The indices may dip in the early part of the week but the trend is up
Yesterday we mentioned that the current upmove on the indices seems to have matured, but we still see the upmove continuing for a few more sessions. Today the market opened much higher and moved further up. After hitting the intra-day high, the indices started giving up gains, however managed to stay above yesterday's close. The positive economic data from the US helped the positive momentum on the bourses.
S&P BSE Sensex opened at 26,420, while CNX Nifty opened at 7,905. Sensex hit a low of 26,383 after reaching a high of 26,508 and closed at 26,420 (up 59 points or 0.23%) while Nifty moved from 7,929 to 7,900 and closed at 7,913 (up 22 points or 0.28%). The NSE recorded a volume of 80.51 crore shares. India VIX fell 0.81% to close at 13.6200.
The Reserve Bank of India (RBI) in its Annual Report for the year ended 30 June 2014, released after trading hours on Thursday, 21 August 2014, said that the acceleration in consumer price inflation (CPI) in July 2014 driven by a vegetable price spike which indicated that the upside risks to the RBI's disinflationary glide path of taking CPI inflation to 8% by January 2015, are still prevalent. To secure a sustainable growth of at least 7% over the medium term, microeconomic policies that improve activity levels and productivity will be needed so that they can work in tandem with a supportive macroeconomic regime with a reasonably positive real interest rate, low inflation, moderate CAD and low fiscal deficit, the RBI said.
There was also news that the Finance Minister Arun Jaitley approved a draft Cabinet note, which proposes to create a holding company structure for state-run banks towards meeting their long-term capital needs.
Bank stocks were in focus today with the notification from the RBI, which has tightened norms related to lending against shares. In a notification issued on Thursday, 21 August 2014, the RBI said that non-banking finance companies (NBFCs) with asset size of Rs 100 crore and above, shall maintain loan to value (LTV) ratio of 50% with regard to lending against shares. RBI further said that lending against shares by NBFCs will be restricted to Group 1 securities as collateral for loans of value more than Rs 5 lakh. The RBI also said that all NBFCs with asset size of Rs100 crore and above shall report on-line to stock exchanges, information on the shares pledged in their favour by borrowers for availing loans. Union Bank (3.71%) was among the top four gainers in the ‘A’ group on the BSE while SBI (2.26%), HDFC Bank (1.80%), Axis Bank (0.92%) were among the top six gainers in the Sensex 30 pack. HDFC (1.91%) was among the top two losers among the Sensex 30 stocks.
Suzlon Energy (4.49%) was among the top two gainers in the ‘A’ group on the BSE. It was in the news for its German unit Senvion SE, supplier of offshore turbines, for being in talks with Japanese companies about forming a potential joint venture.
Bhushan Steel (4.97%), hit its new 52-week low, and was the top loser in the ‘A’ group on the BSE.
US indices closed in the positive on Thursday.
A report in the US yesterday showed fewer Americans than expected applied for unemployment benefits last week. Data yesterday also showed existing home sales rose last month, to the most since September, while the Conference Board's gauge of the economic outlook for the next three to six months increased 0.9%. Separately, the Markit Economics preliminary index of US manufacturing in August jumped to the highest level since April 2010.
Except for the Jakarta Composite (0.14%), KLSE Composite (0.20%) and Nikkei 225 (0.30%), all the other Asian indices closed in the positive. Taiwan Weighted (1.37%) was the top gainer.
European indices were trading in the negative while US Futures were trading marginally in the red.