Market slips on US rate hike concerns
The market declined last week, reflecting the cautious mood in global equities, ahead of the eagerly awaited commentary from US Federal Reserve on how aggressively it plans to raise rates. In the week ended Friday, 26 August 2016, the Sensex fell 294.75 points or 1.05% to settle at 27,782.25. The Nifty 50 index fell 94.35 points or 1.09% to settle at 8,572.55. The BSE Mid-Cap index fell 35.02 points or 0.27% to settle at 13,000.15. The decline in this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index gained 27.66 points or 0.22% to settle at 12,487.12, outperforming the Sensex.
Caution prevailed on the bourses ahead of a speech by Federal Reserve Chairwoman Janet Yellen on Friday, 26 August 2016, at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming, which could provide hints about the timing of the next rate hike from the Fed. High US interest rates would pull money out of emerging markets and redirect it to the US. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.
Trading for the week began on weak note. Key benchmark indices registered modest losses on Monday, 22 August 2016, after the government named Reserve Bank of India (RBI) deputy governor Urjit Patel who is known as an inflation hawk as the new RBI governor to succeed Raghuram Rajan. The Sensex fell 91.46 points or 0.33% to settle at 27,985.54, its lowest closing level since 11 August 2016.
Patel who handles the monetary policy department as the RBI deputy governor will take charge as the new RBI governor on 4 September 2016, the day when Rajan's 3-year term as the RBI governor ends. Patel's term is also for a 3-year period. By naming Patel who is a deputy governor at the central bank as the new RBI governor, the government is sending signal to markets that there will be continuity of central bank's policies.
A recovery towards the latter part of the trading session helped key benchmark indices end near the flat line on Tuesday, 23 August 2016. The Sensex rose 4.67 points or 0.02% to settle at 27,990.21, its highest closing level since 19 August 2016.
Key benchmark indices registered small gains in a lacklustre trading session on Wednesday, 24 August 2016. The Sensex rose 69.73 points or 0.25% to settle at 28,059.94, its highest closing level since 19 August 2016.
Telecom, IT, metal sector stocks and index heavyweight HDFC led losses for key benchmark indices Thursday, 25 August 2016. The Sensex fell 224.03 points or 0.8% to settle at 27,835.91, its lowest closing level since 4 August 2016.
Key benchmark indices registered small losses after witnessing volatility towards late trade on Friday, 26 August 2016. The barometer index, the S&P BSE Sensex, lost 53.66 points or 0.19% to settle at 27,782.25. The Nifty 50 index lost 19.65 points or 0.23% to settle at 8,572.55.
Among the 30 Sensex shares, 22 stocks declined last week.
IT major Wipro was the biggest Sensex loser last week. It fell 5.89% to Rs 489.95.
IT bellwether Infosys fell 0.03% to Rs 1,020.75. As per media reports, Infosys may get about $60 million (Rs 400 crore) in incremental revenue over the third and fourth quarters of the current financial year (FY 2017) as part of the Rs 1380 crore Goods Services and Tax Network (GSTN) project. Under the ongoing GSTN project, Infosys has started importing hardware, including servers and network equipment devices, payment for which will be made by GSTN starting October this year, reports suggested.
Another IT giant TCS fell 2.87% to Rs 2,529.15. The company on Thursday, 25 August 2016, announced new software that enables retailers to leverage insightful data either from in-store sensors or other Internet of Things (IoT) devices to deepen relationships with customers through more personalized customer engagement strategies.
The S&P BSE IT index fell 146.17 points, or 1.39% to 10,390.48 last week.
ITC rose 1.08% to Rs 253.75 on reports that a foreign brokerage has maintained its outperform rating on the stock. The brokerage reportedly stated in a research note that lower price hike will support ITC's cigarette volume growth. The company's earnings are likely to grow at a compound annual growth rate (CAGR) of 14% over FY 2016 to FY 2019, the brokerage reportedly said.
State-run oil production and exploration firm ONGC declined after fall in global crude oil prices. The stock fell 1.45% to Rs 238.45.
Index heavyweight Reliance Industries (RIL) rose 1.27% to Rs 1,027.70.
GAIL (India) rose 4.26% to Rs 379.20 after the company signed a memorandum of understanding with Silicon Valley-based Bloom Energy to generate power with clean and reliable energy. The announcement was made on Monday, 22 August 2016.
