Benchmark indices snap 3-day losing streak
Positive lead from global markets helped Indian stocks snap a 3-day losing streak. The barometer index, the S&P BSE Sensex, gained 178.30 points or 0.78% to settle at 23,154.30. The 50-unit Nifty 50 index gained 59.15 points or 0.85% to settle at 7,029.75. The Sensex reclaimed the psychologically important 23,000 mark and the Nifty reclaimed the psychological 7,000 mark. Key benchmark indices remained in positive zone throughout the day. Meanwhile, the Economic Survey 2015-16 tabled in Parliament by Finance Minister Arun Jaitley set a wider range of 7% to 7.75% for projected GDP growth for 2016-17, with downside risks because of global economic slowdown.
ITC edged higher, with the stock recovering on bargain hunting after recent slide triggered by concerns that the government may hike tax on all tobacco products in the upcoming Union Budget by upto 40%. Coal India moved higher, with the stock extending gains registered during the previous trading session triggered by the Railway Minister keeping freight rates unchanged in the Rail Budget for 2016-17.
Shares of private sector bank stocks rose and state-run banks saw mixed trend after the Reserve Bank of India (RBI) announced changes and issued clarification on some aspects of its prudential guidelines on revitalising stressed assets in the economy. Shares of oil exploration and production (E&P) companies edged higher as crude oil prices rose.
In overseas markets, Asian and European stocks rose as a two-day gathering of G20 finance ministers and central bankers kicked off in Shanghai to discuss global growth concerns. Trading in US index futures indicated that the Dow Jones Industrial Average could gain 128 points at the opening bell. US markets closed higher yesterday, 25 February 2016, as oil prices rose.
The Sensex gained 178.30 points or 0.78% to settle at 23,154.30, its highest closing level since 23 February 2016. The Sensex jumped 251.91 points or 1.09% at the day's high of 23,227.91. The barometer index rose 45.94 points or 0.19% at the day's low of 23,021.94 .
The 50-unit Nifty 50 index gained 59.15 points or 0.85% to settle at 7,029.75, its highest closing level since 23 February 2016. The Nifty jumped 82.30 points or 1.18% at the day's high of 7,052.90 . The index rose 14.50 points or 0.2% at the day's low of 6,985.10.
The market breadth indicating the overall health of the market was negative. On BSE, 1,443 shares declined and 1,041 shares gained. A total of 170 shares were unchanged. The BSE Mid-Cap index rose 0.3%. The BSE Small-Cap index fell 0.45%. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 1914 crore, lower than turnover of Rs 2319.38 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE Metal index (up 1.66%), the S&P BSE Bankex (up 1.51%), the S&P BSE Realty index (up 1.47%), the S&P BSE Finance index (up 1.27%), the S&P BSE Capital Goods index (up 1.12%), the S&P BSE FMCG index (up 1.06%), the S&P BSE Power index (up 0.87%), the S&P BSE Energy index (up 0.85%) and the S&P BSE Utilities index (up 0.83%), outperformed the Sensex. The S&P BSE Industrials index (up 0.52%), the S&P BSE IT index (up 0.48%), the S&P BSE Teck index (up 0.34%), the S&P BSE Oil & Gas index (up 0.27%), the S&P BSE Auto index (down 0.08%), the S&P BSE Consumer Durables index (down 0.16%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.23%), the S&P BSE Basic Materials index (down 0.24%), the S&P BSE Healthcare index (down 0.31%) and the S&P BSE Telecom index (down 0.68%), underperformed the Sensex.
Index heavyweight and housing finance major HDFC advanced 1.45% to Rs 1,057. The stock hit high of Rs 1,058.80 and low of Rs 1,048.50 in intraday trade.
Index heavyweight and software major Infosys advanced 0.98% to Rs 1,122.15. The stock hit high of Rs 1,130.75 and low of Rs 1,113 in intraday trade.
