, though the Japanese market fell to a 7-1/2-week low in the face of volatile oil prices, and as investors avoided riskier assets ahead of an expected hike in US interest rates later this week. The European markets made a good start, climbing for the first time in six days after the euro strengthened against dollar.

Back home, Indian markets got boost with the strong start of European markets and the trade that was looking sluggish till the first half, gained momentum in the latter part, with benchmarks surging to their intraday high. The rupee appreciation too played its part in taking the markets higher for the day, rupee once again went below 67 against the dollar on increased selling of the American currency by exporters and banks. Though there was a sense of nervousness prevailing in the global financial markets as investors started a countdown to Fed’s meeting. There was also some cautiousness with Moody's Investors Service stating that the likely interest rate hike by the US Federal Reserve this week could pose risks to some emerging markets depending on the degree of exposure to rising US interest rates. The report, however, did not specify the impact, the rate hike will have on India.  Aviation stocks that have been in subdued mood since last some time, witnessed good spurt with the government ordering a flat rate for User Development Fee (UDF) in both international and domestic flights from Delhi. According to Airports Economic Regulatory Authority of India (AERA), from next year, domestic passengers will pay Rs 10 UDF and international passengers will pay Rs 45. Spicejet gained over 7%, JetAirways was up by over 5% and InterGlobe Aviation gained around 9%.

The BSE Sensex ended at 25300.81, up by 150.46 points or 0.60% after trading in a range of 25075.54 and 25342.78. There were 17 stocks in green against 13 stocks in red on the index. (Provisional)

The broader indices going neck-in-neck with the benchmarks ended higher by over half a percent each; the BSE Mid cap index was up by 0.56%, while Small cap index added 0.60%. (Provisional)

The top gaining sectoral indices on the BSE were Auto up by 1.24%, Consumer Durables up by 1.23%, FMCG up by 1.08%, Realty up by 0.84%, Oil & Gas up by 0.70%, while  Metal down by 0.24%, TECK down by 0.01% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hindustan Unilever up by 2.45%, ONGC up by 2.23%, Lupin up by 2.21%, Reliance Industries up by 2.10% and Tata Motors up by 1.80%. On the flip side, Wipro down by 1.54%, ICICI Bank down by 1.47%, NTPC down by 1.02%, Vedanta down by 0.77% and Coal India down by 0.70% were the top losers. (Provisional)

Meanwhile, depending on the improvements in performance and efficiency, the finance ministry will infuse Rs 5,000 crore in public sector banks (PSBs) to boost their capital. In total eight lenders are expected to benefit from this last round of capitallisation in the ongoing fiscal year, including Vijaya Bank, Indian Bank and Syndicate Bank. Finance Ministry stated that “We are committed to support PSBs but the onus is on them to improve their profitability and return on assets (RoA), which will be the key factors before allocating any further amount.”

The other parameters on which banks will be assessed include bad loans and growth in low-cost deposits. The finance ministry has also identified six banks - Bank of India, IDBI, Indian Overseas Bank, Bank of Maharashtra, UCO Bank, and United Bank of India which require special focus to arrest bad loans.

Parliament's nod was sought for additional spending of Rs 56,256 crore in the second supplementary demand for grants, largely to cover excess expenditure on defence pensions and the Swachh Bharat Abhiyan.

The government allocated Rs 25,000 crore for bank capitalization in FY16, from the initial budgetary allocation of Rs 7,940 crore. Of this, Rs 20,000 crore has been infused and Rs 5,000 crore was to be provided in the second supplementary this year. However, it did not seek any funds toward bank capitalisation in the second batch of supplementary demands for FY16. State Bank of India, the country's biggest lender, was the biggest beneficiary in the first round of capitalisation for this fiscal with an allocation of Rs 5,531 crore.

In August, the government announced Rs 70,000 crore capitalization plan for state run banks over four years under its seven pronged Indradhanush revamp initiative. As per finance ministry data, the gross non-performing assets (NPAs) of Bank of India have almost doubled to Rs 29,894 crore since September 2014.

The CNX Nifty ended at 7692.60, up by 42.55 points or 0.56% after trading in a range of 7625.10 and 7705.00. There were 33 stocks on gainers side against 16 stocks on decliners side, while one stock remained unchanged on the index. (Provisional)

The top gainers on Nifty were Bosch up by 3.06%, Hindustan Unilever up by 2.64%, Lupin up by 2.35%, ONGC up by 2.30% and Reliance Industries up by 2.19%. On the flip side, Tech Mahindra down by 4.10%, PNB down by 2.73%, Idea Cellular down by 2.22%, Wipro down by 1.51% and ICICI Bank down by 1.33% were the top losers. (Provisional)

European markets were trading with good gains, UK’s FTSE 100 increased 102.25 points or 1.74% to 5,976.31, France’s CAC was up by 106.5 points or 2.38% to 4,579.57 and Germany’s DAX gained 228 points or 2.25% to 10,367.34.

Asian equity markets ended mixed on Tuesday after crude oil prices which have been on the decline lately, rose in US trading session. Japanese shares though declined to a 7-1/2-week low, as investors avoided riskier assets ahead of the historic Federal Reserve meeting ending Wednesday. The US central bank is widely expected to raise its target range for the federal funds rate to 0.25-0.50 percent, bringing an end to the seven-year period of near-zero interest rates. Chinese stocks too ended slightly lower, with a correction in banking and resource shares countering a surge in property firms that was triggered by hopes of more support measures for the real estate market.