Stocks
Nifty, Sensex may try to stabilise and rally – Weekly closing report
If Nifty reclaims 8400, bulls may push it higher
 
We had mentioned in last week’s closing report that Nifty, Sensex were to head higher and that Nifty may head towards 8,700 as long it stays above 8,400. During the week’s trading Nifty fell below 8,400 and closed at 8,299.95. The weekly trends of the major indices are given in the table below:
 
 
On Monday, a sharp fall in July trade data, the rupee value, and poor monsoon rainfall and diminishing hopes of a rate cut disappointed investors, leading to the major indices falling sharply. 
 
On Tuesday, a lowered growth forecast, the widening monsoon deficit and diminishing hopes of a rate cut, coupled with a massive slide in the Chinese stock markets and its effect on the yuan were the major concerns for investors. The slide in rupee value negated the advantage of lower commodity prices like crude oil. The Indian currency closed at Rs.65.32 to the US dollar.
 
Other worries for investors stem from the fact that the Reserve Bank of India (RBI) has shown its reluctance to cut interest rates even after current data showed inflation being under control.
 
Another dampener in Tuesday's trade was global credit ratings agency Moody's decision to lower India's growth forecast for this year by 50 basis points to 7%.
 
However, sector-wise, healthy buying was observed in information technology (IT), capital goods, consumer durables, automobile and technology, entertainment and media (TECK) stocks on Tuesday.
 
On Wednesday, according to analysts, recovery in rupee value and the Chinese markets supported the domestic exchanges in the day's trade. Concerns had grown about the Chinese markets, after various efforts by the government, brokerage firms and mutual funds were not able to arrest the fall. Some estimates point out that the continuous slide in the exchanges of the $10-trillion strong economy has wiped off 40%-45% of the entire stock value in the last three months. 
 
The Chinese situation had brightened hopes of a delay in the US rate hike, the decision for which will come in the Federal Open Market Committee (FOMC) meet slated for September 16-17. Higher interest rates in the US are expected to lead the FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
 
Other concerns such as rupee depreciation were off-set by gains in export-oriented stocks like information technology (IT), pharma and fast moving consumer goods (FMCG). These sectors benefit from the Indian rupee's devaluation and fall in commodity costs.
 
A continuous slide in the Chinese markets, strain in US stocks and uncertainty over the recommendations on retrospective tax subdued investor sentiments in the Indian equity markets on Thursday.
 
On Thursday, the markets were also anxious to know the government's position on the recommendations made by the Justice AP Shah committee on minimum alternate tax (MAT).  The MAT issue on capital gains tax is expected to impact the margins of foreign funds. This might impact the inflows from the FPIs into Indian stock markets.  At the same time, the rupee touched a new two-year low in the intra-day trade at Rs65.69 to a dollar -- the lowest since September 2013. It later closed at Rs65.56. Sector-wise, all 12 indices of the BSE except for fast moving consumer goods (FMCG) and healthcare stocks closed in the red. Sensex was down 1.16% and Nifty 1.44%.
 
On Friday, the downmove in the stock market continued. Heavy selling pressure was seen in realty, auto, capital goods, banking, power and oil and gas sectors, following a massive decline in the US markets on Thursday and Asian markets on Friday. However, marginal positive buying trend was observed in healthcare sector. Major indices fell by nearly 1%. The reasons for the downmove include weak global market cues, persistent weakness of the rupee and developments in China, from where signs are emanating of a further slowdown and devaluation of the yuan.
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 

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UTI AMC shareholders demand appointment of Chairman, directors
During the AGM of UTI AMC, the All India UTI (AMC) Shareholder Association raised six issues, including appointment of a Chairman as the position has been lying vacant for over four years, appointment of woman directors and nominee directors on the Board
 
All India UTI (AMC) Shareholder Association, which has been formed to protect interests of non-institutional and small shareholders of the UTI Asset Management Company Ltd (UTI AMC) has insisted on enforcement of corporate governance, greater transparency and also full disclosures as prescribed under the new company law. 
 
According to Vishwas Utagi, Convener of the Shareholders’ Association, during the 12th Annual General Meeting (AGM) of UTI AMC, they raised six issues, including appointment of a Chairman as the position has been lying vacant for over four years, appointment of woman directors and nominee directors on the Board.
 
He said, the Association also insisted on disclosures which have been prescribed under the new Companies Act and the rules made thereunder, which are effective from 1 April 2014. The Shareholders have sought full disclosure on Remuneration Policy of this UTI AMC, which is mandatory under Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Shareholders have also sought disclosure of the Performance Evaluation Report of Independent Directors that has to be disclosed before their re-appointment as mandated under the new Code for Independent directors which is prescribed under schedule IV (section 149(8) of Companies Act 2013, Mr Utagi added.
 
