Market extends losses

Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade. Weakness in Asian stocks hit investor sentiment adversely. The barometer index, the S&P BSE Sensex, was down 60.28 points or 0.29%, up close to 10 points from the day's low and off close to 60 points from the day's high. The market breadth, indicating the overall health of the market, was positive. Government bond prices dropped as crude oil futures rose.

Capital goods pivotals edged lower on profit booking after recent strong gains. Most realty stocks extended Tuesday's gains. Bank pivotals edged lower.

The market edged lower in early trade on weak Asian stocks. Key benchmark indices hovered in negative terrain in morning trade. A bout of volatility was witnessed as key benchmark indices edged lower once again after recouping almost entire intraday losses in mid-morning trade. Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade

At 12:22 IST, the S&P BSE Sensex was down 60.28 points or 0.29% to 20,794.96. The index lost 72.93 points at the day's low of 20,781.99 in early afternoon trade, its lowest level since 2 December 2013. The index declined 0.35 points at the day's high of 20,854.57 in mid-morning trade.

The CNX Nifty was down 16.75 points or 0.27% to 6,185.10. The index hit a low of 6,180.05 in intraday trade, its lowest level since 2 December 2013. The index hit a high of 6,201.95 in intraday trade.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,125 shares rose and 1,056 shares dropped. A total of 171 shares were unchanged.

Among the 30-share Sensex pack, 16 stocks fell and rest rose. Hindalco Industries (down 1.01%), Sun Pharmaceutical Industries (down 0.95%) and ITC (down 0.86%) declined.

Most realty stocks extended Tuesday's gains. Unitech (up 0.29%), DLF (up 0.22%), and HDIL (up 2.64%) edged higher.

Capital goods pivotals edged lower on profit booking after recent strong gains. L&T (down 1.72%) and Bhel (down 0.06%) dropped.

Bank pivotals edged lower. HDFC Bank (down 0.06%), ICICI Bank (down 1.83%) and SBI (down 0.35%) declined.

The Reserve Bank of India (RBI) early this week placed on its website the Draft Report of the Internal Working Group (IWG) on Implementation of Countercyclical Capital Buffer (CCCB) in India. The IWG approached the implementation framework keeping two main issues in mind. First, the structural changes that the Indian economy has been going through should be considered in calibrating the indicator/s for CCCB imposition. Secondly, being an emerging economy, the maximum potential growth may not have been achieved by it so far and hence CCCB imposition should not stifle the possibility of the same.

The draft report on CCCB suggests that while the credit-to-GDP gap shall be used for empirical analysis to facilitate CCCB decision, it may not be the only reference point in the CCCB framework for banks in India and the credit-to-GDP gap may be used in conjunction with other indicators like Gross Non-Performing Assets (GNPA) growth for CCCB decisions in India. The lower threshold (or L) of the CCCB when the buffer is activated may be set at 3 percentage points of the credit-to-GDP gap, provided its relationship with GNPA remains significant and the upper threshold (or H) may be kept at 15 percentage points of credit-to-GDP gap, according to the draft report. The CCCB shall increase linearly from 0 to 2.5 per cent of the risk weighted assets (RWA) of the bank based on the position of gap between 3 percentage points and 15 percentage points. However, if the gap exceeds 15 percentage points, the buffer shall remain at 2.5 per cent of the RWA. If the gap is below 3 percentage points then there will not be any CCCB requirement, according to the draft report.

The supplementary indicators shall include incremental C-D ratio for a moving period of three-years (along with its correlation with credit-to-GDP ratio gap and GNPA growth), Industry Outlook (IO) assessment index (along with its correlation with GNPA growth) and interest coverage ratio (along with its correlation with credit-to-GDP gap). In due course, indices like House Price Index/RESIDEX and Credit Condition Survey may also form a part of the supplementary indicators for CCCB decision, according to the draft report on CCCB. The Reserve Bank of India may apply discretion in terms of use of indicators while activating or adjusting the buffer, according to the draft report. The CCCB framework in India may be operated in conjunction with sectoral approach that has been successfully used in India over the period of time, it said. The same set of indicators that are used for activating CCCB may be used to arrive at the decision for the release phase of the CCCB. However, instead of hard rules-based approach, flexibility in terms of use of judgement and discretion may be provided to the Reserve Bank of India for operating the release phase of CCCB. Further, the entire CCCB may be released promptly at a single point in time, according to the draft report. For all banks operating in India, CCCB shall be maintained on solo basis as well as on consolidated basis in India, it said. The indicators and thresholds used for CCCB decisions may be subject to continuous research and empirical testing for their usefulness and new indicators may be explored to support CCCB decisions, it said.

