Key benchmark indices regained positive zone in early afternoon trade after the Reserve Bank of India kept its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review today, 1 April 2014. The barometer index, the S&P BSE Sensex, was up 9.74 points or 0.04%, up close to 60 points from the day's low and off close to 90 points from the day's high. The market breadth, indicating the overall health of the market, was positive.
Banking and realty stocks declined.
A bout of volatility was witnessed as key benchmark indices slipped into the red after a firm opening took the Sensex and the 50-unit CNX Nifty to record high. Key benchmark indices regained positive terrain in morning trade. High volatility was witnessed as key benchmark indices alternately swung between positive and negative zone after the Reserve Bank of India kept its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review announced at 11:00 IST today, 1 April 2014. Key benchmark indices regained positive zone in early afternoon trade.
Foreign institutional investors (FIIs) bought shares worth a net Rs 942.86 crore on Monday, 31 March 2014, as per provisional data from the stock exchanges.
At 12:20 IST, the S&P BSE Sensex was up 9.74 points or 0.04% to 22,396.01. The index jumped 99.50 points at the day's high of 22,485.77 in early trade, a record high for the barometer index. The index fell 54.45 points at the day's low of 22,331.82 in mid-morning trade.
The CNX Nifty was up 3.15 points or 0.05% to 6,707.35. The index hit a high of 6,732.25 in intraday trade, a record high for the index. The index hit a low of 6,683.60 in intraday trade.
The BSE Mid-Cap index was up 0.82 points or 0.01% at 7,083.68, underperforming the Sensex. The BSE Small-Cap index was up 27.60 points or 0.39% at 7,099.56, outperforming the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,253 shares gained and 1,081 shares fell. A total of 138 shares were unchanged.
Among the 30-share Sensex pack, 17 stocks declined and rest of them rose. Hindalco Industries (down 2.05%), Bharat Heavy Electricals (Bhel) (down 1.68%) and ITC (down 1.33%) edged lower from the Sensex pack.
Bank stocks declined after the Reserve Bank of India left key policy rates unchanged after monetary policy review today, 1 April 2014. Among private sector banks, ICICI Bank (down 0.37%), Federal Bank (down 0.37%), Kotak Mahindra Bank (down 1.01%) and HDFC Bank (down 0.25%), declined. Axis Bank rose 0.86%.
Among other PSU bank stocks, State Bank of India (SBI) (down 0.05%) and Union Bank of India (down 0.33%) declined. Canara Bank (up 1.12%), Bank of India (up 0.43%) and Bank of Baroda (up 1.55%) gained.
Punjab National Bank declined 0.39%. The bank said during market hours today, 1 April 2014, that after regulatory approvals, the bank has sold its entire 30% stake in India Factoring & Financial Solutions (IFFSL) to an FII (FIM Bank (Malta) and realized Rs 107.83 crore.
The Reserve Bank of India today, 1 April 2014, said it will continue to monitor the liquidity conditions and actively manage liquidity to ensure adequate flow of credit to the productive sectors. The RBI also said that it has decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5% of NDTL of the banking system to 0.75%, and decrease the liquidity provided under overnight repos under the LAF from 0.5% of bank-wise NDTL to 0.25% with immediate effect.
In pursuance of the Dr. Urjit R. Patel Committee's recommendation to de-emphasise overnight guaranteed-access windows for liquidity management and progressively conduct liquidity management through term repos, the Reserve Bank of India has decided to further reduce access to overnight repos under the LAF while compensating fully with a commensurate expansion of the market's access to term repos from the Reserve Bank of India. The primary objective is to improve the transmission of policy impulses across the interest rate spectrum. The term repo has evolved as a useful indicator of underlying liquidity conditions. It also allows market participants to hold liquidity for a longer period, thereby providing the impetus for engaging in term transactions in the market, evolving market-based benchmarks for pricing various financial products and also improving efficiency in cash/treasury management, the RBI said.
Liquidity conditions have tightened in March, partly on account of year-end 'window dressing' by banks, though an extraordinary infusion of liquidity by the Reserve Bank of India has mitigated the tightness. The Reserve Bank of India will propose measures to reduce such practices, the central bank said.
