While the trend is down, Nifty can rally if it closes above 7,050
We had mentioned in Friday’s closing report that Nifty, Sensex were not yet out of the woods and that a disappointing budget may push the market down again. The budget has disappointed many investors and the Sensex and Nifty briefly touched their 52-week lows during Monday’s trading. The trends of the major indices during Monday’s trading are given in the table below:
Union Budget announcements, combined with negative Asian cues, and a dip in the rupee value depressed the Indian equity markets during Monday’s trading. During the Union Budget announcements, the Sensex plunged to a fresh 52-week low of 22,494.61. However, recovered somewhat but still closed negative. Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) touched a fresh 52-week low of 6,825.80 points.
The Union Budget 2016-17 was tabled in parliament on Monday. Finance Minister Arun Jaitley disclosed the government's spending on the rural sector, infrastructure and agricultural credit. Market analysts observed that many investors were disappointed, as they expected some out-of-box reform measures. The budget did provide some measures, as well as healthy fiscal deficit targets. Roads and infrastructure sector were supported. There were some big negatives like the hike in securities transaction tax and lower bank recapitalisation levels. Big positives include the hike in rural spending and infrastructure sector.
Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Finance Minister Arun Jaitley on Monday allocated Rs25,000 crore towards their recapitalisation in the next fiscal. He made the announcement while presenting in parliament the union budget proposals for the next fiscal. Jaitley plans to provide Rs25,000 crore capital each in the current and next fiscal years, while Rs20,000 crore would be provided during 2017-18 and 2018-19. In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs12,000 crore towards recapitalisation of public sector banks (PSBs).
The Rs25,000 crore this year are being provided through three tranches. Around 40% of the amount is to be given to those banks which require support, and all PSBs will be brought to the level of at least 7.5% core capital by the end of fiscal 2016, the finance ministry has said.
In the second tranche, 40% of capital is to be allocated to State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank. The remaining 20% is to be allocated to the banks based on their performance during the three quarters in the current year. As per estimates, PSBs would need additional capital of up to Rs240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis. The quantum of exposure of Indian scheduled banks in terms of gross non-productive assets, re-cast loans and write-offs was Rs9.5 lakh crore as of September last year.
Meanwhile, the government on Sunday named former comptroller and auditor general Vinod Rai has been named the first chairman of the Banks Board Bureau that will give advice on how to recover the bad loans of state-run banks. The members co-opted to the board are Anil K Khandelwal, former chairman of Bank of Baroda, HN Sinor, former joint managing director of ICICI Bank and Rupa Kudwa, former managing director and chief executive of Crisil. Taking the first step towards a holding company structure for state-run banks, the government, in August last, announced the setting up of a Banks Board Bureau (BBB) that will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with stressed assets.
In line with budget proposals’ rural focus, Prime Minister Narendra Modi said he dreams of seeing farmers' income getting doubled by 2022 when the country completes 75 years of its independence. Addressing a big gathering of farmers during a 'Kisan Rally' here, Modi highlighted various initiatives undertaken by his government for their welfare. Stating that while most of the governments wait for the election year to roll out welfare schemes and incentives for farmers, Modi said it was not the case with his National Democratic Alliance government. "Farmers look towards governments after God and it is imperative on us to ensure that the farmers are looked after well," the prime minister said. "I exhort all state governments that they should work on the road map before them and I am sure that my dream and your dream will succeed," he added. The prime minister also described the service, manufacturing and agriculture sectors as the backbone of the Indian economy.
The central parity rate of the Chinese currency renminbi, or the yuan, weakened 114 basis points to 6.5452 against the US dollar on Monday, according to the China Foreign Exchange Trading System. In China's spot foreign exchange market, the yuan is allowed to rise or fall by two percent from the central parity rate each trading day, Xinhua reported. The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
Tokyo stocks rose from the off on Monday as hopes following the G20 finance ministers' agreement to help stabilise markets, coupled with the yen's comparative weakness spurred an upbeat market mood.
Aditya Birla-led UltraTech Cement on Sunday announced acquisition of Jaiprakash Associates Ltd's cement plants, with total capacity of 22.4 million tons per annum (mtpa), for Rs.16,500 crore (about $2.5 billion), situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka. "The assets will give the company access to the newer markets of Satna, UP East, Himachal Pradesh and coastal Andhra where it does not have a presence as of now. Upon consummation of the proposed transaction, the company's cement capacity will stand augmented to 90.7 mtpa (current 68.3 mtpa)," UltraTech said. It was unclear whether this agreement includes two cement plants of Jaiprakash Associates, the purchase of which were cancelled last week by UltraTech owing to lack of necessary approvals. UltraTech had on Friday said it was calling off that deal with Jaiprakash Associates, which has been selling its assets in a bid to reduce debt and improve its balance sheet. UltraTech Cement closed at Rs2,767.05, down 0.30% on the BSE.
The top gainers and top losers of the major indices are given in the table below:
The closing values of the major Asian indices are given in the table below: