Stocks
Nifty, Sensex to head higher – Weekly closing report
We had mentioned in last week’s closing report that Nifty, Sensex were overbought, but that there was no sign of weakness yet. On Thursday, we mentioned that the markets may rally a bit. On Friday, the markets rose sharply. Sensex was up by 363.98 points and Nifty by 135 points. The major indices of the Indian stock markets were bullish for most of the week, but were often struggling to rise higher – sometimes ending flat at the end of the day’s trading. On Friday, there was a strong rally and the major indices closed more than 1% higher than Thursday’s close. 
 
 
Apprehensions over global events subdued the Indian equity markets on Monday. The key indices closed the day's trade on a flat note, as heavy selling pressure was witnessed in capital goods and banking stocks. The equity markets had receded after they touched new intra-day highs in almost a year. On the NSE, there were 528 advances, 910 declines and 45 unchanged. However, global cues from the Asian markets were positive. The BSE market breadth was tilted in favour of the bears -- with 1,563 declines and 1,178 advances. 
 
The country's largest carmaker Maruti Suzuki India on Monday reported a 12.7% increase in its total sales in July, to 1,37,116 units as compared to 1,21,712 units sold in the same month last year. The company July posted its highest ever monthly domestic sales to 1,25,778 units, up 13.9% from 1,10,405 units sold in the year-ago month, the car maker said in a filing to BSE. In July, sales of mini segment cars fell by 7.2% to 35,051 units as compared to 37,752 units sold in July 2015. The company said its total passenger cars sales in the month grew by only 2.2% to 93,634 units as compared to 91,602 units sold in the corresponding month last year. Sales of utility vehicles soared by a whopping 151.3% to 17,382 units in July this year from 6,916 units in the corresponding month last year while sales of vans grew 24.1% to 14,748 units in July as against 1,887 units in the same month last year. Exports during the month increased marginally by 0.3% to 11,338 units as compared to 11,307 units in July last year, the carmaker said. The company’s shares closed at Rs4,869.80, up 2.41% on the BSE.
 
Negative global cues subdued the Indian equity markets during the mid-afternoon trade session on Tuesday as selling pressure was witnessed in metal and healthcare stocks. However, increased chances of a key economic legislation's passage during parliament's monsoon session and positive macro-economic data supported prices at lower levels. On the NSE, there were 411 advances, 1,033 declines and 46 unchanged. Banking stocks traded sideways to firm on some buying support. Most sugar sector stocks faced profit booking, while auto stocks held their initial gains. 
 
On Wednesday, in line with global cues from the Asian stock markets and on uncertainties regarding the passage of the GST (Goods and Services Tax) bill in the Rajya Sabha the major indices of the Indian stock markets suffered a correction of around 1%. Selling pressure was witnessed in automobile, capital goods and fast moving consumer goods (FMCG) stocks. The BSE market breadth was skewed in favour of the bears -- with 1,815 declines and 914 advances. On the NSE, on Wednesday, there were 423 advances, 1,178 declines and 243 unchanged.
 
Investors were watching the GST bill's passage after the union cabinet last week approved key changes in the proposed legislation. The amendments in the bill, scheduled to be moved by Finance Minister Arun Jaitley in the Rajya Sabha, were expected to sail through with the government scrapping the additional levy of 1% proposed earlier. Technically called the Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, it was proposed to delete Clause 18 of the original bill that intended to compensate the manufacturing states with 1% additional duty for a period of two years or more for revenue losses. The pan-India tax reform had been passed by the Lok Sabha but was stuck in the Rajya Sabha, where the government lacks a majority.
 
Profit booking, along with negative Asian indices and a weak rupee, subdued the Indian equity markets on Thursday. However, a fresh bout of buying support and short covering during the last hour of the day's trade saw the key indices closing on a flat-to-positive note. The BSE market breadth was tilted in favour of the bulls during the second half of the session, closing with 1,444 advances and 1,258 declines. On the NSE, on Thursday, there were 764 advances, 677 declines and 59 unchanged.
 
As India took a big leap towards a unified Goods and Services Tax (GST) regime across the country, with the upper house of parliament passing the relevant Constitution amendment bill on Wednesday, industry biggies and major think tanks said this transformational change is a win-win situation and hoped it would be implemented soon. Marie Diron, Senior Vice President, Sovereign Risk Group, Moody's Investors Service said, “The short-term credit implications of GST for the sovereign will be limited. In the medium term, GST is likely to have a positive impact on the economy and government revenues. We assume that GST will have no significant impact on inflation, in line with the revenue-neutral framework.” This development was found likely to be favourable for both FDI and FII (foreign institutional investors) to invest in India.
 
