A sudden slide pushed key benchmark indices further lower in afternoon trade. The barometer index, the S&P BSE Sensex, was currently trading below the psychological 28,000 level, having alternately moved above and below that mark so far during the trading session. Earlier, the Sensex had fallen below the the psychological 28,000 level amid high volatility in mid-morning trade. The market breadth indicating the overall health of the market turned negative from positive in afternoon trade. The Sensex was currently off 277.23 points or 0.98% at 27,909.83. The BSE Small-Cap index slipped into the red from green.
The market sentiment was hit adversely by India's weather office forecasting below normal rains during second half of southwest monsoon season (August to September), with a probability of 86%. Meanwhile, the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.25% after a monetary policy review today, 4 August 2015. RBI Governor Dr. Raghuram G. Rajan said that the RBI has retained the accommodative stance of monetary policy.
Capital goods shares were mixed. Bank stocks declined after Rajan said in his monetary policy statement that the RBI is awaiting greater transmission of monetary policy by way of cut in base rate by commercial banks.
Earlier, the Sensex and the 50-unit CNX Nifty, both, reversed direction after hitting 1-1/2-week high at the onset of the trading session.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 350.41 crore yesterday, 3 August 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 33.36 crore yesterday, 3 August 2015, as per provisional data released by the stock exchanges.
In overseas markets, European shares edged lower after disappointing US data and slipping commodity prices dented sentiment on Wall Street and in Asia. Asian stocks were mixed. US stocks edged lower yesterday, 3 August 2015, after weak economic data and a further slump in crude-oil prices.
At 13:20 IST, the S&P BSE Sensex was down 277.23 points or 0.98% at 27,909.83. The index fell 320.94 points at the day's low of 27,866.12 in afternoon trade, its lowest level since 31 July 2015. The index gained 77.66 points at the day's high of 28,264.72 at the onset of the trading session, its highest level since 24 July 2015.
The CNX Nifty was down 73.75 points or 0.86% at 8,469.30. The index hit a low of 8,448.25 in intraday trade, its lowest level since 31 July 2015. The index hit a high of 8,565.15 in intraday trade, its highest level since 24 July 2015.
The market breadth indicating the overall health of the market turned negative from positive in afternoon trade. On BSE, 1,432 shares fell and 1,291 shares rose. A total of 121 shares were unchanged.
The BSE Mid-Cap index was up 28.11 points or 0.25% at 11,359.02, outperforming the Sensex. The BSE Small-Cap index was down 2.92 points or 0.02% at 11,938.28. The decline in this index was lower than the Sensex's decline in percentage terms.
Capital goods shares were mixed. AIA Engineering (down 2.02%), Bharat Heavy Electricals (down 1.29%), Havells India (down 1.16%), Siemens (down 1.03%), ABB India (down 0.98%), Alstom T&D India (down 0.9%), Crompton Greaves (down 0.87%), Thermax (down 0.83%), Larsen & Toubro (down 0.75%), Bharat Electronics (down 0.73%) and Suzlon Energy (down 0.41%), edged lower. Pipavav Defence and Offshore Engineering Company (up 0.17%), Praj Industries (up 0.35%), BEML (up 0.45%), SKF India (up 0.45%), Lakshmi Machine Works (up 0.60%), ALSTOM India (up 1.10%), Jindal Saw (up 4.17%) and Punj Lloyd (up 6.37%), edged higher.
Bank stocks declined after Rajan said in his monetary policy statement that the RBI is awaiting greater transmission of monetary policy by way of cut in base rate by commercial banks. IndusInd Bank (down 2.63%), HDFC Bank (down 0.82%), Federal Bank (down 0.74%), ICICI Bank (down 0.51%), Axis Bank (down 0.42%), Kotak Mahindra Bank (down 0.42%), Yes Bank (down 0.14%) and City Union Bank (down 0.1%), edged lower.
Rajan said that while the RBI has cut repo rate by 75 basis points since January 2015, the median base lending rates of banks has fallen by only around 30 basis points. As loan demand picks up in Q3 December 2015, banks will see more gains from cutting rates to secure new lending and more transmission will take place, Rajan said.
Most PSU banks declined. United Bank of India (down 2.53%), IDBI Bank (down 2.34%), Punjab and Sind Bank (down 1.95%), Allahabad Bank (down 1.87%), Bank of Maharashtra (down 1.42%), Central Bank of India (down 1.26%), Dena Bank (down 1.21%), Andhra Bank (down 1.19%), Vijaya Bank (down 0.96%), Corporation Bank (down 0.19%) and UCO Bank (down 0.18%), edged lower. State Bank of India (up 0.28%), Bank of Baroda (up 0.49%), Punjab National Bank (up 0.55%), Bank of India (up 1.29%), Indian Bank (up 2.56%), Canara Bank (up 4.24%) and Union Bank of India (up 4.86%), edged higher.
With regard to public sector banks, Rajan said that the recent announcement by the government of infusion of bank capital into public sector banks will help loan growth and hence monetary policy transmission.