The Reserve Bank of India has also released on its website the draft framework for dealing with Domestic Systemically Important Banks (D-SIBs). The draft framework discusses the methodology to be adopted by the Reserve Bank of India for identifying the D-SIBs and proposes regulatory/supervisory policies which D-SIBs would be subjected to. The assessment methodology adopted by RBI is primarily based on the BCBS methodology for identifying the Global Systemically Important Banks (G-SIBs) with suitable modifications to capture domestic importance of a bank, the RBI said in a press release. The indicators which would be used for assessment are size, interconnectedness, substitutability and complexity. Based on the sample of banks chosen for computation of their systemic importance, a relative composite systemic importance score of the banks will be computed, the RBI said. The RBI will determine a cut-off score beyond which banks will be considered D-SIBs. Based on their systemic importance scores, banks will be plotted into different buckets. D-SIBs will be required to have additional Common Equity Tier 1 capital requirement ranging from 0.2% to 0.8% of risk weighted assets, the RBI said. D-SIBs will also be subjected to differentiated supervisory requirements and higher intensity of supervision based on the risks they pose to the financial system, the RBI said. The computation of systemic importance scores will be carried out at yearly intervals, the central bank said in a statement. The names of the banks classified as D-SIBs will be disclosed in the month of August every year starting from 2015, the RBI said.

Bank of Baroda rose 0.14%. The state run bank's board of directors at its meeting held on 3 December 2013 considered and approved issue of such number of equity shares aggregating upto Rs 550 crore on preferential basis to Government of India. The announcement was made after market hours on Tuesday, 3 December 2013.

Thomas Cook (India) rose 4.33% after the company said it has expanded its footprint in South India with the launch of its new branch outlet in Puducherry today, 4 December 2013. The announcement was made during trading hours today, 4 December 2013.

Commenting on the inauguration of the branch, Mr. Madhavan Menon, MD, Thomas Cook (India) said, "The launch of this new branch, is part of Thomas Cook's strategic intent to expand our footprint in South India - Which offers strong potential to grow. Our focus has always been to be easily accessible by all our customers and focused network expansion plays a critical role in achieving this. As India's largest integrated travel services company, we offer a variety of services to customers across segments - inbound tourists, families, honeymooners, special interest groups, young adults, NRIs, students, business professionals and more - and this new branch is just another step in our constant efforts to serve our valuable customers in Puducherry better".

VST Tillers Tractors jumped 5.08% to Rs 626.30 after HDFC Mutual Fund bought 1.71% stake in the company on Tuesday, 3 December 2013. HDFC Mutual Fund bought 72,508 shares or 0.84% stake in VST Tillers Tractors at Rs 596 per share in a bulk deal on the BSE on Tuesday, 3 December 2013. Also, HDFC Mutual Fund under its Prudence Fund scheme acquired 75,079 shares or 0.87% stake in the company at Rs 596 on the NSE on Tuesday, 3 December 2013. Shares of VST Tillers Tractors settled 0.28% higher at Rs 596 on Tuesday, 3 December 2013.

Orient Bell jumped 3.52% after the company on Tuesday, 3 December 2013, announced a licensing deal with Disney Consumer Products India to launch Disney and Marvel branded tiles collection in the country. The announcement was made after market hours on Tuesday, 3 December 2013.

Commenting on the development, Mr. Madhur Daga, JMD, Orient Bell said, "It is exciting to be working with Disney to create a range of products that makes people feel bright and happy".

Roshini Bakshi, MD, Licensing & Retail, Disney UTV said, "We are thrilled to launch a Disney & Marvel character branded tiles collection through this licensing deal with Orient Bell and to provide consumers the opportunity bring Disney Magic into their homes. Disney home products span across total home solutions including furniture, beddings, rugs, tableware, kitchenware, fans, paints and bath accessories. As we continue to expand our offerings for kids and families in India, we hope to bring exciting new products that would take the Disney experience to the next level".

The new line of collection will be available with all Orient and Bell Tile boutiques and dealers across India soon, Orient Bell said in a statement.

Disney is the largest retail character licensor in the world with $37 billion in character merchandising retail sales globally in 2012.

In the foreign exchange market, the rupee alternately swung between positive and negative zone against the dollar. The partially convertible rupee was currently hovering at 62.37, unchanged for the day compared with its close of 62.36/37 on Tuesday, 3 December 2013.