On Friday, the markets rallied as the central government had clearly shown that economic and fiscal reforms were well on their way. A strong green signal of a strong and able government in Delhi improved the optimism of businessmen and investors alike. On Friday, the major indices closed more than 1% higher than Thursday’s close, setting the stage of a bullish week.

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Kailash Auto Finance dropped from BSE indices

Based on SEBI directions and under provisions of rules, bye-laws and regulation of the Bombay Stock Exchange, Kailash Auto Finance Ltd (Exchange ticker – 511357) shall be suspended with effect from Tuesday, 9 August 2016. This stock will be dropped from the following indices including S&P BSE AllCap, S&P BSE Industrials, S&P BSE MidSmallCap and S&P BSE SmallCap.

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Government pegs inflation target at 4% for five years
The central government on Friday notified a 4% inflation target, plus or minus 2%, for the next five years under the monetary policy framework agreement with the Reserve Bank of India.
 
A notification tabled in the Lok Sabha fixed inflation target at 4% with upper tolerance level of 6%, while the lower limit could be fixed at 2%.
 
"In view of the powers conferred by Section 45ZA of the RBI Act, 1934, the central government, in consultation with the bank (RBI), hereby notifies the inflation target beginning from the date of publication of this notification and ending on March 31, 2021," the notification said.
 
The announcement is seen as an important strategy of the inflation-fight policy pioneered by the outgoing RBI Governor Raghuram Rajan.
 
The government and the RBI had in early 2015 entered into a monetary policy framework agreement, under which RBI would set the policy interest rates and aim to bring inflation below 6% by January 2016.
 
Against this backdrop, the central government had also amended the RBI Act through Finance Act, 2016. However, the inflation target was not mentioned.
 
The government has also started the process of setting up a Monetary Policy Committee. The MPC would be mandated to set the interest rate -- a practice now being done by the RBI.
 
The interest rates would be based on inflation target set up by the government and also agreed upon by the RBI.
 
However, according to media reports, some experts including former RBI Governor D. Subbarao have disfavoured fixing inflation target given the challenge to ensure financial stability.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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COMMENTS

MG Warrier

10 months ago

Great! There is no better way to rein in Reserve bank of India than giving a ‘TARGET’ to chase after clearly expressing the intention to remove all instruments from RBI Governor’s armoury.
Till 2008, to be more specific, till Centre started searching for an ‘obedient’ RBI Governor to succeed Dr Y V Reddy, despite expressions of dissent between GOI and RBI, the assertion of ‘ownership rights’ and encroachment into the sanctum sanctorum of the central bank by the former was never so blatant and transparent. The appointment of the Financial Sector Legislative Commission which concentrated more on clipping the wings of RBI rather than worrying about changes needed in the legislations needed to implement financial sector reforms consistent with the transformation of the global financial market during the last couple of decades almost sealed the possibility of a review of the role of RBI envisaged in the Preamble of the RBI Act in 1934.
RBI is still surviving, thanks to the inherent strength of the institution developed during its 75 years of existence and the willingness of RBI to resist pressure from GOI, under the able leadership of two successive governors. It is another matter that the memoirs of Duvvuri Subbarao(“Who Moved My Interest Rate?”) attracted media attention and the “Governor’s Overview”, a new chapter written into the Reserve bank of India Annual report 2014-15 by Raghuram Rajan was blacked out by both electronic and print media in August 2015.
M G WARRIER, Mumbai

RAVI RAM PV

10 months ago

Govt. & Corporates (in that order) manipulate the media & the data to gun for low interest rates.
Inflation rate: for CPI, improvement in the volume, reliability & validity of data is important. Most of the times we see the govt. tom-tom-ing that inflation is low but, reality has been the galloping inflation in essential items like pulses, milk. Which common home maker who actually buys day-to-day stuff accepts that inflation is low?
Cooked-up data is being bandied around to justify lowering of rates.
Does anyone care about the retired who have no option other than schemes like SCSS? Where will they generate income?? ULIPS??? or, scam ridden stock markets????

Bapoo Malcolm

10 months ago

+ or - 2% is not just 2%. It is a 100% spread, either way. Better to say 3% or 5%, and stick to it. The spread will bring in ad hocism. Has anyone dared say the economy will increase by 8%, + or - 2%?

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