Key benchmark indices were trading with small gains in afternoon trade. At 13:20 IST, the barometer index, the S&P BSE Sensex, was up 71.94 points or 0.27% at 26,388.28. The Nifty 50 index was currently up 20.40 points or 0.25% at 8,134.70. The Sensex, and the Nifty, both, hit their highest level in 1-1/2 weeks.
In overseas stock markets, most Asian stocks were trading higher as oil prices slid on unease about this week's meeting of Organization of the Petroleum Exporting Countries (OPEC) members to discuss possible output cuts. Major oil producers are scheduled to meet on Wednesday, 30 November 2016 to discuss production cuts to shore up prices, but Iran and Iraq have reportedly failed to agree to a reduction, raising jitters about the Vienna meeting's outcome. US stocks hit fresh records in a shortened trading session on Friday, 25 November 2016 as investors bet on a pickup in economic growth and rising corporate profits. Investors anticipate plans by President-elect Donald Trump to cut taxes, reduce regulations and spend on infrastructure will speed economic growth. In the latest economic data, Markit's flash November purchasing manager's index stood at 54.7, down fractionally from October's 54.8.
Closer home, the broad market depicted strength. There were more than two gainers against every loser on BSE. 1,632 shares rose and 734 shares declined. A total of 170 shares were unchanged. The BSE Mid-Cap index was currently up 0.81%. The BSE Small-Cap index was currently up 1%. Both these indices outperformed the Sensex.
Most capital goods stocks rose. Bharat Heavy Electricals (Bhel) (up 1.06%), Havells India (up 0.35%), ABB India (up 0.67%), Bharat Electronics (up 5.44%), and Siemens (up 1.35%) gained. Thermax shed 1.24%.
Engineering and construction major L&T shed 0.48%. L&T announced that its wholly owned subsidiary, L&T Hydrocarbon Engineering unveiled a high-tech spool base facilities at L&T's fabrication facility at Kattupalli in Chennai on 25 November 2016. These facilities are being employed to execute a prestigious lump sum turn key (LSTK) contract that has been bagged from ONGC for a subsea installation by a consortium of J. Ray Mc Dermott S.A., Berlian McDermott & L&T Hydrocarbon Engineering in international competitive bidding. The announcement was made after market hours on Friday, 25 November 2016.
Most public sector bank stocks dropped and private sector banks were mixed after the central bank announced measures to drain excess liquidity after the government's recent move to withdraw legal tender status of Rs 500 and Rs 1,000 bank notes. Among public sector banks, Bank of Baroda (down 2.03%), State Bank of India (down 1.99%), Bank of India (down 1.57%), Punjab National Bank (down 1.67%), Corporation Bank (down 0.77%), IDBI Bank (down 0.37%), Canara Bank (down 0.47%) and Union Bank of India (down 0.52%) edged lower. Indian Bank (up 0.77%) and Indian Overseas Bank (up 0.4%) edged higher.
Among private sector banks, RBL Bank (up 1.08%), Axis Bank (up 0.84%), HDFC Bank (up 0.26%), and Kotak Mahindra Bank (up 0.15%) edged higher. Yes Bank (down 0.05%), ICICI Bank (down 1.83%) and IndusInd Bank (down 0.89%) edged lower.
The Reserve Bank of India (RBI) stated on Saturday, 26 November 2016, that with the withdrawal of the legal tender status of Rs 500 and Rs 1,000 denomination bank notes (specified bank notes) beginning 9 November 2016, there has been a surge in deposits relative to the expansion in bank credit, leading to large excess liquidity in the system. The magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead, the central bank said. In view of this, it has been decided to absorb a part of this surplus liquidity by applying an incremental cash reserve ratio (CRR) as a purely temporary measure, the bank said.
The CRR remains unchanged at 4% of outstanding net demand and time liabilities (NDTL). On the increase in NDTL between 16 September 2016 and 11 November 2016, scheduled banks shall maintain an incremental CRR of 100%, effective the fortnight beginning 26 November 2016. This is intended to absorb a part of the surplus liquidity arising from the return of specified bank notes (SBNs) to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy. As the incremental CRR is intended to be a temporary measure within RBI's liquidity management framework to drain excess liquidity in the system, it shall be reviewed on 9 December 2016 or even earlier, the central bank said. The central bank has separately revived the Guarantee Scheme to enable deposit of SBN balances at the RBI or at currency chests and get immediate value. This measure should also facilitate banks' compliance with the incremental CRR, the central bank said.
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