Nifty, Sensex may move sideways – Tuesday closing report

Nifty does not go below 8,720, it is likely to move up to 8,800


In Monday’s closing report we had mentioned that NSE’s CNX Nifty may move up marginally and if it stays above 8,750, it will move up to 8,900. Today, although the benchmark opened higher, it went below 8,750 and closed around that level. The market awaited the RBI’s sixth bi-monthly monetary review. On the announcement of the reduction in the statutory liquidity ratio (SLR) and the repo rate kept unchanged, resulted in a fall in the index, however, it managed to recover.  The index did not remain in the black for long and was pulled into the red for the remaining session.
S&P BSE Sensex opened at 29,217, while Nifty opened at 8,823. Sensex moved to a low of 28,900 after hitting a high of 29,253 and closed at 29,000 (down 122 points or 0.42%) while Nifty moved from the high of 8,837 to the low of 8,727 and closed at 8,757 (down 41 points or 0.46%). NSE recorded a volume of 104.52 crore shares. India VIX fell 2.93% to close at 19.8075.
The RBI kept its main lending rate viz. the repo rate, unchanged after the monetary policy review and announced a reduction in the SLR of scheduled commercial banks by 50 basis points with effect from the fortnight beginning 7 February 2015 in order to create space for banks to expand credit to the productive sectors so as to support investment and growth in the economy. The RBI has decided to replace the export credit refinance facility with the provision of system level liquidity with effect from 7 February 2015.
The current account deficit is estimated to come down to 1.3% of GDP in the fiscal ending March, helped by moderation in petroleum and gold imports, the Reserve Bank said today.
Eight core industries comprise nearly 38% of the weight of items included in the Index of Industrial Production (IIP). The combined index of Eight Core Industries stands at 172.7 in December, 2014, which was 2.4% higher compared to the index of December, 2013. Its cumulative growth during April to December, 2014-15 was 4.4%.
There was a media report that the government plans to raise Rs5,000 crore ($809 million) by selling additional units of a fund made up of shares in public sector companies.
Videocon Industries (8.79%) was the top gainer in ‘A’ group on the BSE. It announced petroleum discovery in Brazil by a consortium. This is the largest discovery of petroleum by the consortium this year. The consortium includes Petrobras, BPCL and Videocon.
JSW Energy (8.97%) was the top loser in ‘A’ group on the BSE. The stock hit its 52-week high at the beginning of the session after posting an improved December 2014 quarter result yesterday. However, this was followed by the stock falling gradually throughout the session and closed lower.
Sesa Sterlite (6.23%) was the top gainer in Sensex 30 pack. Chinese iron ore futures rebounded on Tuesday and were on course for their second-biggest daily gain this year.
Axis Bank (4.95%) was the top loser in Sensex 30 stock.
On Monday, US indices closed in the green.
Asian indices showed mixed performance. Shanghai Composite (2.45%) was the top gainer while Nikkei 225 (1.27%) was the top loser.
The Reserve Bank of Australia (RBA) cut its key policy rate by a quarter percentage point after a monetary policy review today, 3 February 2015, citing weak inflation and a stronger-than-desired currency. The move put the cash rate at a historic low of 2.25%.
European indices were trading higher. US Futures too were trading in the green.
Greece's new government has proposed ending a standoff with its international creditors by swapping its outstanding debt for new growth-linked bonds.


Rush to set up payment banks and small banks

Big companies like Reliance, Airtel, Vodafone and Aditya Birla Nuvo are eyeing payment banks just when Modi Jan Dhan scheme claims to have brought everyone into the formal banking fold