State-run NTPC fell 5.25% to Rs 158. after net profit rose 4.09% to Rs 2369.53 crore on 10.89% rise in total income to Rs 19220.80 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Monday, 22 August 2016.
Index heavyweight HDFC Bank rose 1.04% to Rs 1,257.90.
The Reserve Bank of India (RBI) said in a draft paper on banks' large exposure (LE) limit that large exposure limit in respect of each counterparty and group of connected counterparties will be capped at 20% and 25% respectively of the bank's eligible capital base under normal circumstances. The eligible capital base will be defined as the Tier 1 capital of the bank as against capital funds at present. A group of connected counterparties will be identified on the basis of 'control' as well as 'economic dependence' criteria. The RBI has sought public comments on the draft LE framework by 15 September 2016.
Separately, RBI has allowed banks to issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing. This was a part of the measures announced by RBI for the development of fixed income and currency markets.
State Bank of India fell 4.56% to Rs 246.70. ICICI Bank fell 3.44% to Rs 245.25. The RBI continued to classify these two banks as domestic systemically important banks (D-SIBs). The additional Common Equity Tier 1 (CET1) requirement for D-SIBs has already been phased-in from 1 April 2016 and would become fully effective from 1 April 2019. The additional CET1 requirement will be in addition to the capital conservation buffer. On account of being classified as D-SIB, there is additional CET1 requirement of 0.6% of Risk Weighted Assets (RWAs) for SBI and 0.2% of RWAs for ICICI Bank.
Tata Motors fell 1.25% to Rs 503.65. The company's consolidated net profit dropped 56.98% to Rs 2260.40 crore on 8.9% growth in total income to Rs 67229.69 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Friday, 26 August 2016.
Meanwhile, RBI after trading hours on Thursday, 25 August 2016, announced a package of measures for the development of fixed income and currency markets. The central said it has been decided to enhance the aggregate limit of partial credit enhancement (PCE) provided by banks, permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds and encourage credit supply for large borrowers through market mechanism. The RBI has allowed banks to issue issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing.
Foreign Portfolio Investors (FPIs) will be given direct access to NDS-OM to ease the process of investment in debt securities. The RBI said it has also been decided to provide FPIs facility to trade directly in corporate bonds.
Meanwhile, the India Meteorological Department (IMD) in its monsoon update issued on Thursday, 25 August 2016, said that for the country as a whole, cumulative rainfall during this year's monsoon so far (till 25 August 2016) was 3% below the long period average (LPA).
Caution prevailed on the bourses ahead of a speech by Federal Reserve Chairwoman Janet Yellen on Friday, 26 August 2016, at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming, which could provide hints about the timing of the next rate hike from the Fed. High US interest rates would pull money out of emerging markets and redirect it to the US. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.
Trading for the week began on weak note. Key benchmark indices registered modest losses on Monday, 22 August 2016, after the government named Reserve Bank of India (RBI) deputy governor Urjit Patel who is known as an inflation hawk as the new RBI governor to succeed Raghuram Rajan. The Sensex fell 91.46 points or 0.33% to settle at 27,985.54, its lowest closing level since 11 August 2016.
Patel who handles the monetary policy department as the RBI deputy governor will take charge as the new RBI governor on 4 September 2016, the day when Rajan's 3-year term as the RBI governor ends. Patel's term is also for a 3-year period. By naming Patel who is a deputy governor at the central bank as the new RBI governor, the government is sending signal to markets that there will be continuity of central bank's policies.
A recovery towards the latter part of the trading session helped key benchmark indices end near the flat line on Tuesday, 23 August 2016. The Sensex rose 4.67 points or 0.02% to settle at 27,990.21, its highest closing level since 19 August 2016.
Key benchmark indices registered small gains in a lacklustre trading session on Wednesday, 24 August 2016. The Sensex rose 69.73 points or 0.25% to settle at 28,059.94, its highest closing level since 19 August 2016.
Telecom, IT, metal sector stocks and index heavyweight HDFC led losses for key benchmark indices Thursday, 25 August 2016. The Sensex fell 224.03 points or 0.8% to settle at 27,835.91, its lowest closing level since 4 August 2016.
Key benchmark indices registered small losses after witnessing volatility towards late trade on Friday, 26 August 2016. The barometer index, the S&P BSE Sensex, lost 53.66 points or 0.19% to settle at 27,782.25. The Nifty 50 index lost 19.65 points or 0.23% to settle at 8,572.55.