Meanwhile, India's weather office, the India Meteorological Department (IMD), after trading hours yesterday, 3 August 2015, announced that the rainfall over the country as a whole during second half of southwest monsoon season (August to September) is likely to be below normal with a probability of 86%. Quantitatively, the rainfall over the country as a whole during the second half of the season (August to September) is likely to be 84% of long period average (LPA), with a model error of plus/minus 8%. From April to July 2015, El Nino conditions have strengthened from weak to moderate level. Latest forecast from ESSO-IMD-IITM coupled model indicates 72% probability of El Nino conditions to become strong during remaining part of the monsoon season. Over the Indian Ocean, there is 86% probability of current neutral Indian Ocean Dipole conditions to continue during the monsoon season.
The rainfall during August 2015 is likely to be 90% of LPA, with a model error of plus/minus 9% as was forecasted in June. The season rainfall (June to September) over the country as a whole is likely to be deficient. The season rainfall (June to September) over the country as a whole is likely to be 88% of LPA with a model error of plus/minus 4% as was forecasted in June, the IMD said.
The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation.
The India Meteorological Department said in a daily report issued yesterday, 3 August 2015, that the Southwest Monsoon was active over Arunachal Pradesh, Odisha, Jharkhand and Chhattisgarh during past 24 hours until 8:30 IST. For the country as a whole, cumulative rainfall during this year's monsoon season was 6% below the Long Period Average (LPA) until 3 August 2015. Region wise, the rainfall was 22% below the LPA in South Peninsula, 8% below the LPA in East & Northeast India, 7% below the LPA in Central India and 8% above the LPA in Northwest India until 3 August 2015.
Meanwhile, the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 7.25% after a monetary policy review. The RBI also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liability (NDTL). RBI Governor Dr. Raghuram G. Rajan said that the RBI has retained the accommodative stance of monetary policy. As the RBI awaits greater transmission of its front-loaded repo rate cuts since January 2015, it will monitor developments for emerging room for more accommodation, Rajan said in the monetary policy statement. While the RBI has cut repo rate by 75 basis points since January 2015, the median base lending rates of banks has fallen by only around 30 basis points so far.
The RBI is concerned about the sustained hardening of inflation excluding food and fuel. Rajan said that risks to inflation are broadly balanced around the target of 6% for January 2016, according to the central bank. The RBI said that the full effects of the service tax increase, which took effect from June, will feed through over the rest of the year. Rajan said that RBI will keep a close watch on the movement of food prices. Some food prices, particularly of protein-rich items, pulses and oilseeds have risen sharply in recent months. This assumes significance in view of households' inflation expectations rising again. Several factors, however, could have a significant mitigating influence on inflation. These include the sharp fall in crude prices since June and the increase in planting of pulses and oilseeds and prospects of rainfall in August and September according to some forecasters. The RBI also appreciated the government's current pro-active supply management to contain shocks to food prices, especially of vegetables and its decision to keep increases in minimum support prices moderate.
The RBI has retained the projected GDP growth forecast unchanged at 7.6% for 2015-16. The RBI said that the outlook for growth is improving gradually. Favourable real income effects could accrue from weaker commodity prices, in particular crude oil, and a possible step-up in agricultural activity if monsoon conditions continue to improve, the RBI said. On the other hand, global growth projections for 2015 have generally been revised downwards and, therefore, the export contraction could become a prolonged drag on growth going forward. Notwithstanding some improvement in the state of stalled projects, supply constraints continue to be binding and new investment demand emanating from the private sector and the central government remains subdued.
Meanwhile, in the global commodities markets, Brent crude oil futures edged higher after a sharp slide overnight. Brent for September settlement was currently up 39 cents at $49.91 a barrel. The contract had dropped $2.69 a barrel or 5.15% to settle at $49.52 a barrel during the previous trading session.
India imports about 80% of its crude requirements and a decline in crude eases concerns on fiscal deficit, inflation and gives more room for the government to boost growth through spending on infrastructure
In overseas markets, European shares edge lower today, 4 August 2015, after disappointing US data and slipping commodity prices dented sentiment on Wall Street and in Asia. Key benchmark indices in UK, France and Germany were off 0.36% to 0.73%.
Asian stocks were mixed today, 4 August 2015. Key benchmark indices in Taiwan, Japan, Singapore, Indonesia and fell by 0.14% to 0.48%. South Korea's Seoul Composite was up 0.97%.
In mainland China, the Shanghai Composite rose 3.69%. In Hong Kong, the Hang Seng index was down 0.11%.
US markets dropped yesterday, 3 August 2015, following weak economic data and a further slump in crude-oil prices. In US economic news, the Commerce Department yesterday, 3 August 2015 said personal spending by US consumers rose 0.2% in June, while personal income grew by 0.4%. Another data showed that the Institute for Supply Management's index of national factory activity slipped to 52.7 in July, falling short of reading of 53.5 in June.
The influential monthly US nonfarm payroll report for July 2015 is due on Friday, 7 August 2015.
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