ITC rose 1.76% to Rs 291.25, with the stock recovering on bargain hunting after recent slide triggered by concerns that the government may hike tax on all tobacco products in the upcoming Union Budget by upto 40%. Shares of ITC had fallen 6.14% in the preceding five trading sessions to settle at Rs 286.20 yesterday, 25 February 2016, from its close of Rs 304.95 on 18 February 2016. Highlighting a discrepancy between the existing tobacco prices and rising income levels, the health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products, as per reports.
Metal and mining stocks were mixed. Hindalco Industries (up 3.42%), National Aluminium Company (up 1.22%) rose. Hindustan Zinc fell 0.43%. Hindustan Copper was unchanged at Rs 43.45. Steel stocks were mixed. Tata Steel (up 0.28%) and Steel Authority of India (Sail) (up 0.87%) rose. JSW Steel (down 2.21%) and Jindal Steel & Power (down 2.21%) fell.
In view of dumping of steel into India from China, South Korea and Japan, the steel industry expects increase in customs duty to 25% on both long steel products and flat products in Union Budget 2016-17. At present, import duty on long steel products is 10% and that on flat products is 12.5%. Earlier this month, the government imposed a minimum import price (MIP) or floor price on 173 steel products ranging from $341 to $752 per tonne in a bid to protect the domestic steel industry from cheap imports.
The steel industry also expects withdrawal of the 2.5% customs duty on coking coal in the Budget, which will help reduce input cost for steel makers.
Iron ore makers were mixed. Vedanta rose 3.38%. NMDC lost 1.3%. Given the decline in India's iron ore production, the steel industry expects withdrawal of the 2.5% customs duty on iron ore. Iron ore is the primary raw material for steel making.
Coal India advanced 4.37% to Rs 312.60, with the stock extending gains registered during the previous trading session triggered by the Railway Minister keeping freight rates unchanged in the Rail Budget for 2016-17. The stock had risen 1.32% to settle at Rs 299.50 yesterday, 25 February 2016. Substantial movement of coal takes places through the railways and there will be no change in existing freight rates on coal transport through railways, with the Railway Minister keeping freight rates unchanged in the Rail Budget 2016-17 announced yesterday, 25 February 2016.
Meanwhile, there is wide expectation of further increase in clean energy cess on coal in Union Budget 2016-17 as the government intends to encourage renewable energy generation. It may be recalled that in Union Budget 2015-16, the government had raised the clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne.
Most auto stocks declined. Maruti Suzuki India (down 0.1%), Ashok Leyland (down 0.47%), Eicher Motors (down 0.24%), Bajaj Auto (down 3.52%), Hero MotoCorp (down 2.41%) and TVS Motor Company (down 1.31%) declined. Tata Motors (up 1.58%) and Mahindra & Mahindra (M&M) (up 1.01%), gained.
The commercial vehicles industry is seeking announcement in the Union Budget 2016-17 on scrappage policy that would provide incentive for replacing old commercial vehicles with new vehicles. This would be positive for commercial vehicles manufacturers, as it will result in spurt in demand for commercial vehicles.
Telecom stocks declined. Bharti Airtel (down 1.52%), Idea Cellular (down 1.13%), Tata Teleservices (Maharashtra) (down 2.65%) and Reliance Communications (down 1.93%) fell. MTNL rose 1.79%.
Shares of private sector bank stocks rose and state-run banks saw mixed trend after the Reserve Bank of India (RBI) announced changes and issued clarification on some aspects of its prudential guidelines on revitalising stressed assets in the economy. Among private sector banks, HDFC Bank (up 1.63%), Kotak Mahindra Bank (up 1.32%), ICICI Bank (up 0.71%), Axis Bank (up 1.9%), IndusInd Bank (up 0.64%) and Yes Bank (up 1.88%) gained.
Among public sector banks, State Bank of India (SBI) (up 3.36%), Bank of Baroda (up 1.73%), Punjab National Bank (up 0.56%), Canara Bank (up 0.62%), Bank of India (up 0.24%) rose. Union Bank of India (down 4.32%), Indian Overseas Bank (down 0.62%), Vijaya Bank (down 0.49%) and IDBI Bank (down 0.89%) fell.