Among the 30 Sensex shares, 22 stocks declined last week.
IT major Wipro was the biggest Sensex loser last week. It fell 5.89% to Rs 489.95.
IT bellwether Infosys fell 0.03% to Rs 1,020.75. As per media reports, Infosys may get about $60 million (Rs 400 crore) in incremental revenue over the third and fourth quarters of the current financial year (FY 2017) as part of the Rs 1380 crore Goods Services and Tax Network (GSTN) project. Under the ongoing GSTN project, Infosys has started importing hardware, including servers and network equipment devices, payment for which will be made by GSTN starting October this year, reports suggested.
Another IT giant TCS fell 2.87% to Rs 2,529.15. The company on Thursday, 25 August 2016, announced new software that enables retailers to leverage insightful data either from in-store sensors or other Internet of Things (IoT) devices to deepen relationships with customers through more personalized customer engagement strategies.
The S&P BSE IT index fell 146.17 points, or 1.39% to 10,390.48 last week.
ITC rose 1.08% to Rs 253.75 on reports that a foreign brokerage has maintained its outperform rating on the stock. The brokerage reportedly stated in a research note that lower price hike will support ITC's cigarette volume growth. The company's earnings are likely to grow at a compound annual growth rate (CAGR) of 14% over FY 2016 to FY 2019, the brokerage reportedly said.
State-run oil production and exploration firm ONGC declined after fall in global crude oil prices. The stock fell 1.45% to Rs 238.45.
Index heavyweight Reliance Industries (RIL) rose 1.27% to Rs 1,027.70.
GAIL (India) rose 4.26% to Rs 379.20 after the company signed a memorandum of understanding with Silicon Valley-based Bloom Energy to generate power with clean and reliable energy. The announcement was made on Monday, 22 August 2016.
State-run NTPC fell 5.25% to Rs 158. after net profit rose 4.09% to Rs 2369.53 crore on 10.89% rise in total income to Rs 19220.80 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Monday, 22 August 2016.
Index heavyweight HDFC Bank rose 1.04% to Rs 1,257.90.
The Reserve Bank of India (RBI) said in a draft paper on banks' large exposure (LE) limit that large exposure limit in respect of each counterparty and group of connected counterparties will be capped at 20% and 25% respectively of the bank's eligible capital base under normal circumstances. The eligible capital base will be defined as the Tier 1 capital of the bank as against capital funds at present. A group of connected counterparties will be identified on the basis of 'control' as well as 'economic dependence' criteria. The RBI has sought public comments on the draft LE framework by 15 September 2016.
Separately, RBI has allowed banks to issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing. This was a part of the measures announced by RBI for the development of fixed income and currency markets.
State Bank of India fell 4.56% to Rs 246.70. ICICI Bank fell 3.44% to Rs 245.25. The RBI continued to classify these two banks as domestic systemically important banks (D-SIBs). The additional Common Equity Tier 1 (CET1) requirement for D-SIBs has already been phased-in from 1 April 2016 and would become fully effective from 1 April 2019. The additional CET1 requirement will be in addition to the capital conservation buffer. On account of being classified as D-SIB, there is additional CET1 requirement of 0.6% of Risk Weighted Assets (RWAs) for SBI and 0.2% of RWAs for ICICI Bank.
Tata Motors fell 1.25% to Rs 503.65. The company's consolidated net profit dropped 56.98% to Rs 2260.40 crore on 8.9% growth in total income to Rs 67229.69 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Friday, 26 August 2016.
Meanwhile, RBI after trading hours on Thursday, 25 August 2016, announced a package of measures for the development of fixed income and currency markets. The central said it has been decided to enhance the aggregate limit of partial credit enhancement (PCE) provided by banks, permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds and encourage credit supply for large borrowers through market mechanism. The RBI has allowed banks to issue issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing.
Foreign Portfolio Investors (FPIs) will be given direct access to NDS-OM to ease the process of investment in debt securities. The RBI said it has also been decided to provide FPIs facility to trade directly in corporate bonds.
Meanwhile, the India Meteorological Department (IMD) in its monsoon update issued on Thursday, 25 August 2016, said that for the country as a whole, cumulative rainfall during this year's monsoon so far (till 25 August 2016) was 3% below the long period average (LPA).
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