Post Session: Quick Review

Indian markets suffered sharp setback on Friday, relinquishing most of the gains made in previous session and snapping the four days gaining streak. Earlier, the major averages opened with a negative bias tracking muted global cues, as the Asian markets following the sharp selloff on Wall Street overnight made a weak start. Though, there was some resistance till noon and the markets traded in range but afterwards the choppiness increased and bourses started declining with the government in its mid-year Economic Review stating that the Indian economy is likely to grow at 7-7.5 percent in fiscal 2015-16 down  from 8.1-8.5 percent estimated in February, while retail inflation is expected at 6 percent. Though, the report also reiterated government would meet its fiscal deficit target of 3.9 percent and revenue deficit target of 2.8 for this year. Traders remained concerned about the global growth with cautiousness increasing after former RBI Governor C Rangarajan stating that the country may see some capital outflow and weakness in stocks following the rate hike by US Federal Reserve, but he said that the negative impact is not expected to be severe. He also added that India's situation on the balance of payment side is reasonably under control now.

The global cues remained somber and after a sell-off in the US markets, the Asian markets followed the trend and ended in red. Japanese shares sank the most in two weeks as tweaks to the Bank of Japan’s monetary stimulus boosted the yen and spurred gains in the nation’s bonds. The Bank of Japan kept its main target for monetary stimulus unchanged and said it would extend the average maturity of sovereign debt it holds to 7-12 years. The European markets too made a soft start, as the oil traded near $35 a barrel and headed for a third weekly decline.

Back home, the weak opening of the European markets intensified the selling on the domestic bourses, though there was some recovery after European markets showed sign of bounce back but it was short lived and instead the fall on the Indian bourses aggravated as selling pressure deepened in metal, IT and banking shares. Markets took a breather after four days of solid gains with all the high beta stocks that have gained in last few rallies witnessing profit taking. The broader markets that outperformed benchmarks for most part of the day also succumbed to the pressure and made a mixed closing. Most of the sectoral indices too ended in red on the BSE led by IT and technology. It sector stocks after showing some resilience in last session fell today after the US Congress doubled the 'outsourcing fee' imposed on highly qualified IT professionals to $ 4,000 on certain categories of H-1B visas and $ 4,500 on L-1 visas to fund a 9/11 healthcare act and biometric tracking system. The new H-1B and L-1 visa fee increase is for a period of 10 years as against a previous provision of five years. The banking pack too lost around a percent after the Reserve Bank of India released the final guidelines on computing interest rates on advances based on the marginal cost of funds. The guidelines come into effect from 1 April 2016. RBI has said that the marginal cost pricing of loans will help the banks become more competitive and enhance their long run value and contribution to economic growth.

The BSE Sensex ended at 25507.92, down by 295.86 points or 1.15% after trading in a range of 25481.51 and 25789.51. There were just 3 stocks on gainers side against 27 stocks on losers’ side on the index. (Provisional)

The broader indices made a mixed closing; the BSE Mid cap index ended up by 0.12%, while Small cap index lost 0.18%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.05%, Realty up by 0.26%, Power up by 0.05%, while IT down by 1.50%, TECK down by 1.26%, Bankex down by 0.79%, FMCG down by 0.78%, Metal down by 0.78% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Coal India up by 0.27%, NTPC up by 0.22% and Mahindra & Mahindra up by 0.06%. On the flip side, Vedanta down by 3.33%, Infosys down by 2.11%, SBI down by 2.08%, Lupin down by 2.02% and Reliance Industries down by 1.69% were the top losers. (Provisional)

Meanwhile, the Reserve Bank of India (RBI), in order to improve transparency and ensure speedier monetary policy transmission has said that all banks will have to follow a new uniform methodology from the next fiscal (April 1, 2016) for calculation of base rate on the basis of the marginal cost of funds. The apex bank stated that marginal cost pricing of loans will help the banks become more competitive and enhance their long run value and contribution to economic growth.

The new lending rates, Marginal Cost of Funds-based Lending Rate (MCLR), will be computed based on banks' marginal cost of borrowing, or incremental cost of funds, rather than the average cost of funds that banks have used so far. Apart from helping improve the transmission of policy rates into the lending rates of banks, these measures are expected to improve transparency in the methodology followed by banks for determining interest rates on advances.

As per the RBI notifications, the MCLR will be a tenor linked internal benchmark and the actual lending rates will be determined by adding the components of spread to the MCLR. Banks will have to review and publish their MCLR of different maturities every month on a pre-announced date. If a bank's cost of borrowing is eight per cent now but tomorrow the incremental cost of funds becomes 7.5 per cent, the marginal cost of borrowing for the computation purpose will be 7.5 per cent, rather than the average of the two as was previously being used.

Banks will have the option to offer loans with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of MCLR. The periodicity of reset shall be one year or lower. RBI has further said that the MCLR prevailing on the day the loan is sanctioned will be applicable till the next reset date, irrespective of the changes in the benchmark during the interim period. It also said that existing loans and credit limits linked to the Base Rate may continue till repayment or renewal, as the case may be. Existing borrowers will also have the option to move to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms.

The CNX Nifty ended at 7763.05, down by 81.30 points or 1.04% after trading in a range of 7753.35 and 7836.15. There were 10 stocks in green against 40 stocks in red on the index. (Provisional)

The top gainers on Nifty were Adani Ports &Special up by 1.79%, Idea Cellular up by 0.93%, Power Grid Corpn. up by 0.71%, Asian Paints up by 0.68% and Ambuja Cement up by 0.56%. On the flip side, Vedanta down by 3.16%, Ultratech Cement down by 2.89%, Bajaj Auto down by 2.37%, SBI down by 2.10% and Infosys down by 1.91% were the top losers. (Provisional)

European markets were trading in red, Germany’s DAX was down by 58.74 points or 0.55% to 10,679.38, France’s CAC was lower by 23.73 points or 0.51% to 4,653.81 and UK’s FTSE 100 was down by 2.21 points or 0.04% to 6,100.33.

Asian equity markets closed in red on Friday after Wall Street suffered a setback overnight and fresh signs of inventory buildup put further downward pressure on the already low prices. While positive home price data from China spurred some buying interest, the recovery quickly petered out following the Bank of Japan's policy decision. China's home prices rose 0.9 percent in November, up from the previous month's reading of 0.1 percent, signaling further stabilization in the country's housing markets. Japanese shares ended a choppy session lower after the Bank of Japan tweaked its bond-buying program. While keeping its main target for monetary stimulus unchanged at an annual pace of about 80 trillion yen, the Bank of Japan expanded the quantitative easing program to include exchange traded funds (ETFs).