Axis Bank jumps after clarification on exposure to NSEL

Key benchmark indices held firm in mid-afternoon trade. The barometer index, the S&P BSE Sensex, was up 357.87 points or 1.93%, up close to 70 points from the day's low and off about 190 points from the day's high. The market breadth, indicating the overall health of the market, was strong. Indian stocks surged and the rupee rose today, 5 September 2013, after the new central bank Governor Raghuram Rajan announced plans late on Wednesday to bolster the financial industry and stabilize the rupee.

Bhel extended intraday gain. Bank stocks jumped after Rajan said that RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country and also said that there is need to reduce the requirement for banks to invest in government securities in a calibrated way so as to ensure the flow of credit to the productive sectors of the economy. Axis Bank jumped after the bank said its total direct and indirect exposure to the National Spot Exchange is insignificant and that the bank has adequate collateral to back these exposures.

Gains in European and Asian stocks supported the domestic bourses. The market sentiment was also boosted after the Lok Sabha on Wednesday, 4 September 2013, passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector.

The market surged in early trade after Mr. Raghuram Rajan after taking charge as the 23rd governor of the Reserve Bank of India (RBI) on Wednesday, 4 September 2013, announced fresh steps to stabilize the currency and sought to reassure investors. The Sensex and the 50-unit CNX Nifty, both, hit their highest level in almost three weeks. The Sensex fell below the psychological 19,000 mark, after regaining that mark in early trade. Firmness prevailed on the bourses in mid-morning trade. The market remained firm in early afternoon trade. A bout of volatility was witnessed as key benchmark indices regained strength soon after paring intraday gains in afternoon trade. It hovered in positive terrain in mid-afternoon trade.

In the foreign exchange market, the rupee strengthened against the dollar after the new head of the central bank on Wednesday, 4 September 2013, announced fresh steps to stabilize the currency and sought to reassure investors. The partially convertible rupee was hovering at 66.29, stronger than its close of 67.065/075 on Wednesday, 4 September 2013. Banks can swap dollars raised from foreign-currency deposits by overseas Indians for rupees with the central bank an annual interest of 3.5%, Reserve Bank of India Governor Raghuram Rajan said late on Wednesday. The RBI also doubled what banks can raise through overseas bonds and allowed them to hedge those dollars at a special rate with the RBI.

The market sentiment was boosted by data showing that foreign funds were net buyers of Indian stocks on Wednesday, 4 September 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 172.53 crore on Wednesday, 4 September 2013, as per provisional data from the stock exchanges.

At 14:20 IST, the S&P BSE Sensex was up 357.87 points or 1.93% to 18,925.42. The index spurted 549.97 points at the day's high of 19,117.52 in early trade, its highest level since 16 August 2013. The index rose 290.05 points at the day's low of 18,857.60 in opening trade.

The CNX Nifty was up 132.60 points or 2.43% to 5,580.70. The index hit a high of 5,625.75 in intraday trade, its highest level since 16 August 2013. The index hit a low of 5,553.75 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,378 shares rose and 792 shares fell. A total of 155 shares were unchanged.

Among the 30-share Sensex pack, 21 stocks rose and rest of them fell. ICICI Bank (up 9%), State Bank of India (up 8.08%), and HDFC (up 5.83%), edged higher from the Sensex pack.

Axis Bank jumped 13.46% after the bank said its total direct and indirect exposure to the National Spot Exchange (NSEL) is insignificant and that the bank has adequate collateral to back these exposures. Axis Bank issued the clarification amid media reports that it and two other private sector banks viz. ICICI Bank and HDFC Bank have the highest exposure to NSEL.

Another trigger for the rally in the Axis Bank counter was the removal of restrictions by the Reserve Bank of India (RBI) on foreign institutional investors (FIIs) on buying shares of Axis Bank as the overall foreign share holding in Axis Bank fell below the prescribed limit of 49%. Foreign share holding in Axis Bank under the portfolio investment scheme have gone below the prescribed threshold limit stipulated under the extant FDI Policy, the RBI said in a statement. Hence, the restrictions placed on the purchase of shares of Axis Bank are withdrawn with immediate effect, the central bank said.

Total foreign holding in Axis Bank was 48.96% as at 30 June 2013, of which 40.70% was held by FIIs.

The NSEL had to shut down its operation since 1 August 2013 following the government direction in the wake of violation of certain rules. NSEL is grappling with the problem of payment settlement after the suspension. It has given eight-month plan to settle Rs 5574.31 crore to investors. NSEL is scheduled to make a payout every Tuesday for 30 weeks, ending in March 2014. Financial Technologies (India) is one of the two promoters of the NSEL.

Shares of Financial Technologies jumped 14.06%.

Rural Electrification Corporation (REC) rose 3.79% after the company said during market hours today, 5 September 2013, that REC Transmission Projects Company (RECTPCL) a 100% subsidiary of REC has transferred its wholly owned subsidiary, namely Kudgi Transmission (KTL) incorporated for development of Transmission System required for evacuation of power from Kudgi TPS (3 x 800 MW in Phase-I) of NTPC to L&T Infrastructure Development Projects, the successful bidder selected through Tariff Based Competitive Bidding Guidelines for Transmission services issued of Ministry of Power, Government of India. RECTPCL has received an acquisition price of Rs 15.19 crore from L&T Infrastructure Development Projects towards acquisition of KTL along with its all assets and liabilities.

Shares of L&T gained 3.5%.

Bhel surged 6.47%, with the stock extending intraday gain.