The Reserve Bank of India (RBI) has announced reduction in the minimum percentage of shareholding to be initially divested by the lenders in case of Strategic Debt Restructuring (SDR). The central bank has also directed lenders to build up adequate provisions for possible loss in value of the equity acquired in lieu of debt and residual loan exposures. On the issue of divestment of banks' holding in favour of a new promoter in case where SDR has been initiated, the asset classification benefit will be available to the lenders provided they divest a minimum of 26% of the shares of the company to the new promoters within the stipulated time line of 18 months and the new promoters take over management control of the company.
Lenders would, thus, have the option to exit their remaining holdings gradually, with upside as the company turns around. Lenders should, however, grant the new promoters the 'Right of First Refusal' for the subsequent divestment of their remaining stake, the RBI said. The RBI introduced SDR scheme for lenders for reviving stressed accounts and providing banks with enhanced capabilities to initiate change of ownership in accounts which fail to achieve the agreed critical conditions and viability milestones.
The RBI has also directed banks to periodically value and provide for depreciation of equity shares acquired and held by banks under the SDR scheme as per Income Recognition and Asset Classification (IRAC) norms for investment portfolio. Banks will have the option of distributing the depreciation on equity shares acquired under SDR over a maximum of four calendar quarters from the date of conversion of debt into equity. Furthermore, banks desiring to have a longer period for making provisions, say 6 quarters, can start making ex-ante provisions in anticipation of marked to market (MTM) requirement, from the reference date itself.
The RBI has also directed banks to build provisions on residual loan exposures in case of SDR such that, by the end of the 18-month period from the reference date, they hold provision of at least 15% of the residual loan. The required provision will have to be made in equal installments over four quarters. This provision can be reversed only when all the outstanding loans/facilities in the account perform satisfactorily after transfer of ownership/management control to new promoters.
With regard to the Framework to Revitalise the Distressed Assets in the Economy, the RBI has announced a reduction in the percentage of lenders, by number, required to approve the Corrective Action Plan (CAP). The RBI has also revised composition of the Joint Lenders' Forum Empowered Group (JLF-EG) for enhancing the quality of decision making. The central bank has also announced a scheme of incentives for adherence to timelines for decision-making by JLF members to facilitate timely implementation of the CAP.
The RBI has also allowed restructuring and benefits of asset classification in cases of borrower accounts, which were involved in fraud where the promoters have been subsequently replaced by new promoters and the borrower is totally delinked from the erstwhile promoters. The RBI has also clarified that flexible structuring of project loans is also permitted for ECBs
Meanwhile, the key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). As per Indradhanush framework for transforming PSU banks, the government has proposed capital infusion of Rs 70000 crore in PSU banks over four years through FY 2019, with Rs 25000 crore each for FY 2016 and FY 2017 and Rs 10000 crore each for FY 2018 and FY 2019. The government has already infused Rs 20000 crore in FY 2016 so far. A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
Shares of oil exploration and production (E&P) companies edged higher as crude oil prices rose. Cairn India (up 2.82%), Reliance Industries (up 0.7%), ONGC (up 0.14%) and Oil India (up 0.61%) edged higher. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.
In the global commodities markets, Brent for April settlement was currently up 63 cents at $35.92 a barrel. The contract had risen 88 cents, or 2.56% to settle at $35.29 a barrel during the previous trading session.
In the backdrop of a sharp fall in global crude oil prices during the past two years, companies involved in oil exploration and production expect relaxation on rate of cess on crude oil in the Union Budget 2016-17. The industry expects the levy to be made on ad-valorem basis on realized price on crude from the current specific levy of Rs 4,500 per metric tonne (MT). The industry also expects withdrawal of National Calamity Contingent Duty of Excise of Rs 50 per MT on crude oil. The upstream oil and gas sector also expects reduction/removal of the 5% customs duty on liquefied natural gas in order to provide a boost to the usage of cleaner fuel.
Stocks of public sector oil marketing companies (PSU OMCs) rose. HPCL (up 2.41%) and BPCL (up 0.92%) gained. Indian Oil Corporation shed 0.14%.
