Post Session: Quick Review

Indian equity benchmarks which traded in green for most part of the day snapped the session in red on Wednesday. Equity benchmarks fell sharply after RBI kept all policy rates unchanged. The outcome came in as a shocker for the market which was anticipating a cut in the repo rate in the backdrop of easing inflation and rising concerns over a slowdown in the economy. The market made a modestly positive start in early deals on expectation of rate cut and as positive cues from global markets aided sentiment. Some support came with Asian Development Bank’s (ADB’s) report, indicating that the largest economies of Asia - India and China - will help maintain the growth rate of the region at 5.7% in 2016 and 2017. The report also mentioned that India’s growth prospects have got a boost from the acceptance of the 7th pay panel recommendations and likely implementation of the Goods and Services Tax (GST) regime next year. Separately, Fitch Ratings in its latest report titled ‘2017 Outlook: Emerging Asia Sovereigns’ said that there is scope for monetary easing in India as retail inflation is holding below the 5 percent target. Fitch said that inflation of 4.2 percent in October 2016 was below the intermediate target of 5 percent by March 2017 and within the medium-term target range of 4 percent (+/-) 2 percent.

Selling intensified after the Reserve Bank of India (RBI) surprised the street, in its fifth bi-monthly policy announcement and left the main repo rate unchanged at 6.25 percent, to keep inflation in check. This was despite the possibility of growth being impacted due to the crippling cash crunch since the currency ban. Most importantly the central bank lowered GDP forecast for current fiscal from 7.6 percent to 7.1 percent. The RBI clearly is playing the long game by targeting inflation instead of taking measures to address the short-term impact on GDP due to the scrapping of high value notes. However, banks got a major liquidity boost with the central bank withdrawing the 100% incremental Cash Reserve Ratio (CRR) requirement which was imposed on November 26. The RBI also forecasted inflation to be around 5% for the fourth quarter of FY17 stating that some of the price reduction resulting out of demonetisation could be temporary.

On the global front, Asian markets ended mostly in green, while China stocks snapped a three-day streak of losses, helped by a rally in resources shares. A broad rally in commodities, in particular in coke, coking coal, iron ore and rebar, boosted share prices in steelmakers, coal miners and other resources companies. European markets were trading in green as investors look ahead to Thursday’s highly-anticipated European Central Bank (ECB) policy meeting. The ECB is seen extending its asset purchase program by six months. Investors are focused on the ability of the central bank to step up purchases of Italian bonds to contain any fallout from the Italian referendum on constitutional reform.

The BSE Sensex ended at 26268.07, down by 124.69 points or 0.47% after trading in a range of 26164.82 and 26540.83. There were 11 stocks advancing against 19 stocks declining on the index. (Provisional)

The broader indices ended mixed; the BSE Mid cap index was up by 0.05%, while Small cap index was down by 0.39%. (Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.08%, Metal up by 0.59%, Auto up by 0.49%, Consumer Durables up by 0.27% and PSU up by 0.21%, while Realty down by 1.18%, Bankex down by 0.90%, IT down by 0.61%, Capital Goods down by 0.49% and TECK down by 0.46% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Adani Ports & Special Economic Zone up by 2.00%, HDFC up by 1.62%, Hero MotoCorp up by 1.12%, Tata Motors up by 0.99% and Mahindra & Mahindra up by 0.66%. (Provisional)

On the flip side, Sun Pharma down by 5.96%, Axis Bank down by 1.90%, TCS down by 1.39%, Lupin down by 1.31% and SBI down by 1.22% were the top losers. (Provisional)

Meanwhile, in order to boost online cashless payments using credit and debit cards, the Reserve Bank of India (RBI) has relaxed norms for additional factor of authentication (AFA) requirement for transactions up to Rs 2,000 for online CNP (card not present) transactions. RBI relaxed two-factor authentication for online payments below Rs 2,000 and stated that only authorised card networks shall provide such payment authentication solutions with participation of card issuing and acquiring banks.

As per the latest circular from RBI, an alternate solution, provided by authorised card networks is expected to meet the objective of customer convenience with sufficient security for low value transactions. In this model, the card-issuing banks will offer the payment authentication solutions of the respective card networks to their customers on an optional basis.

Customers opting for this facility will go through a one-time registration process requiring entry of card details and AFA by the issuing bank. Thereafter, the registered customers will not be required to re-enter the card details for every transaction at merchant locations that offer this solution and thereby save time and effort.  In this model, the card details already registered would be the first factor while the credentials used to login to the solution (as confirmed by the card network providing the solution) would be the additional factor of authentication.

Further, in the interest of customer awareness and protection, RBI said that the banks and authorized card networks offering such solutions will bear the full liability in the event of any security breach or compromise in the authorized card network. It added that banks and card networks are free to facilitate their customers to set lower per transaction limits.

The CNX Nifty ended at 8114.05, down by 29.10 points or 0.36% after trading in a range of 8077.50 and 8190.45. There were 15 stocks advancing against 36 stocks declining on the index. (Provisional)

The top gainers on Nifty were Eicher Motors up by 4.60%, BPCL up by 3.43%, Adani Ports & Special Economic Zone up by 2.21%, Idea Cellular up by 1.95% and HDFC up by 1.76%. (Provisional)

On the flip side, Sun Pharma down by 5.91%, Bank of Baroda down by 3.14%, Axis Bank down by 1.96%, Tech Mahindra down by 1.69% and Bosch down by 1.40% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 86.73 points or 1.28% to 6,866.57, Germany’s DAX increased 163.32 points or 1.52% to 10,938.64 and France’s CAC increased 55.23 points or 1.19% to 4,687.17.

Most of the Asian markets made a positive closing on Wednesday; with Japanese shares rallying on weaker yen after another record close on Wall Street overnight bolstered investor sentiment. Further, Chinese stocks snapped a three-day streak of losses, helped by a rally in resources shares. News that China's local government pension fund is moving one step closer to investing in the stock market provided some relief, rising hopes that typically longer investment strategy of the fund will foster stability and raise liquidity. Though, gains remained muted ahead of Thursday's highly-anticipated ECB meeting, which may set the tone for financial markets after Sunday's votes in Austria and Italy. The ECB is expected to extend its asset purchase program by six months to prop up growth and inflation. Oil prices eased further in Asian deals after losing 1.7 percent overnight on data showing record high production in the producer group and the API data showing solid builds in gasoline and distillate inventories.