Government bond prices dropped as crude oil futures rose. The yield on 10-year benchmark federal paper, 7.16% GS 2023, was hovering at 9.0936%, higher than its close of 9.069% on Tuesday, 3 December 2013. Bond yield and bond prices are inversely related.

The Organization of Petroleum Exporting Countries (OPEC) holds a meeting in Vienna on today, 4 December 2013, to decide production quota. The OPEC is expected to assess the impact of rising US oil production and the potential return of Iranian oil barrels to the market. OPEC countries will have to accommodate any additional oil supply into the market without changes to the cartel's overall production ceiling of 30-million-barrels-a-day, Venezuela Oil Minister Rafael Ramirez said on 28 November 2013.

The downturn in services activity eased slightly in November although a dearth of new orders prompted firms to rein in hiring plans, a business survey showed on Wednesday. The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, nudged up to 47.2 last month from 47.1 in October. While the services PMI reading was a little better than the previous month, it has now spent five straight months below the 50 mark that divides contraction from growth, prompting firms to freeze hiring plans. The employment sub-index fell to 49.9 in November from 50.1.

New business in November fell at a slightly slower pace than in October, but it was the fifth month running that demand has declined. For inflation, the survey showed a mixed picture, with firms ramping up their prices faster despite some moderation in rising input costs.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Service sector activity remains subdued, but would at least appear to be stabilizing. The inflation picture is a bit mixed, with prices charged rising at a faster pace while input price inflation eased somewhat. Looking ahead, economic activity is expected to remain soft in coming months as high inflation, tighter financial conditions, and structural constraints continue to weigh on growth".

The Reserve Bank of India (RBI) announces next Mid-Quarter Review of Monetary Policy for 2013-14 on 18 December 2013. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled 28 January 2014.

On the political front, Delhi goes to polls today, 4 December 2013. Polls for assembly election in Chattisgarh, Rajasthan, Madhya Pradesh and Mizoram are already over. Counting of votes for assembly elections in Delhi, Madhya Pradesh, Chhattisgarh and Rajasthan takes place on 8 December 2013. Counting of votes for assembly elections in Mizoram takes place on 9 December 2013.

The outcome of the assembly elections could provide clues as to which party comes to power in the national elections that are due by May 2014. Many investors are hoping the state elections will show strong support for the Bharatiya Janata Party whose prime ministerial candidate Narendra Modi is considered a pro-business leader.

The winter session of parliament begins tomorrow, 5 December 2013. The session will end on 20 December 2013. It will have 12 sittings in which government is likely to introduce a bill to create a separate Telangana.

Asian stocks fell on Wednesday, 4 December 2013, with investors awaiting influential US job data later this week that may provide further evidence as to when the Federal Reserve will reduce stimulus to the US economy. Key benchmark indices in Indonesia, Hong Kong, Japan, Singapore and South Korea were down 0.46% to 2.17%. Key benchmark indices in China and Taiwan rose 0.3% to 1.35%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.

Chinese President Xi Jinping said the environment for economic and social development next year isn't optimistic.

Trading in US index futures indicated that the Dow could advance 8 points at the opening bell on Wednesday, 4 December 2013. US stocks declined for a third day on Tuesday, 3 December 2013, as investors assessed reports on car and retail sales before US jobs data later this week that may offer clues on when the Federal Reserve will reduce stimulus.

Investors are keeping a close watch on economic data in the United States as the Federal Reserve monitors the pace of recovery to gauge when it will begin to reduce monetary stimulus for the US economy, which has been aimed at encouraging growth. The US government will release the influential US non-farm payrolls data for November 2013 on Friday, 6 December 2013. The Fed has said improvement in the labor market is a key factor in its policy assessment.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.

In Europe, the European Central Bank (ECB) holds its monthly monetary policy meeting tomorrow, 5 December 2013. The ECB unexpectedly cut the benchmark interest rate by a quarter-percentage point last month to a record-low 0.25% after inflation slowed in October to the least in four years.

UK's central bank -- Bank of England -- is also expected to keep its key policy rate steady at 0.5% after a monetary policy review tomorrow, 5 December 2013.

Brazil's economy contracted in the third quarter for the first time since early 2009, falling short of expectations yet again as plunging investment underscored eroding confidence in what was recently one of the world's most promising emerging markets. The economy shrank 0.5% between July and September from the prior three months, government statistics agency IBGE said on Tuesday.

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