UltraTech Cement shed 0.63%. Jaiprakash Associates (JAL) fell 1.03%. UltraTech Cement after market hours today, 26 February 2016, announced withdrawal of Scheme of Arrangement between the company and JAL for the acquisition of JAL's entire cement business situated at Bela and Siddhi in Madhya Pradesh as a going concern on slump sale basis.
Meanwhile, the Economic Survey 2015-16 prepared by finance ministry's chief economic adviser Arvind Subramanian stated that the country's macro-economy is stable, founded on the government's commitment to fiscal consolidation and low inflation. Major public investment has been undertaken to strengthen the country's infrastructure. But the survey has expressed concern over approval of GST Bill being elusive so far and the disinvestment programme falling short of targets. The survey states that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. The survey cautions that if the world economy remains weak, India's growth will face considerable headwinds.
The survey states that the fiscal deficit target of 3.9% of GDP for the year 2015-16 seems achievable. However, the coming year is expected to be a challenging one from the fiscal point of view as the implementation of the Pay Commission recommendations and the One Rank One Pay (OROP) scheme will put additional burden on expenditure. The survey states that the government should retain its previously stated 3.5% fiscal deficit target for 2016-17. At the same time, the survey states that the time is ripe for a review of the medium term fiscal framework. It states that a medium-term perspective to expenditure planning is necessary.
The survey states that due to the government's commitment to carry the reform process forward, conditions do exist for raising the economy's growth momentum to 8% or more in the next couple of years. The survey underlines that despite global headwinds and a truant monsoon, India registered 7.2% growth in 2014-15 and 7.6% in 2015-16, thus becoming the fastest growing major economy in the world.
The Economic Survey 2015-16 comes ahead of the presentation of Union Budget 2016-17 early next week. Finance Minister Arun Jaitley may provide a roadmap for rationalisation of the corporate tax exemptions when he presents the Budget in parliament on 29 February 2016. Jaitley in his last Budget had announced phased reduction in corporate taxes over four years to 25% from present 30%, and also simultaneous withdrawal of corporate tax exemptions.
The Sensex and the Nifty today, 26 February 2016, snapped their three-day falling trend. The Sensex had lost 812.79 points or 3.41% in the preceding three trading sessions from its close of 23,788.79 on 22 February 2016.
ITC edged higher, with the stock recovering on bargain hunting after recent slide triggered by concerns that the government may hike tax on all tobacco products in the upcoming Union Budget by upto 40%. Coal India moved higher, with the stock extending gains registered during the previous trading session triggered by the Railway Minister keeping freight rates unchanged in the Rail Budget for 2016-17.
Shares of private sector bank stocks rose and state-run banks saw mixed trend after the Reserve Bank of India (RBI) announced changes and issued clarification on some aspects of its prudential guidelines on revitalising stressed assets in the economy. Shares of oil exploration and production (E&P) companies edged higher as crude oil prices rose.
In overseas markets, Asian and European stocks rose as a two-day gathering of G20 finance ministers and central bankers kicked off in Shanghai to discuss global growth concerns. Trading in US index futures indicated that the Dow Jones Industrial Average could gain 128 points at the opening bell. US markets closed higher yesterday, 25 February 2016, as oil prices rose.
The Sensex gained 178.30 points or 0.78% to settle at 23,154.30, its highest closing level since 23 February 2016. The Sensex jumped 251.91 points or 1.09% at the day's high of 23,227.91. The barometer index rose 45.94 points or 0.19% at the day's low of 23,021.94 .
The 50-unit Nifty 50 index gained 59.15 points or 0.85% to settle at 7,029.75, its highest closing level since 23 February 2016. The Nifty jumped 82.30 points or 1.18% at the day's high of 7,052.90 . The index rose 14.50 points or 0.2% at the day's low of 6,985.10.
