Key indices hover in positive zone
A bout of volatility was witnessed as key benchmark indices recovered from lower level after trimming gains in morning trade. At 10:17 IST, the barometer index, the S&P BSE Sensex was up 59.37 points or 0.22% at 26,462.33. The Nifty 50 index was currently up 19.10 points or 0.24% at 8,113.80. The Sensex rose 87.35 points or 0.33% at the day's high of 26,490.31 in early trade. The index lost 24.50 points or 0.09% at the day's low of 26,378.46 at the onset of trading session. The Nifty rose 30.20 points or 0.37% at the day's high of 8,124.90 in early trade, its highest level since 23 June 2016. The index fell 7.85 points or 0.09% at the day's low of 8,086.85 at the onset of trading session.
In overseas stock markets, most Asian stocks edged higher in an indication that markets were stabilizing in the wake of the UK's vote last week to leave the European Union. But Chinese stocks languished in negative zone. In mainland China, the Shanghai Composite was currently off 0.04%. In Hong Kong, the Hang Seng index was currently off 0.84%. Trading in US index futures indicated a recovery for US stocks from a recent selloff triggered by the UK's decision to leave the European Union. Trading in US index futures indicated that the Dow Jones Industrial Average could gain 133 points at the opening bell today, 28 June 2016.
US stocks registered heavy losses for the second trading session in a row yesterday, 27 June 2016, as investors continued to dump assets perceived as risky in the wake of the UK's vote last week to leave the European Union. Activity in the US services sector remained subdued in June, according to preliminary data released yesterday, 27 June 2016. In a report, market research group Markit said that its flash services purchasing managers' index (PMI) remained unchanged at 51.3 in June.
Closer home, the broad market depicted strength. There were more than two gainers against every loser on the BSE. 1,343 shares rose and 533 shares declined. A total of 110 shares were unchanged. The BSE Mid-Cap index was currently up 0.36%. The BSE Small-Cap index was currently up 0.67%. Both these indices outperformed the Sensex.
Bank stocks were mixed. Among public sector banks, Indian Bank (up 1.82%), Bank of India (up 0.96%), Union Bank of India (up 0.12%) and Corporation Bank (up 0.85%) edged higher. Punjab National Bank (down 0.19%), State Bank of India (down 0.28%), Bank of Baroda (down 0.26%), Canara Bank (down 0.07%) and IDBI Bank (down 0.15%) edged lower.
Global credit rating agency Moody's Investors Service has said in a recent report that the Indian government's proposal to consolidate the country's public sector banks (PSBs) creates risks that -- in the current weak economic environment -- could offset the potential long-term benefits. Moody's Vice President and Senior Analyst Alka Anbarasu said that India's banking system has witnessed an increase in stressed assets since 2012 and that not a single PSB currently has the financial strength to assume a consolidator role without risking its own credit standing post-merger. The banks' weakened financial metrics since 2012 and weak performance mean that many have difficulties meeting minimum regulatory requirements without regular capital injections from the government. As a result, few public sector banks have the excess capital required to acquire meaningfully sized peers.
According to the credit rating agency, government support will be a crucial driver of the credit outcome of potential mergers of PSBs, particularly in the form of the equity capital required to shore up capital buffers. Moody's also sees considerable challenges from potential opposition from employee unions, which could hamper merger efforts and drive up costs.
Stocks of private sector banks also witnessed a mixed trend. Kotak Mahindra Bank (up 0.88%), Axis Bank (up 0.47%) and HDFC Bank (up 0.68%) edged higher. Yes Bank (down 0.49%), ICICI Bank (down 0.97%) and IndusInd Bank (down 0.06%) edged lower.
Realty stocks witnessed a mixed trend. Unitech (up 1.76%), Godrej Properties (up 0.22%), Oberoi Realty (up 0.52%) and Prestige Estates Projects (up 0.22%) edged higher. DLF (down 0.26%), Sobha (down 0.02%), Housing Development and Infrastructure (down 0.82%), D B Realty (down 0.32%) and Indiabulls Real Estate (down 0.96%) edged lower.
The finance ministry has announced that it has initiated the process to constitute Monetary Policy Committee (MPC) under the Reserve Bank of India Act, 1934. Out of the six members of MPC, three members will be from the Reserve Bank of India (RBI), including the RBI Governor, who will be the ex-officio Chairperson of the MPC, the Deputy Governor, RBI and one officer of RBI. The other three members of MPC will be appointed by the central government on the recommendations of a Search-cum-Selection Committee, which will be headed by the Cabinet Secretary. These three members of MPC will be experts in the field of economics or banking or finance or monetary policy and will be appointed for a period of 4 years and will not be eligible for re-appointment. The meetings of the MPC will be held at least 4 times a year and the MPC will publicise its decisions after each meeting. A committee-based approach will add a lot of value and transparency to monetary policy decisions, the finance ministry said in a statement issued after trading hours yesterday, 27 June 2016.
Tata Communications surged 4.7% at Rs 470.75 after the company entered into an agreement to sell its South African subsidiary Neotel to Liquid Telecom, a privately owned, pan-African telecoms group, majority owned by Econet Wireless Global. Tata Communications, Neotel's majority shareholder and Neotel's minority shareholders led by Nexus Connection, have agreed for Liquid Telecom to acquire Neotel for ZAR6.55 billion. Liquid Telecom is partnering with Royal Bafokeng Holdings (RBH), a South African empowerment investment group, which has committed to take a 30% equity stake in Neotel. The transaction, which is subject to obtaining all affirmative approvals and other corporate approvals that may be required by the shareholders of Neotel and other regulatory approvals, is transformative and will create the largest pan-African broadband network and B2B telecoms provider. Through a single access point, businesses across Africa will be able to access Liquid Africa's 24,000 kilometres of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned.
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