The Reserve Bank of India said it will be open to banking mergers, provided competition and stability are not compromised. With competition in the banking sector set to increase, financial markets will play a complementary role, allowing banks to trade their long term assets and match the maturity profile of assets and liabilities, the RBI said. The Reserve Bank of India will strive to increase the reach of financial services to everyone, however remote or small, by using technology, new products, and new entities to link people up to the formal financial system, the RBI said. Priority sector lending will become an effective vehicle to promote greater financial access, the RBI said.
The Reserve Bank of India said that on the basis of the recommendations of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (Chairman: Dr. Nachiket Mor) to encourage banks to actively manage their exposures to various sectors, including priority sectors, it is proposed to prescribe certain additional disclosure requirements in the financial statements by end-June 2014.
The Reserve Bank of India also said that it will shortly issue guidelines that would allow banks to offer partial credit enhancements to corporate bonds.
Realty stocks edged lower after the Reserve Bank of India left key policy rates unchanged after monetary policy review today, 1 April 2014. Purchases of both residential and commercial property are largely driven by finance. D B Realty (down 2.33%), Sobha Developers (down 1.46%), Housing Development & Infrastructure (HDIL) (down 2.17%), Unitech (down 3.22%) and DLF (down 0.65%) declined.
The Reserve Bank of India (RBI) left its benchmark lending rate unchanged after a monetary policy review today, 1 April 2014. The RBI kept its main lending rate -- the repo rate -- unchanged at 8% in line with market expectations. The central bank also left the cash reserve ratio, or the minimum percentage of deposits that lenders must park with the RBI, unchanged at 4%.
The Reserve Bank of India said it will continue to monitor the liquidity conditions and actively manage liquidity to ensure adequate flow of credit to the productive sectors. The RBI also said that it has decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5% of NDTL of the banking system to 0.75%, and decrease the liquidity provided under overnight repos under the LAF from 0.5% of bank-wise NDTL to 0.25% with immediate effect.
Liquidity conditions have tightened in March, partly on account of year-end 'window dressing' by banks, though an extraordinary infusion of liquidity by the Reserve Bank of India has mitigated the tightness. The Reserve Bank of will propose measures to reduce such practices, the RBI said.
For a number of emerging markets, further tightening of external financing conditions and renewed volatility of capital flows are the biggest risks to their outlook, the RBI said.
Domestically, real GDP growth continued to be modest in Q3 of 2013-14, with some strengthening of activity in services such as trade, hotels, transport and communication, and financing, real estate and business services. Despite some positive movement in more recent data, industrial activity continues to be a drag on the economy, with retrenchment in both consumption and investment demand reflected in the contraction of output of consumer durables as well as capital goods. In the quarters ahead, the boost provided by robust agricultural production in 2013 may wane, the RBI said. Moreover, the outlook for the 2014 south-west monsoon appears uncertain. Sluggishness in industrial activity, exports and several categories of services underlines the need to revitalise productivity and competitiveness, the RBI said.
The RBI said that India's exports growth has slowed recently, partly because of slowdown in demand in partner countries as well as a softening of prices of exports of petroleum products and gems and jewellery (offset by a reduction in the prices of oil and gold imports). Whether the export slowdown persists as global growth picks up once again remains to be seen, the RBI said.
Retail inflation measured by the consumer price index (CPI) moderated for the third month in succession in February 2014, driven lower by the sharp disinflation in food prices, although prices of fruits, milk and products have started to firm up. Excluding food and fuel, however, retail inflation remained sticky at around 8%. This suggests that some demand pressures are still at play, the RBI said. Since December 2013, the sharper than expected disinflation in vegetable prices has enabled a sizable fall in headline inflation. Looking ahead, vegetable prices have entered their seasonal trough and further softening is unlikely, the RBI said.