The market breadth indicating the overall health of the market was negative. On BSE, 1,443 shares declined and 1,041 shares gained. A total of 170 shares were unchanged. The BSE Mid-Cap index rose 0.3%. The BSE Small-Cap index fell 0.45%. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 1914 crore, lower than turnover of Rs 2319.38 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE Metal index (up 1.66%), the S&P BSE Bankex (up 1.51%), the S&P BSE Realty index (up 1.47%), the S&P BSE Finance index (up 1.27%), the S&P BSE Capital Goods index (up 1.12%), the S&P BSE FMCG index (up 1.06%), the S&P BSE Power index (up 0.87%), the S&P BSE Energy index (up 0.85%) and the S&P BSE Utilities index (up 0.83%), outperformed the Sensex. The S&P BSE Industrials index (up 0.52%), the S&P BSE IT index (up 0.48%), the S&P BSE Teck index (up 0.34%), the S&P BSE Oil & Gas index (up 0.27%), the S&P BSE Auto index (down 0.08%), the S&P BSE Consumer Durables index (down 0.16%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.23%), the S&P BSE Basic Materials index (down 0.24%), the S&P BSE Healthcare index (down 0.31%) and the S&P BSE Telecom index (down 0.68%), underperformed the Sensex.
Index heavyweight and housing finance major HDFC advanced 1.45% to Rs 1,057. The stock hit high of Rs 1,058.80 and low of Rs 1,048.50 in intraday trade.
Index heavyweight and software major Infosys advanced 0.98% to Rs 1,122.15. The stock hit high of Rs 1,130.75 and low of Rs 1,113 in intraday trade.
ITC rose 1.76% to Rs 291.25, with the stock recovering on bargain hunting after recent slide triggered by concerns that the government may hike tax on all tobacco products in the upcoming Union Budget by upto 40%. Shares of ITC had fallen 6.14% in the preceding five trading sessions to settle at Rs 286.20 yesterday, 25 February 2016, from its close of Rs 304.95 on 18 February 2016. Highlighting a discrepancy between the existing tobacco prices and rising income levels, the health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products, as per reports.
Metal and mining stocks were mixed. Hindalco Industries (up 3.42%), National Aluminium Company (up 1.22%) rose. Hindustan Zinc fell 0.43%. Hindustan Copper was unchanged at Rs 43.45. Steel stocks were mixed. Tata Steel (up 0.28%) and Steel Authority of India (Sail) (up 0.87%) rose. JSW Steel (down 2.21%) and Jindal Steel & Power (down 2.21%) fell.
In view of dumping of steel into India from China, South Korea and Japan, the steel industry expects increase in customs duty to 25% on both long steel products and flat products in Union Budget 2016-17. At present, import duty on long steel products is 10% and that on flat products is 12.5%. Earlier this month, the government imposed a minimum import price (MIP) or floor price on 173 steel products ranging from $341 to $752 per tonne in a bid to protect the domestic steel industry from cheap imports.
The steel industry also expects withdrawal of the 2.5% customs duty on coking coal in the Budget, which will help reduce input cost for steel makers.
Iron ore makers were mixed. Vedanta rose 3.38%. NMDC lost 1.3%. Given the decline in India's iron ore production, the steel industry expects withdrawal of the 2.5% customs duty on iron ore. Iron ore is the primary raw material for steel making.
Coal India advanced 4.37% to Rs 312.60, with the stock extending gains registered during the previous trading session triggered by the Railway Minister keeping freight rates unchanged in the Rail Budget for 2016-17. The stock had risen 1.32% to settle at Rs 299.50 yesterday, 25 February 2016. Substantial movement of coal takes places through the railways and there will be no change in existing freight rates on coal transport through railways, with the Railway Minister keeping freight rates unchanged in the Rail Budget 2016-17 announced yesterday, 25 February 2016.
Meanwhile, there is wide expectation of further increase in clean energy cess on coal in Union Budget 2016-17 as the government intends to encourage renewable energy generation. It may be recalled that in Union Budget 2015-16, the government had raised the clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne.