Another area, where even market regulator SEBI has been raising concerns, is increasing the cost of salary to the top management in AMCs. Mr Utagi said, the Association too raises concerns during the AGM on the rising costs of salary being paid to top management of UTI AMC during 2014-15.

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Bank union opposes payment bank license to private sector
According to AIBEA, if private payment banks are allowed to collect deposits, then the cost of banking services as well as interest rates on small and priority sector loans in public sector banks will go up
 
All India Bank Employees' Association (AIBEA) has opposed the licensing to payment banks in private sector, calling it an anti-public move. "The Government is trying to dilute public sector banks (PSBs) and boost private banks in the name of banking reforms," says CH Venkatachalam, General Secretary of AIBEA, in a release.
 
Earlier this week, the Reserve Bank of India decided to grant "in-principle" approval to 11 entities to set up payment banks. These includes, Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd, Cholamandalam Distribution Services Ltd, Department of Posts, Fino PayTech Ltd, National Securities Depository Ltd, Reliance Industries Ltd, Dilip Shantilal Shanghvi (Sun Pharma), Vijay Shekhar Sharma, Tech Mahindra Ltd, and Vodafone m-pesa Ltd.
 
Mr Venkatachalam said, "At a time when Government wants to ensure that banking services reach everyone, the need is to strengthen and expand public sector banks which alone take care of the concerns of the common people and their banking needs; as such private banks are being encouraged. We know the history of such small private banks in the past which have cheated public savings and vanished from the scene. In India savings of the people is an import of the social capital and one cannot afford to play with this. Public savings should be fully regulated and controlled by the Government in the interest of our country and the common masses."
 
According to the bank employees' union, the move (to allow payment banks) is nothing but a direct attempt to boost private sector banking and to minimise the role of public sector banks as well as to reduce the market share of public sector banks. "Public sector banks in India have done yeoman services in changing the banking profile and transforming from class banking to mass banking. Our economy was saved from global financial and banking crisis only due to the reason that our banks were insulated by Government-controlled public sector banks. Our strong banking regulations helped in sparing the country from a major financial disaster. But in the name of banking reforms the Government is trying to dilute PSBs and boost private Banks," it said.
 
Raising the issue of increasing non-performing assets (NPAs) in PSBs, Mr Venkatachalam said, "Because of the colossal private corporate delinquency, public sector banks are saddled with huge bad loans of nearly Rs6 lakh crore. As on 31 March 2015, there are 7,035 cases of wilful defaulters, involving bad loans of Rs58,792 crore.  The bad loans in the banks as on 31 March 2015 has risen to Rs2,97,000 crore excluding another Rs4,03,004 crore of bad loans of 530 corporates shown as rescheduled and restructured loans under the corporate debt restructuring (CDR) scheme. Bad loans struck up in top 30 borrower accounts of PSBs as on 31 March 2015 is Rs1,21,162 crore." 
 
"All these are private corporate companies who had defaulted (PSBs) and it is strange that RBI and Government want to encourage the very same private sector to start banks? Further, because of the thinning of margins and profits, Banks are striving hard to fetch low cost deposits like savings and current account and every bank is concentrating on current account and saving account (CASA) deposits as the main route to improve their cost of funds and profitability."
 
"CASA Deposits/ Savings deposits of the common people are like oxygen to the Banks. At this juncture, giving license to such private companies to start payment banks whose main job is to collect savings and current account deposits will cut at the roots of the public sector banks," Mr Venkatachalam added.   
 
According to AIBEA, if these private payment banks are allowed to gather the savings and current deposits of the people which are of low cost, public sector banks will be deprived the same and hence the cost of banking services in PSBs will increase and rate of interest on small loans and priority sector loans will also go up. Allowing such Banks in the private sector is anti-public sector banks and in the long run anti-people, it said.
 
Opposing the move, the bank employees union has urged the government to stop this policy. AIBEA said it will write letters to the RBI Governor and Finance Minister requesting them not to go ahead with the policy.  

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COMMENTS

Anurag

2 years ago

Banks have been looting general public while creating cartel and keeping Savings Interest at lower. The new step might help general public.

Meenal Mamdani

2 years ago

It is funny that the union opposes a sound financial move simply to assure the primacy of their employers, the PSBs. This is a very short sighted stand.

The new payment banks will not be giving any loans, unless it is in the form of an overdraft on the accounts. Yes, eventually many years down the line, they may make links with existing banks to offer loans for their consumers. Even then, the size of the loan could be capped so there would be less risk.

The need of the hour is greater financial inclusion for the masses. Bank employees cannot ask for continued protection for their jobs by damping down competition.

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