Meanwhile, CPI inflation excluding food and fuel has remained flat. There are risks to the central forecast of 8% CPI inflation by January 2015 stemming from a less-than-normal monsoon due to possible El Nino effects; uncertainty on the setting of minimum support prices for agricultural commodities and the setting of other administered prices, especially of fuel, fertiliser and electricity; the outlook for fiscal policy; geo-political developments and their impact on international commodity prices. There will also be a downward statistical pull on CPI inflation exerted by base effects of high inflation during June-November 2013. It is critical to look through any transient effects, including these base effects, which could temporarily soften headline inflation during 2014, the RBI said.
The Reserve Bank of India's policy stance will be firmly focussed on keeping the economy on a disinflationary glide path that is intended to hit 8% CPI inflation by January 2015 and 6% by January 2016, the RBI said. At the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy, the RBI said. If inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture, the RBI said.
Contingent upon the desired inflation outcome, real GDP growth is projected to pick up from a little below 5% in 2013-14 to a range of 5% to 6% in 2014-15 albeit with downside risks to the central estimate of 5.5%, the RBI said. Lead indicators do not point to any sustained revival in industry and services as yet, and the outlook for the agricultural sector is contingent upon the timely arrival and spread of the monsoon. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should brighten up the growth outlook, as would stronger anticipated export growth as the world economy picks up, the RBI said.
Some of the recommendations of the Expert Committee to Revise and Strengthen the Monetary Policy Framework (Chairman: Dr. Urjit R. Patel) have been implemented including adoption of the new CPI (combined) as the key measure of inflation, explicit recognition of the glide path for disinflation, transition to a bi-monthly monetary policy cycle, progressive reduction in access to overnight liquidity under the LAF at the fixed repo rate and corresponding increase in access to liquidity through term repos, and introduction of longer tenor term repos, the RBI said.
The Reserve Bank of India said it will continue to work to ease entry while reducing risk to foreign investors from the volatility of flows. The modalities for allowing FIIs to hedge their currency risk by using exchange traded currency futures in the domestic exchanges are being finalised in consultation with the Securities and Exchange Board of India (Sebi), the RBI said. In order to enhance hedging facilities for foreign investors in debt instruments, it is proposed to allow them to hedge the coupon receipts falling due during the next 12 months, the RBI said. Rebooking of cancelled contracts in case of contracted exposures has been fully restored, the central bank said. It is further proposed to allow all resident individuals, firms and companies with actual foreign exchange exposures to book foreign exchange derivative contracts up to $250,000 on declaration, subject to certain conditions, the RBI said.
The Reserve Bank of India has also been rationalising and expanding limits for FPI investments in debt markets. As a further step towards encouraging longer-term flows, investments by FPIs in G-Secs shall henceforth be permitted only in dated securities of residual maturity of one year and above, and existing investment in Treasury Bills will be allowed to taper off on maturity/sale, the RBI said. The overall limit for FPI investment in G-Secs will, however, remain unchanged at $30 billion, so the investment limits vacated at the shorter end will be available at longer maturities.
As regards foreign direct investment (FDI), it has been decided to withdraw all the existing guidelines relating to valuation in case of any acquisition/sale of shares and accordingly, such transactions will henceforth be based on acceptable market practices, the RBI said. Operating guidelines will be notified separately.
Indian manufacturing activity grew at a slower pace in March as weaker domestic demand dragged on output growth, a business survey showed today, 1 April 2014. The HSBC Manufacturing Purchasing Managers' Index (PMI), which gauges business activity in Indian factories but not its utilities, fell to 51.3 in March after surging to a one-year high of 52.5 in February.
March data highlighted a further improvement in business conditions across India's manufacturing economy. Nonetheless, the headline PMI dipped lower, as output and new orders increased at weaker rates. Encouragingly, growth of new export orders picked up pace over the month.
Down from February's one-year high of 52.5 to 51.3 in March, the seasonally adjusted HSBC India Purchasing Managers' Index (PMI) signalled a slight and weaker improvement of business conditions across the country's goods producing sector. Nonetheless, the PMI average for Jan-Mar 2014 (51.7) was the highest since the same period in 2013.
Consumer goods continued to outperform the other two market groups, with robust increases in output and new orders registered in March. Operating conditions also improved at intermediate goods companies, but deteriorated in the capital goods category.
