Benchmarks recover some early losses; trade continues in red

The local benchmarks recovered from day’s low, but still trading below the neutral line, on account of sustained selling in frontline blue chips stocks. Sentiments remained subdued as appointment of Urjit Patel as the next Reserve Bank of India's (RBI’s) governor signals a strong likelihood of policy continuity. Patel is known for his hawkish view on inflation just like Raghuram Rajan whose term as the RBI governor ends on 4 September 2016. However, investors got some comfort with the International global rating agency, Moody’s Investors Service in its latest report stating that it may consider India for a rating upgrade if the government is successful in introducing more growth enhancing economic and institutional reform. Policies like relaxation of thresholds for Foreign Direct Investment (FDI) and a change in the monetary policy framework that fosters credibility will contribute to more stable economic environment.

On global front, European markets were slightly higher as investors trod cautiously ahead of the US Federal Reserve's Jackson Hole meeting this week which could produce some hints about the timing of a further interest rate hike. Back home, in scrip specific development, Infinite Computer Solutions (India) was trading higher after the company announced that its board will meet on August 24, 2016 to consider a share buyback proposal. Mahanagar Gas (MGL) has moved higher by 1.5% to Rs 586, its highest level since listing on bourses on July 1, 2016. The stock is now trading at a 39% premium against issue price of Rs 421 per share.

The BSE Sensex is currently trading at 27997.44, down by 79.56 points or 0.28% after trading in a range of 27918.05 and 28143.28. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.24%, while Small cap index was up by 0.01%.

The top gaining sectoral indices on the BSE were FMCG up by 0.54%, Consumer Durables up by 0.50%, Realty up by 0.43%, Capital Goods up by 0.20% and Oil & Gas up by 0.10%, while IT down by 1.25%, TECK down by 1.07%, Auto down by 0.70%, Metal down by 0.52%, Bankex down by 0.25% were the losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.84%, ITC up by 1.06%, HDFC up by 0.58%, Larsen & Toubro up by 0.51% and Cipla up by 0.44%. On the flip side, TCS down by 2.23%, Sun Pharma down by 1.90%, Lupin down by 1.66%, NTPC down by 1.65% and Tata Steel down by 1.16% were the top losers.

Meanwhile, the government has announced Urjit Patel as the next governor of the Reserve Bank of India (RBI) for a three-year term. This signals continuity in monetary policy, as Urjit Patel and Raghuram Rajan are on same view on inflation. 

The idea of setting up a Monetary Policy Committee (MPC) was mooted by an RBI-appointed committee led by deputy governor Urjit Patel in February 2014 that suggested the 2% to 6% inflation target range and also recommended that interest rate decisions should be taken by the RBI governor along with a group of members.

The government has already started the process of finalising three members for Monetary Policy Committee, which will fix the benchmark interest rate of the RBI and set inflation targets. The Governor will have a casting vote once the country shifts to the panel system. Three members of the committee will be from the RBI, while three others will be appointed by the government. Those appointments are yet to be made.

Further, the appointment of Urjit Patel indicated that the government wants RBI to maintain inflation on a tight leash and did not want to experiment with a new face from outside the central bank. The government also hinted that the expectations of immediate rate cut will not be possible in near term, as there is no change in the 2% to 6% target.

The CNX Nifty is currently trading at 8635.50, down by 31.40 points or 0.36% after trading in a range of 8614.00 and 8684.85. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were BHEL up by 2.29%, Hindustan Unilever up by 2.12%, BPCL up by 1.56%, ITC up by 1.00%, Zee Entertainment up by 0.69%. On the flip side, TCS down by 2.38%, HCL Tech. down by 1.96%, Sun Pharma down by 1.86%, Grasim Industries down by 1.82% and NTPC down by 1.68% were the top losers.

Asian market were trading mostly in red; Taiwan Weighted decreased 52.46 points or 0.58% to 8,981.81, Shanghai Composite was down by 23.3 points or 0.75% to 3,084.81, KOSPI Index declined 14.08 points or 0.68% to 2,042.16 and Jakarta Composite dropped 5.02 points or 0.09% to 5,411.02. On other hand, FTSE Bursa Malaysia KLCI increased 0.98 points or 0.06% to 1,688.66, Nikkei 225 gained 52.37 points or 0.32% to 16,598.19 and Hang Seng was up 60.69 points or 0.26% to 22,997.91.

European markets were trading in green; UK’s FTSE 100 increased 20.07 points or 0.29% to 6,879.02, France’s CAC climbed 38.49 points or 0.87% to 4,439.01 and Germany’s DAX surged 100.44 points or 0.95% to 10,644.80.