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Indian markets erase their initial gains and settle in negative territory

Jainam Research | 21 Apr, 2017  | Follow Author | Add to my Favourites 
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Post session - QuickReview

Erasing their initial gains, Indian markets settled in negative territory with Nifty and Sensex breaching their psychologically crucial 9150 and 29,400 mark, respectively. The equity benchmarks made a positive start and traded in fine fettle in early deals taking support from the International Monetary Fund’s (IMF) report on Fiscal Monitor which highlighted that India has recorded quite an impressive growth performance in recent years which makes room for tax broadening efforts by the government. The report also stated that India returned to fiscal consolidation in the fiscal year 2016-17 largely due to the near-elimination of fuel subsidies and enhanced targeting of social benefits, notwithstanding the impact of demonetization. Separately, after witnessing a decline in the month of February, the share of Foreign Portfolio Investments (FPI) in domestic capital markets through participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by SEBI to curb inflow of illicit funds.

Selling crept in after deputy governor of RBI SS Mundra’s stated that the Indian government and the Reserve Bank of India had not yet reached an agreement on a new plan to clean up the record troubled debt accumulated at the country’s lenders. Further, RBI’s monetary policy committee cited upside risks to inflation arising from price pressure excluding food and fuel as the main reason for keeping its policy rate unchanged, according to minutes of its April meeting released. The six-member monetary policy committee (MPC), which aims to bring down inflation to 4% in the medium term, maintained its hawkish stance on inflation, with most members expressing concern over upside risks to core inflation. Meanwhile, Fitch’s report raised concerns that RBI’s updated prompt corrective action (PCA) rules can potentially impact more than half of the NPA-laden state-run banks. It said that more than half of stateowned banks would breach at least one of the new thresholds, mainly owing to high NPLs, based on their latest financial reports.

The broader indices ended in green; the BSE Mid cap index was up by 0.01%, while Small cap index was up by 0.22%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 2.34%, Energy up by 0.80%, Telecom up by 0.39%, Utilities up by 0.32% and Power up by 0.30%, while FMCG down by 1.00%, Healthcare down by 0.81%, Metal down by 0.75%, Basic Materials down by 0.48% and IT down by 0.44% were the top losing indices on BSE. (Provisional)

The report stated that the RBI's PCA framework suggests a greater willingness to regulatory action to address problems of struggling banks. However, it noted that the implementation of the new rules is only expected to be effective if it is matched by credible plans to address banks' significant asset quality issues and capital shortages. The report underscored that the central bank has tightened the thresholds for capital ratios, NPLs, profitability and leverage at which banks enter the PCA framework. It also said that this appears to be an acknowledgement of stressed assets and that more banks need regulatory intervention. It observed that the RBI has given itself greater discretion in terms of the measures it can use to intervene in banks once they fall under the PCA framework.

Fitch further said that PCA was previously viewed as an extraordinary step which the central bank avoided but the same is set to change now. It also noted that under the previous framework, the central bank’s powers were restricted to bank lending but the scope for possible regulatory actions has been broadened under the amended framework and added that it remains uncertain to what extent the RBI will use the tools.

The CNX Nifty ended at 9119.30, down by 17.10 points or 0.19% after trading in a range of 9088.75 and 9183.65. There were 15 stocks advancing against 36 stocks declining on the index. (Provisional)


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Jainam Research was incorporated in 2003 with the vision to be the most preferred organization providing all financial services across the country. The foundation is on "Value" Systems - "Value" addition to Corporate, Retails and HNI Individuals through superior Wealth Creation Practices.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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