Most auto stocks declined. Maruti Suzuki India (down 0.1%), Ashok Leyland (down 0.47%), Eicher Motors (down 0.24%), Bajaj Auto (down 3.52%), Hero MotoCorp (down 2.41%) and TVS Motor Company (down 1.31%) declined. Tata Motors (up 1.58%) and Mahindra & Mahindra (M&M) (up 1.01%), gained.
The commercial vehicles industry is seeking announcement in the Union Budget 2016-17 on scrappage policy that would provide incentive for replacing old commercial vehicles with new vehicles. This would be positive for commercial vehicles manufacturers, as it will result in spurt in demand for commercial vehicles.
Telecom stocks declined. Bharti Airtel (down 1.52%), Idea Cellular (down 1.13%), Tata Teleservices (Maharashtra) (down 2.65%) and Reliance Communications (down 1.93%) fell. MTNL rose 1.79%.
Shares of private sector bank stocks rose and state-run banks saw mixed trend after the Reserve Bank of India (RBI) announced changes and issued clarification on some aspects of its prudential guidelines on revitalising stressed assets in the economy. Among private sector banks, HDFC Bank (up 1.63%), Kotak Mahindra Bank (up 1.32%), ICICI Bank (up 0.71%), Axis Bank (up 1.9%), IndusInd Bank (up 0.64%) and Yes Bank (up 1.88%) gained.
Among public sector banks, State Bank of India (SBI) (up 3.36%), Bank of Baroda (up 1.73%), Punjab National Bank (up 0.56%), Canara Bank (up 0.62%), Bank of India (up 0.24%) rose. Union Bank of India (down 4.32%), Indian Overseas Bank (down 0.62%), Vijaya Bank (down 0.49%) and IDBI Bank (down 0.89%) fell.
The Reserve Bank of India (RBI) has announced reduction in the minimum percentage of shareholding to be initially divested by the lenders in case of Strategic Debt Restructuring (SDR). The central bank has also directed lenders to build up adequate provisions for possible loss in value of the equity acquired in lieu of debt and residual loan exposures. On the issue of divestment of banks' holding in favour of a new promoter in case where SDR has been initiated, the asset classification benefit will be available to the lenders provided they divest a minimum of 26% of the shares of the company to the new promoters within the stipulated time line of 18 months and the new promoters take over management control of the company.
Lenders would, thus, have the option to exit their remaining holdings gradually, with upside as the company turns around. Lenders should, however, grant the new promoters the 'Right of First Refusal' for the subsequent divestment of their remaining stake, the RBI said. The RBI introduced SDR scheme for lenders for reviving stressed accounts and providing banks with enhanced capabilities to initiate change of ownership in accounts which fail to achieve the agreed critical conditions and viability milestones.
The RBI has also directed banks to periodically value and provide for depreciation of equity shares acquired and held by banks under the SDR scheme as per Income Recognition and Asset Classification (IRAC) norms for investment portfolio. Banks will have the option of distributing the depreciation on equity shares acquired under SDR over a maximum of four calendar quarters from the date of conversion of debt into equity. Furthermore, banks desiring to have a longer period for making provisions, say 6 quarters, can start making ex-ante provisions in anticipation of marked to market (MTM) requirement, from the reference date itself.
The RBI has also directed banks to build provisions on residual loan exposures in case of SDR such that, by the end of the 18-month period from the reference date, they hold provision of at least 15% of the residual loan. The required provision will have to be made in equal installments over four quarters. This provision can be reversed only when all the outstanding loans/facilities in the account perform satisfactorily after transfer of ownership/management control to new promoters.
With regard to the Framework to Revitalise the Distressed Assets in the Economy, the RBI has announced a reduction in the percentage of lenders, by number, required to approve the Corrective Action Plan (CAP). The RBI has also revised composition of the Joint Lenders' Forum Empowered Group (JLF-EG) for enhancing the quality of decision making. The central bank has also announced a scheme of incentives for adherence to timelines for decision-making by JLF members to facilitate timely implementation of the CAP.