Manufacturing production growth across India eased from February's one-year high and was modest overall. While panellists reported higher levels of incoming new work, there was evidence suggesting that competitive pressures and shortages of some raw materials hampered growth.
Similarly, new orders rose at a weaker clip in March, with the respective index dropping since February and being below the long-run series average. Survey participants commented on higher underlying demand, but indicated that increased competition for new work and the elections had weighed on growth.
Indian manufacturers reported higher new export orders in March, stretching the current period of growth to six months. The latest increase in new work from abroad was marked and the strongest since April 2011. Anecdotal evidence highlighted improved demand conditions in key export markets.
Manufacturing employment increased in March, marking a six-month sequence of expansion. Nonetheless, the rate of job creation remained marginal as around 98% of panellists reported unchanged workforce numbers.
Inflationary pressures eased in March. Input costs rose at the weakest rate in nine months and one that was below the series average. Similarly, output prices increased at the slowest pace since last June.
Purchasing activity increased further in March, though moderately and at a weaker rate than that recorded one month previously. Survey members reporting a higher quantity of purchases commented on rising production requirements.
Finally, stocks of purchases were broadly unchanged from the levels registered in February, while post-production inventories were accumulated again in March. The rate of increase was, however, slight overall.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: The momentum in the manufacturing sector eased on the back of a slowdown in order flows and raw material shortages. Meanwhile, inflation also moderated. Growth is likely to remain moderate in coming months as fiscal tightening, relatively high corporate leverage, and rising non-performing loans in the banking system pose headwinds to growth. While we might see traction on economic reform and execution of investment projects after the upcoming elections, the recovery in growth is likely to prove protracted.
Infrastructure sector output rose 4.5% year-on-year in February 2014, mainly driven by higher electricity generation, oil refining and steel production, data released by the government after trading hours on Monday, 31 March 2014, showed. The sector grew 1.6% year-on-year in January 2014. In the first 11 months of the current fiscal year, the output grew an annual 2.6%, the data showed. The infrastructure sector, which comprises coal, crude oil, oil refining, natural gas, steel, cement, electricity and fertilisers, accounts for 37.9% of India's industrial output.
The next major trigger for the market is Q4 March 2014 and year ended 31 March 2014 (FY 2014) corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the results to see if there is any revision in their future earnings forecast of the company for the year ending 31 March 2015 (FY 2015) and/or for the year ending 31 March 2016 (FY 2016). Indian companies will start reporting their Q4 and full year results from mid-April 2014. The result season will conclude in end-May 2014.
Another major trigger for the stock market is the outcome of the upcoming Lok Sabha elections. Lok Sabha elections will be held between 7 April 2014 and 12 May 2014 in nine phases. The counting of votes will take place on 16 May 2014. The term of the current Lok Sabha expires on June 1 and the new House has to be constituted by May 31. Along with the Lok Sabha election, Andhra Pradesh (AP), including the regions comprising Telangana, Odisha and Sikkim will go to polls to elect new assemblies. AP, Odisha and Sikkim assemblies come to end on June 2, June 7 and May 7 respectively.
The Bharatiya Janata Party (BJP) on Monday, 31 March 2014, said that if it wins national elections set to begin next week, its first priority would be to revive investment in the country's slowing economy. We'll have to reestablish confidence of both Indian and international investors in the Indian economy, said Arun Jaitley, a senior BJP leader. But, he added, our policy will also have a social conscience, a signal that welfare programs for the country's poor would also be a priority. Mr. Jaitley said that in the last decade, Congress had halted the liberal approach it had adopted in 1991, and he said his party would work to make sure India once again is a great place for doing business. At the same time, Mr. Jaitley said, his party wouldn't rely on the benefits of growth to trickle down to the poor. India will always need, at least for the foreseeable future, a state intervention for poverty alleviation, he said, a message aimed at India's millions of poor.
The BJP's prime ministerial candidate, Narendra Modi, has campaigned on pledges to spur development, create jobs and boost manufacturing. In a televised interview on Monday, 31 March 2014, Mr. Modi spoke about removing bureaucratic hurdles, bringing predictability to tax policies and creating jobs by encouraging new industries like agro-based ventures, ship building and defense manufacturing. Today, vote-bank-oriented programs that are bankrupting our treasury are being called economic reforms. Economic reforms are those that breathe new life into a system and create opportunities for people, Modi said.