NTPC gained 1.73%. The stock turned ex-dividend today, 5 September 2013, for a total dividend of Rs 2 per share for the year ended 31 March 2013. This includes a special dividend of Rs 1.25 per share.

Sadbhav Engineering rose 2.85% to Rs 55.85 after the company said its step down subsidiary viz. Ahmedabad Ring Road Infrastructure (ARRIL), the special purpose vehicle incorporated for undertaking of improvement and widening of then existing 2 Lane Sardar Patel Ring Road around Ahmedabad City to 4 lane carriageway, has received sanction of Rs 632.90 crore including existing debt of Rs 379.90 crore towards securitization of the project. This means that the company has received sanction of additional facility over and above existing facility to the tune of Rs 253 crore out of securitization proceeds of surplus toll revenue of the project. Door to door tenure of the total facility including existing facility is for a period of 11 years and 9 months at interest rate of 11% per annum linked to base rate of Senior Lenders of the project facility. These proceeds will be used for part funding of ongoing BOT projects of the company. ARRIL is in the process of executing the financing documents with the lenders.

The project is on DBFOT (toll) basis with a concession period of 20 years including the construction period of 18 months with effect from 1 January 2007. Commercial Operation Date of the project was achieved on 31 May 2008.

In an unexpectedly detailed and wide-ranging briefing, new RBI Governor Raghuram Rajan on Wednesday outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk. He made clear his intention to liberalise markets, including pushing for more rupee trade settlement, introducing new financial products such as overnight interest rate swaps and removing curbs on opening new branches by Indian banks. Rajan, in his remarks, outlined the plan to attract more funds from non-resident Indians (NRIs) as part of a broader push to lure inflows. Under the plan, the central bank will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians. India has the world's second-biggest diaspora, according to the Ministry of Overseas India Affairs, and the country has turned to overseas Indians for help in past financial crises. The central bank will also offer forex swap into rupees at a concessional rate below market levels for banks who raise dollar funds through overseas borrowings.

Rajan said banks should gradually be allowed to decrease their mandatory holdings of government securities, which would free up capital for lending. He also said new bank licences should be awarded on an ongoing basis. The central bank is now in the process of awarding the first new bank licences in a decade. Rajan also proposed the issue of inflation-indexed bonds linked to the consumer price index, an indication that the central bank may soon shift its inflation benchmark from the wholesale price index. Rajan also pushed back the date of the RBI's next monetary policy review by two days to 20 September 2013. That will give the central bank more time to consider the outcome of what is expected to be a pivotal two-day meeting of the US Federal Reserve, ending on 18 September 2013

The Lok Sabha on Wednesday passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector. The Bill allows 26% foreign investment in the Pension sector and gives statutory backing to the interim pension authority that had been functioning on executive authority for over a decade now. It also gives legal backing to the pensions regulator to create a social security architecture that channels savings of households into the financial sector. The PFRDA manages the New Pension System, a defined contribution scheme for the central government that many states have joined and is also now open to private individuals.

Global credit rating agency Moody's Investors Service on Wednesday, 4 September 2013, said that India's inflation and fiscal metrics remain weaker than peers. A higher subsidy burden and lower growth will weaken the country's fiscal metrics, analyst Atsi Sheth said in a presentation. The agency, however, said the country's current reserves can finance the current account and external debt payment needs. Moody's has an investment grade rating on India with a stable outlook.

European stocks edged higher on Thursday, 5 September 2013, ahead of the latest policy decisions from the European Central Bank (ECB) and the Bank of England (BoE). Key benchmark indices in UK, France and Germany were up 0.36% to 0.92%.

The ECB and the BoE are both expected to leave monetary policy unchanged after a monthly review today, 5 September 2013.

Asian stocks rose on Thursday, 5 September 2013, following gains on Wall Street overnight. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by 0.08% to 1.22%. Key benchmark indices in Indonesia and China were down by 0.24% to 0.99%.

The Bank of Japan upgraded its assessment of the economy, saying a moderate recovery is underway, reinforcing Governor Haruhiko Kuroda's message that Japan can weather a sales-tax increase due in April. The central bank will expand the monetary base at an annual pace of 60 trillion yen ($602 billion) to 70 trillion yen, it said in Tokyo today, leaving policy unchanged.

Trading in US index futures indicated that the Dow could gain 17 points at opening bell on Thursday, 5 September 2013. US stocks jumped on Wednesday after surging US auto sales pointed to robustness in the manufacturing sector. Federal Reserve data released overnight showed that the US economy grew at a "modest to moderate" pace in July and August, according to the central banks "beige book".

The influential US nonfarm payroll report for August 2013 is due for release tomorrow, 6 September 2013. The employment numbers will be keenly watched given the implications for the timing of the Federal Reserve's plan to begin slowing the pace of its monetary stimulus.

Investors across the globe are eyeing the next policy meeting of the Federal Open Market Committee (FOMC) scheduled this month, with their focus squarely on the timing of tapering of Federal Reserve's bond purchases. The FOMC holds a two-day policy meeting on 17-18 September 2013 to decide on interest rates in the United States. The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.

Meanwhile, a summit of leaders from the Group of 20 major economies begins in St. Petersburg today, 5 September 2013. The summit is expected to be dominated by unrest in Syria.

On Wednesday, US President Barack Obama reiterated the need for a global response on Syria as a US Senate panel approved a resolution authorising US military intervention. The Senate Foreign Relations Committee on Wednesday, in a 10-7 vote, approved a resolution allowing Obama to conduct military strikes against Syria. Obama is seeking full congressional approval for "limited" strikes in Syria. There are allegations that the Syrian government used chemical weapons against civilians late last month.

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