Post Session: Quick Review

Indian equity benchmarks traded on a firm note for most part of the day but slipped in red with cut of around quarter percent. The last hour of trade dragged the market to close below neutral line for sixth straight session. US dollar rose to its highest level in 14 years as the outlook about US economy improved with Federal Reserve intent on adopting higher pace of rate hikes in 2017. The markets were trading slightly in green in early deals on account of buying in front line blue chip counters. Investors continue to consolidate beaten down stocks on account of value buying amid low volumes. The sentiments remained up-beat with Finance Minister Arun Jaitley’s statement that the government would offer tax incentives to small businesses engaged in cashless transactions, as part of the government’s fight against the cash economy. He said the move would enable businesses with annual turnover of Rs 2 crore to save up to 30 percent in tax payments. The street took note of CRISIL report that the government’s demonetising Rs 500 and Rs 1,000 notes may yield lasting economic benefits but its immediate impact has been stunningly disruptive, with cash shortages roiling business plans. The report highlighted that the long-term aim of India’s demonetisation policy is to improve economic and public administrative conditions by forcing black markets and cash-based sectors of the economy to operate in the formal economy.

Selling crept in after confirming fears of demonetisation move hitting growth, Japanese brokerage Nomura said its proprietary indices have dipped to the lowest levels since 1996, with rural consumption showing the maximum impact. The report said the demonetisation move has hit rural consumption demand harder than the urban demand. The Nomura Composite Leading Index (CLI) for India for early 2017 has slumped to the lowest level since the series began in 1996 and is consistent with GDP growth of below 6 per cent. Investors took cautious approach after N. Chandrababu Naidu, chief minister of Andhra Pradesh abruptly distanced himself from the Prime Minister’s move to scrap high-value banknotes, as broad initial support for the radical monetary reform showed signs of crumbling. While Modi remains by far India’s most popular politician, any crack in his authority could have negative implications in state elections next year that will set the tone for his expected bid for a second term in 2019. Foreign Institutional Investors (FIIs) continued their relentless sell-offs and sold domestic equities worth Rs 535.77 crore on December 20, 2016.

On the global front, Asian markets ended mostly in red. China stocks rebounded as fears of a liquidity squeeze in the banking system subsided after risks from a bond scandal appeared contained and on a pledge to deepen reforms in state-owned sectors. Japan’s government upgraded its overall assessment of the economy, echoing the Bank of Japan’s more upbeat view, in a sign the economy may be steadying. The government also upgraded its view of household spending, exports and business sentiment, saying consumers’ mindsets are improving and exports to Asia are recovering. European shares were marginally lower but stayed close to their highest in more than 11 months as merger and acquisition activity continued to prop up the market.

Back home, select micro finance stocks were under pressure on reports that the Maharashtra government will form a special investigation team to look into complaints of irregularities and violations of RBI guidelines by microfinance companies. Gold & Jewellery stocks like PC Jeweller, Rajesh Export, Gitanjali Gems, Asian Star Company and Tribhovandas Bhimji Zaveri were trading firm on reports that the government is likely to lower gold import duty from 10 percent to 6 percent.

The BSE Sensex ended at 26238.19, down by 69.79 points or 0.27% after trading in a range of 26213.51 and 26396.00. There were 14 stocks advancing against 16 stocks declining on the index. (Provisional)

The broader indices ended mixed; the BSE Mid cap index was down by 0.19%, while Small cap index was up by 0.05%. (Provisional)
The top gaining sectoral indices on the BSE were Realty up by 1.33%, Power up by 0.55%, Consumer Durables up by 0.52%, Metal up by 0.47% and PSU up by 0.47%, while FMCG down by 0.90%, TECK down by 0.74%, IT down by 0.74% and Capital Goods down by 0.42% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Maruti Suzuki up by 1.31%, Lupin up by 1.07%, NTPC up by 1.05%, Mahindra & Mahindra up by 1.02% and ONGC up by 0.85%. (Provisional)

On the flip side, Sun Pharma down by 2.34%, ITC down by 1.46%, TCS down by 1.31%, Axis Bank down by 1.16% and Larsen & Toubro down by 0.96% were the top losers. (Provisional)

Meanwhile, with an aim to recover from the effect of demonetization, the Reserve Bank of India in a pre-Budget meeting with Finance Minister Arun Jaitley urged for full tax exemption on provisioning made for non-performing assets (NPAs) and the removal of service tax on digital transactions.It argued that such a facility of full tax deduction will shore up banks, which face challenges from demonetisation and sluggish loan recoveries in the ongoing third quarter.

Currently, banks and financial institutions are allowed deduction in respect of provision made for doubtful debts is only up to 7.5 percent of the total income. Thus, the RBI and some bankers sought to allow 100 percent deduction on bad debt provisioning in the upcoming Budget. PSU banks also sought higher capital infusion from the government saying they had not been able to carry out normal lending activity since demonetisation as their prime focus has been on exchanging notes and accepting old currency.

During the meeting, banks also pitched for extension of the additional 60-day window granted to them for recognition of a loan account as sub-standard. The RBI, on November 21, had temporarily relaxed prudential norms for banks and non-banking finance companies. They were given an additional 60 days beyond what is applicable to them for recognition of a loan account as sub-standard, thereby saving them the burden of provisioning. The relaxation in norms applied for dues payable between November 1 and December 31. Banks now want this facility extended even for dues payable beyond December 31.

The CNX Nifty ended at 8056.10, down by 26.30 points or 0.33% after trading in a range of 8053.25 and 8112.55. There were 24 stocks advancing against 27 stocks declining on the index. (Provisional)

The top gainers on Nifty were Ultratech Cement up by 1.25%, Lupin up by 1.16%, NTPC up by 1.11%, IndusInd Bank up by 1.00% and Hindalco up by 0.96%. (Provisional)

On the flip side, Bharti Infratel down by 2.66%, Sun Pharma down by 2.18%, ITC down by 1.63%, Idea Cellular down by 1.50% and Ambuja Cement down by 1.49% were the top losers. (Provisional)

The European markets were trading mostly in red; UK’s FTSE 100 decreased 1.12 points or 0.02% to 7,042.84 and France’s CAC decreased 7.99 points or 0.16% to 4,841.90, while Germany’s DAX increased 6.08 points or 0.05% to 11,470.82.

Asian equity markets ended mostly in red on Wednesday, with Japanese shares closed slightly lower in choppy trade as a modest uptick in the yen overshadowed overnight advances in US stocks and the government's upbeat assessment of the domestic economy. The government has upgraded its assessment of the Japanese economy for the first time since March 2015, citing a pickup in private consumption and exports. Oil prices nudged higher to trade above $53 a barrel in Asian deals after API data showed US stockpiles declined last week. The EIA report due out later in the day is also expected to show a draw of 2.5 million barrels in the week ending December 16. Chinese shares ended higher as liquidity worries eased and the State-owned Assets Supervision and Administration Commission pledged to deepen reforms in state-owned sectors.