Key benchmark indices registered modest losses after the government named Reserve Bank of India deputy governor Urjit Patel who is known as an inflation hawk as the new RBI governor to succeed Raghuram Rajan. The barometer index, the S&P BSE Sensex, lost 96.44 points or 0.34% at 27,980.56, as per the provisional closing data. The decline for the Nifty 50 index was higher than the Sensex's fall in percentage terms. The Nifty lost 37.75 points or 0.44% at 8,629.15, as per the provisional closing data. The Sensex provisionally settled below the psychologically important 28,000 level. The Sensex alternately swung above and below that level in intraday trade after falling below that mark in morning trade.
The Sensex lost 158.95 points or 0.56% at the day's low of 27,918.05 in mid-morning trade, its lowest level since 12 August 2016. The barometer index rose 66.28 points or 0.23% at the day's high of 28,143.28 in early trade. The Nifty lost 52.90 points or 0.61% at the day's low of 8,614 in mid-morning trade, its lowest level since 17 August 2016. The index rose 17.95 points or 0.2% at the day's high of 8,684.85 in early trade.
Patel who handles the monetary policy department as the RBI deputy governor will take charge as the new RBI governor on 4 September 2016, the day when Rajan's 3-year term as the RBI governor ends. Patel's term is also for a 3 year period. By naming Patel who is a deputy governor at the central bank as the new RBI governor, the government is sending signal to markets that there will be continuity of central bank's policies.
The government early this month notified consumer price inflation target of 4% with upper tolerance level of 6% and lower tolerance level of 2% to be achieved by RBI. This target is valid until 31 March 2021.
In overseas stock markets, European stocks edged higher albeit with caution ahead of the US Federal Reserve's Jackson Hole meeting later this week which could produce some hints about the timing of a further interest rate hike. Asian stocks witnessed a mixed trend amid uncertainty about US monetary policy outlook. US stocks registered small losses on Friday, 19 August 2016, with traders holding their horses ahead of a speech from Federal Reserve chair Janet Yellen at Jackson Hole later this week. Yellen's speech at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming is scheduled on Friday, 26 August 2016. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,442 shares declined and 1,250 shares rose. A total of 209 shares were unchanged. The BSE Mid-Cap index provisionally declined 0.42%. The decline in this index was higher than the Sensex's decline in percentage terms. The BSE Small-Cap index provisionally lost 0.14%. The decline in this index was lower than the Sensex's decline in percentage terms.
The total turnover on BSE amounted to Rs 3040 crore, lower than turnover of Rs 3505.76 crore registered during the previous trading session.
Index heavyweight and cigarette major ITC rose 1.39% at Rs 254.55. The stock hit a high of Rs 254.95 and a low of Rs 251.25 in intraday trade.
IT stocks edged lower. TCS (down 1.92%), HCL Technologies (down 0.97%), Tech Mahindra (down 1.54%), Wipro (down 1.12%) and Oracle Financial Services Software (down 0.85%) declined.
Index heavyweight and software major Infosys was down 0.5% at Rs 1,016. The stock hit a high of Rs 1,030 and a low of Rs 1,009.20 in intraday trade.
Auto stocks also declined. TVS Motor Company (down 1.73%), Maruti Suzuki India (down 1.22%), Tata Motors (down 1.22%), Hero MotoCorp (down 0.48%), Mahindra & Mahindra (down 0.78%) and Eicher Motors (down 0.04%) edged lower. Bajaj Auto (up 0.11%) and Ashok Leyland (up 0.06%) edged higher.
NTPC edged lower after the company announced uninspiring Q1 results. The stock was down 2.1% at Rs 163.25. The company's net profit rose 4.08% to Rs 2369.53 crore on 10.88% growth in total income to Rs 19220.80 crore in Q1 June 2016 over Q1 June 2015. The result was announced during market hours today, 22 August 2016.
NTPC Group's commercial capacity increased by 2,735 megawatts (MW) to 45,878 MW as on 30 June 2016 from 43,143 MW as on 30 June 2015. Installed capacity rose by 2,130 MW to 47,178 MW as on 30 June 2016 from 45,048 MW as on 30 June 2015.
Meanwhile, global credit rating agency Moody's Investors Service said in a report that India's credit profile is supported by the strong growth potential of its large economy and the high private savings rate which underpins the government's access to domestic financing at relatively favorable terms. These credit strengths are balanced against a high government debt burden (67.4% of GDP in 2015), regulatory and infrastructure constraints on its competitiveness, slow pace of policy reform, and the contingent liability risk to the sovereign from public sector banks' high and rising non-performing loans, the rating agency said. Moody's expect Indian corporate sector's profitability to remain muted which will continue to dampen its ability and willingness to invest in the next few quarters. Moody's expects India's real GDP growth at around 7.5% in the next two years.
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