A clutch of hopefuls, ranging from the biggest to smaller make up the list of 113 applications, 72 for starting small finance banks and 41 for payment banks. The biggies for starting a payment bank include Reliance Industries Ltd (RIL), Aditya Birla Nuvo Ltd (ABNL), Bharti Airtel and Vodafone. In a statement, Reserve Bank of India (RBI), said the External Advisory Committees (EACs) for small finance banks and payment banks will be chaired by Usha Thorat, its former Deputy Governor and Dr Nachiket Mor, Director, Central Board of the Reserve Bank.
Among the others to have applied for payment bank, include Oxigen Services India Pvt Ltd, Paytm, Citrus Payments, Cholamandalam Investment and Finance Co, Videocon Industries, Future Group and Vakrangee Ltd. In addition, there are some little known names also in the ring, including Kolkata-based Village Financial Services and Chennai-based GI Technology as well as Manish Khera, managing director and chief finance officer of mobile money service provider YTS, who has applied for a small finance bank in his individual capacity. SKS Microfinance, DHFL, IIFL Holdings Ltd (formerly India Infoline), and UAE Exchange are among those who want to set up small banks.
A payment bank can accept a maximum deposit of Rs1 lakh from an individual customer, but cannot lend. A small bank can do everything that a normal bank can do but at least 50% of its loan portfolio should constitute loans and advances of less than Rs25 lakh. Interestingly, public sector banks have opened about 12.4 crore accounts as on 30 January 2015, under the Pradhan Mantri Jan Dhan Yojana (PMJDY), thus bringing the unbanked population into banking system. These customers can not only use banking, but also are receiving free RuPay debit card and insurance coverage, in addition to Rs5,000 overdraft facility, six month after successful use of banking facility.
Will payment banks ride on the new needs of this vast population who have just brought into the banking fold by helping them with payments and funds transfer? After all, payment banks would enable payments and remittances to migrant labours, low-income households and small businesses, who find regular banking cumbersome. 
According to TM Bhasin, chairman of Indian Banks’ Association (IBA) and chairman and managing director, Indian Bank, currently around Rs10,300 crore are lying in around 12.4 crore accounts opened under the PMJDY, that too when about 73% of accounts have zero balance. He said, around Rs52,000 crore would be distributed during the next fiscal year through these accounts, and activation of these accounts will happen once the subsidies starts flowing that would make the system automatically viable.
The deadline for submission of applications for niche banks – payment banks and small finance banks ended on Monday after being extended by the RBI. 
While most of the smaller players have applied on their own, several biggies had preferred the partnership route. For example, while RIL had collaborated with State Bank of India (SBI), ABNL, has preferred to tie up with its sister concern Ideal Cellular from the Aditya Birla group.
RIL will be the promoter of the payment bank joint venture, with SBI, the country's largest lender holding up to 30%. "The Payment Bank will leverage SBI's nationwide distribution network and risk management capabilities along with the substantial investments made by RIL in its retail and telecom businesses. It will deploy state-of-the-art technology, build scalable infrastructure and create extensive branch and business correspondent network in order to provide last-mile access and intuitive user experience to all sections of society," RIL, said in a release.
In a statement, Vodafone said, "Vodafone has filed an application with RBI for the payments bank licence. We are exploring options for partnerships. We are keen and remain highly committed to building a financially inclusive business model leveraging our telco strengths and experience in the mobile payments space, fully aligned with the government and RBI's vision."
ABNL said it will hold 51% stake in the payment bank to be named as Idea Payments Bank Ltd, in the joint venture with Idea holding the rest.
It must be noted that the Aditya Birla group company earlier last year failed to get a license for a bank from RBI. 


BP writes off $790 million of its investment in KG-D6 block

BP said it wrote off $790 million from its investment in eastern offshore KG-D6 block and another $830 million in impairment charges without explaining the reasons


BP Plc said it has written down $790 million from its investment in eastern offshore KG-D6 block and another $830 million in impairment charges, following lower-than-expected gas price hike.
Announcing its fourth quarter and full 2014 results, BP said, “Third quarter, fourth quarter and full year 2014 include write-offs of $375 million, $20 million and $395 million respectively relating to block KG D6 in India.”
“In addition, impairment charges of $395 million, $20 million and $415 million for the same periods were also recorded in relation to this block,” it added.
The company did not explain the reasons for the write-off and impairment charges.
BP in 2011 bought 30% interest in Reliance Industries Ltd (RIL)’s eastern offshore KG-D6 as well as 20 other oil and gas exploration blocks for $7.2 billion. Bulk of this was for the producing block of KG-D6 and gas discovery area of NEC-25.
The government had on 18th October last year approved a new formula for pricing of all domestic gas. The rate, when the formula comes into effect from 1st November, would be $5.61 per million British thermal unit as against current $4.2.
The price is lower than $8.4 approved by the previous UPA government and general expectation of a rate around $6.5 after some deductions from that price.
Both BP and RIL have been advocating market—linked gas pricing and had initiated arbitration against the government for not revising rates from the due date of 1 April 2014.
The $4.2 per mmBtu rate, fixed in 2007, was for the first five years of production from KG-D6 fields. KG-D6 fields started gas output from April 1, 2009.
RIL is the operator of KG-D6 block with 60% stake while the balance 10% is with Canada’s Niko Resources.



R Balakrishnan

2 years ago

Given that the present spot price is under $4 per mmbtu, the scale of manipulation seems to be mind boggling.

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