Weakness continued on the bourses in early afternoon trade. The barometer index, the S&P BSE Sensex, was down 202.96 points or 0.82%, off close to 260 points from the day's high and up about 90 points from the day's low. The market breadth indicating the overall health of the market was weak. The BSE Small-Cap index was off almost 1.5%. The BSE Mid-Cap index was off over 1%. Weakness in Asian stocks hit sentiment on the domestic bourses adversely.
Metal stocks declined. Shares of non-banking financial companies (NBFCs) declined after the Reserve Bank of India tightened merger and acquisition rules for NBFCs.
The Sensex slipped into the red after opening higher. Key benchmark indices extended initial losses and hit fresh intraday low in morning trade. A bout of volatility was witnessed as key benchmark indices trimmed intraday losses in mid-morning trade. Weakness continued on the bourses in early afternoon trade.
Foreign institutional investors (FIIs) sold shares worth a net Rs 84.13 crore on Monday, 26 May 2014, as per provisional data from the stock exchanges.
The market may remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from the near month May 2014 series to June 2014 series. The near month May 2014 derivatives contract expire on Thursday, 29 May 2014.
At 12:20 IST, the S&P BSE Sensex was down 202.96 points or 0.82% to 24,513.92. The index declined 294.55 points at the day's low of 24,422.33 in mid-morning trade, its lowest level since 22 May 2014. The index rose 60.43 points at the day's high of 24,777.31 in early trade.
The CNX Nifty was down 60.75 points or 0.83% to 7,298.30. The index hit a low of 7,274.75 in intraday trade. The index hit a high of 7,372.95 in intraday trade.
The BSE Mid-Cap index was off 101.10 points or 1.19% at 8,386.96. The BSE Small-Cap index was off 133.20 points or 1.49% at 8,790.45. Both these indices underperformed the Sensex.
The market breadth indicating the overall health of the market was weak. On BSE, 1,735 shares fell and 903 shares rose. A total of 86 shares were unchanged.
Among the 30-share Sensex pack, 23 stocks fell and rest of them rose. GAIL (India) (down 6.37%), Bharat Heavy Electricals (Bhel) (down 3.74%) and Mahindra & Mahindra (M&M) (down 2.79%) edged lower from the Sensex pack.
Shares of non-banking financial companies (NBFCs) declined after the Reserve Bank of India tightened merger and acquisition rules for NBFCs. IFCI (down 6.3%), LIC Housing Finance (down 3.95%), Power Finance Corporation of India (down 3.83%), Reliance Capital (down 3.6%), IDFC (down 3.15%), Bajaj Finance (down 0.47%) and L&T Finance Holdings (down 1.84%) and declined.
The Reserve Bank of India (RBI) has on Monday issued directions to all the NBFCs both deposit accepting and non-deposit accepting, stating that prior approval of the Reserve Bank is required in case of any takeover/acquisition of shares of an NBFC; or merger/amalgamation of an NBFC with another entity; or any merger/amalgamation of an entity with an NBFC, that would give the acquirer/ another entity control of the NBFC, or would result in acquisition/transfer of shareholding in excess of 10% of the paid up capital of the NBFC. The said requirement is applicable to all NBFCs, irrespective of it being a deposit taking or a non-deposit taking NBFC, the RBI said. Prior written approval of the Reserve Bank of India would also be required before approaching the Court or Tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs.
Metal stocks declined. Sesa Sterlite (down 2.56%), JSW Steel (down 1.99%), Hindalco Industries (down 0.65%), Hindustan Zinc (down 2.44%), Bhushan Steel (down 1.18%), Steel Authority of India (Sail) (down 2.64%), National Aluminum Company (down 3.01%) and Hindustan Copper (down 3.84%) declined. But, Tata Steel rose 0.22%.
On the macro front, India's current account deficit (CAD) narrowed sharply to $1.2 billion (0.2% of GDP) in Q4 March 2014, from $18.1 billion (3.6% of GDP) in Q4 March 2013, which was also lower than $4.2 billion (0.9% of GDP) in Q3 December 2013. The lower CAD was primarily on account of a decline in the trade deficit as decline in imports was sharper than that in exports.
On a BoP basis, merchandise exports declined by 1.3% to $ 83.7 billion in Q4 March 2014 as against an increase of 5.9% in Q4 March 2013.
Narendra Modi was sworn in India's 15th Prime Minister on Monday, 26 May 2014. The Union Council of Ministers includes Rajnath Singh as Home Minister and Sushma Swaraj as Minister for External Affairs. Arun Jaitley was allocated Finance Ministry, corporate affairs and will also have additional charge of Defence. Nitin Gadkari will be a minister of road transport, highways and shipping. Ravi Shankar Prasad will take charge of Communications and Information Technology, Law and Justice Ministry. Venkaiah Naidu takes charge as minister of Urban Development, Housing and Urban Poverty Alleviation and Parliamentary Affairs. Shri D.V. Sadananda Gowda was allotted Ministry of railways. Uma Bharati was allotted Water Resources, River Development and Ganga Rejuvenation Ministry, Ashok Gajapathi Raju Pusapati was allotted Civil Aviation Ministry, Ananthkumar was allotted Chemicals and Fertilizers. Gopinath Munde was allotted Rural Development, Panchayati Raj and Drinking Water and Sanitation Ministry. Ramvilas Paswan was allotted Consumer Affairs, Food and Public Distribution Ministry. Kalraj Mishra was allotted Micro, Small and Medium Enterprises. Maneka Gandhi was allotted Women and Child Development Ministry. Anant Geete was allotted Heavy Industries and Public Enterprises Ministry. Harsimrat Kaur Badal was allotted Food Processing Industries Ministry. Dharmendra Pradhan has got Petroleum and Natural Gas ministry with independent charge.
After taking charge of the Finance Ministry, Arun Jaitley said at a news conference today, 27 May 2014, that a balancing act will have to be done to restore growth while curbing inflation and taking steps toward fiscal consolidation. "I think political change itself sends strong signals to the global community as also to domestic investors. Over the next few months by expediting decision making processes, I'm sure we'll be able to build on that," Jaitley said.
Investors are expecting measures from the new government to revive the Indian economy. India's GDP growth slowed sharply at 4.7% in Q3 December 2013. Investors expect the new government to accelerate policy reforms and overhaul the country's poor infrastructure.
Modi is favored by business leaders because of his record in Gujarat, which he's led since 2001. With Modi at the helm of affairs, Gujarat's economy expanded by 10.1% a year, on average and adjusting for inflation, from 2001 and 2012, compared with 7.7% growth a year for India's economy as a whole.
Modi has pledged to fight inflation by cracking down on food hoarders, creating a national agriculture market and improving rural infrastructure.
The first budget of the new government is expected by July 2014. An interim budget was presented by P. Chidambaram in February this year. Essentially, in the nature of a vote on account, the interim budget was intended to get Parliament approval for expenditure to be incurred during the first few months of fiscal year 2014-15 due to Lok Sabha elections.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.
Asian stocks edged lower in choppy trade on Tuesday, 27 May 2014. Key benchmark indices in China, Singapore, Hong Kong and South Korea were off 0.14% to 0.63%. Key benchmark indices in and Taiwan and Japan were up 0.21% to 0.23%.
Trading in US index futures indicated that the Dow could gain 45 points at the opening bell on Tuesday, 27 May 2014. US stock market was closed on Monday, 26 May 2014, on account of Memorial Day.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.
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