Congress has criticized Mr. Modi for being too close to big business. His brand of liberalism is crony capitalism, India's finance minister P. Chidambaram said on Monday, 31 March 2014.
Asian stocks edged higher on Tuesday, 1 April 2014, after China's official PMI survey showed manufacturing managed to continue expanding in March, and dovish comments from Federal Reserve Chair Janet Yellen. Key benchmark indices in Hong Kong, South Korea, China, Singapore, Japan and Taiwan were up 0.32% to 1.9%. Japan's Nikkei Average was off 0.24%.
China's official Purchasing Managers' Index (PMI) increased to 50.3 in March from February's 50.2. Above 50 indicates expansion, below 50 signifies contraction. A separate PMI HSBC Holdings Plc and Markit Economics pointed to weakness in the world's second-biggest economy. Chinese Purchasing Managers' Index fell to 48 in March, the lowest reading since July, from 48.5, HSBC Holdings Plc and Markit Economics said today, 1 April 2014.
The Tankan index of sentiment among large Japanese manufacturers was at 17 in March, climbing from 16 in December, a Bank of Japan report showed today, 1 April 2014.
Australia's central bank left its benchmark interest rate unchanged at a record low and said the recent climb in the local dollar will reduce the stimulus provided by the currency. Governor Glenn Stevens kept the overnight cash-rate target at 2.5%, as forecast.
Developing Asia is poised to sustain its current growth momentum and is well positioned to manage risks coming from a slightly slower Chinese economy and possible uneven demand from major industrialised nations, the Asian Development Bank said. India is forecast to accelerate to 5.5% this year, much faster than the 4.7% forecast in December, although the South Asian nation was still operating below potential which can be solved by clearing investment bottlenecks, the bank said. Asian nations can undertake preemptive measures to protect the region's growing economy from unpredictable capital inflows, said the Manila-based lender as it unveiled its forecasts for the region for 2014 and 2015. The bank said it expects the region, grouping 45 counties in Asia-Pacific, to grow 6.2% this year, slightly faster than its most recent estimate of 6% in December, before accelerating further to 6.4% in 2015.
Most regional economies have strengthened their economic fundamentals. Looking ahead, strengthening macroprudential measures before the boom can help avert sudden capital reversals that accompany the bust, the ADB said in its Asian Development Outlook 2014.
Trading in US index futures indicated that the Dow could advance 22 points at the opening bell on Tuesday, 1 April 2014. US stocks edged higher on the final trading day of the quarter on Monday, 31 March 2014, after Federal Reserve Chair Janet Yellen said the economy will need stimulus for some time.
In economic news, a gauge of Chicago-area businesses unexpectedly tumbled in March, hitting the lowest level since August, led by drops for new orders and employment, according to data released Monday.
The influential US non-farms payroll data for March 2014 will be released this Friday, 4 April 2014.
Yellen said on Monday the Fed hasn't done enough to combat unemployment even after holding interest rates near zero for more than five years and pumping up its balance sheet to $4.23 trillion with bond purchases. This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers, Yellen said at a community development conference in Chicago. The scars from the Great Recession remain, and reaching our goals will take time.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 said after the conclusion of a monetary policy review that it will trim its monthly bond purchases by $10 billion to $55 billion. The Federal Reserve will end its bond-buying program before the end of the year with an interest-rate increase likely to follow in around six months, Chair Janet Yellen said on 19 March 2014. Quarterly Fed forecasts on 19 March 2014 showed more officials predicting that the benchmark interest rate, now close to zero, will rise to at least 1% by the end of 2015 and 2.25% a year later.
In Europe, a policy meeting of the Governing Council of the European Central Bank (ECB) will be held on Thursday, 3 April 2014, in Frankfurt to decide euro zone interest rates. ECB President Mario Draghi has consistently reassured listeners that the euro zone isn't heading for deflation, but that the central bank stands ready to act if needed.