The RBI has also allowed restructuring and benefits of asset classification in cases of borrower accounts, which were involved in fraud where the promoters have been subsequently replaced by new promoters and the borrower is totally delinked from the erstwhile promoters. The RBI has also clarified that flexible structuring of project loans is also permitted for ECBs
Meanwhile, the key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). As per Indradhanush framework for transforming PSU banks, the government has proposed capital infusion of Rs 70000 crore in PSU banks over four years through FY 2019, with Rs 25000 crore each for FY 2016 and FY 2017 and Rs 10000 crore each for FY 2018 and FY 2019. The government has already infused Rs 20000 crore in FY 2016 so far. A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
Shares of oil exploration and production (E&P) companies edged higher as crude oil prices rose. Cairn India (up 2.82%), Reliance Industries (up 0.7%), ONGC (up 0.14%) and Oil India (up 0.61%) edged higher. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.
In the global commodities markets, Brent for April settlement was currently up 63 cents at $35.92 a barrel. The contract had risen 88 cents, or 2.56% to settle at $35.29 a barrel during the previous trading session.
In the backdrop of a sharp fall in global crude oil prices during the past two years, companies involved in oil exploration and production expect relaxation on rate of cess on crude oil in the Union Budget 2016-17. The industry expects the levy to be made on ad-valorem basis on realized price on crude from the current specific levy of Rs 4,500 per metric tonne (MT). The industry also expects withdrawal of National Calamity Contingent Duty of Excise of Rs 50 per MT on crude oil. The upstream oil and gas sector also expects reduction/removal of the 5% customs duty on liquefied natural gas in order to provide a boost to the usage of cleaner fuel.
Stocks of public sector oil marketing companies (PSU OMCs) rose. HPCL (up 2.41%) and BPCL (up 0.92%) gained. Indian Oil Corporation shed 0.14%.
UltraTech Cement shed 0.63%. Jaiprakash Associates (JAL) fell 1.03%. UltraTech Cement after market hours today, 26 February 2016, announced withdrawal of Scheme of Arrangement between the company and JAL for the acquisition of JAL's entire cement business situated at Bela and Siddhi in Madhya Pradesh as a going concern on slump sale basis.
Meanwhile, the Economic Survey 2015-16 prepared by finance ministry's chief economic adviser Arvind Subramanian stated that the country's macro-economy is stable, founded on the government's commitment to fiscal consolidation and low inflation. Major public investment has been undertaken to strengthen the country's infrastructure. But the survey has expressed concern over approval of GST Bill being elusive so far and the disinvestment programme falling short of targets. The survey states that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. The survey cautions that if the world economy remains weak, India's growth will face considerable headwinds.
The survey states that the fiscal deficit target of 3.9% of GDP for the year 2015-16 seems achievable. However, the coming year is expected to be a challenging one from the fiscal point of view as the implementation of the Pay Commission recommendations and the One Rank One Pay (OROP) scheme will put additional burden on expenditure. The survey states that the government should retain its previously stated 3.5% fiscal deficit target for 2016-17. At the same time, the survey states that the time is ripe for a review of the medium term fiscal framework. It states that a medium-term perspective to expenditure planning is necessary.
The survey states that due to the government's commitment to carry the reform process forward, conditions do exist for raising the economy's growth momentum to 8% or more in the next couple of years. The survey underlines that despite global headwinds and a truant monsoon, India registered 7.2% growth in 2014-15 and 7.6% in 2015-16, thus becoming the fastest growing major economy in the world.
The Economic Survey 2015-16 comes ahead of the presentation of Union Budget 2016-17 early next week. Finance Minister Arun Jaitley may provide a roadmap for rationalisation of the corporate tax exemptions when he presents the Budget in parliament on 29 February 2016. Jaitley in his last Budget had announced phased reduction in corporate taxes over four years to 25% from present 30%, and also simultaneous withdrawal of corporate tax exemptions.
The Sensex and the Nifty today, 26 February 2016, snapped their three-day falling trend. The Sensex had lost 812.79 points or 3.41% in the preceding three trading sessions from its close of 23,788.79 on 22 February 2016.
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