Stocks
Nifty, Sensex under pressure – Tuesday closing report
Nifty is in a downtrend, which will get over if it closes above 7,655 
 
We had mentioned in Monday’s closing report that Nifty, Sensex were on an uptrend again and that a close below 7,700 would be the first sign of a trend change. The major indices of the Indian markets suffered a sharp correction of more than 2%. The trends of the major indices in Tuesday’s trading are given in the table below:
 
 
Negative global cues, along with profit booking and weak crude oil prices, plunged the Indian equity markets on Tuesday. In the process, the key indices of the Indian equity markets closed the day's trade deep in the red. The BSE market breadth favoured the bears -- with 1,620 declines and 888 advances. In contrast, the indices had closed in the positive territory on Monday. It had ended Monday's trade with a gain of 0.51%, while the Nifty inched up 0.59%.
 
India's central bank on Tuesday cut its key lending rate by 25 basis points (bps) in line with overall expectations, comforted by the central government's fiscal prudence steps, a cut in interest rates on small savings rates and moderate inflation. The repurchase rate, or the short-term lending rate for commercial banks on loans taken from the central bank (Reserve Bank of India), stands lowered to 6.5% from 6.75%. The reverse repurchase rate, or the short-term borrowing rate, has been adjusted upward to 6% from 5.75%. The changes were carried out in the monetary policy for the current fiscal announced by Reserve Bank of India (RBI) Governor Raghuram Rajan on Tuesday. Among the two key instruments to directly regulate the money flow in the system, the cash reserve ratio (CRR), which is the quantum of liquid funds against deposits which commercial banks have to hold, has been left unchanged at 4%. But the minimum daily maintenance of CRR has been cut to 90% from 95%. Similarly, the statutory liquidity ratio, or the value of specified securities which commercial banks have to subscribe to, stands at 21.25%, effective from April 2. The central bank had last cut its short-term lending rate in September by 50 basis points to 6.75%. Cumulatively, 2015 saw the monetary authority cut the repo rate by 1.25%. "Inflation has evolved along the projected trajectory and the target set for January 2016 was met with a marginal undershoot," Rajan said in his policy statement, adding that retail inflation was expected to decelerate modestly and remain around 5%  in this fiscal. "After two consecutive years of deficient monsoon, a normal monsoon would work as a favourable supply shock, strengthening rural demand and augmenting the supply of farm products that also influence inflation," he said. "On the other hand, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook could impart a downside to growth outcomes going forward," he said. He said the growth projection for 2016-17 was being retained at 7.6%. The RBI governor declared that the stance of monetary policy will remain accommodative.
 
US stocks ended lower amid falling oil on Monday, as the country's factory orders came out weaker than expected. Oil prices reversed early gains to end sharply lower on Monday and continued to head lower on Tuesday.  The central parity rate of the Chinese currency renminbi, or the yuan, weakened 78 basis points to 6.4663 against the US dollar on Tuesday, according to the China Foreign Exchange Trading System. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day, Xinhua news agency reported. The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
 
Shares in Shanghai gained on Tuesday, while Hong Kong stocks dropped. The benchmark Shanghai Composite Index ticked up by 0.97%, or 29.05 points, at 3,038.58 at mid-day, while the Shenzhen Composite Index, rallied by 1.75%, or 33.36 points, at 1,934.88. In Hong Kong, the blue chip Hang Seng Index tumbled by 1.40%, or 286.68 points, at 20,212.24. China stocks rose on Tuesday as a series of government support measures and improving economic data revived investors' appetite for riskier assets, though thin trading volume indicated that confidence remains fragile. Hong Kong shares dropped because they were pulled lower by the energy sector against a backdrop of slumping crude oil prices and mixed messages on the outlook for U.S. monetary policy.
 
The Nikkei average plunged to close at its lowest level in about seven weeks on Tuesday, with the market beaten by risk-averse selling in the wake of the firmer yen, setbacks on Wall Street and falling crude oil prices.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of major Asian indices are given in the table below:
 
 

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Amitabh Bachchan denies links with 'Panama Papers' firms
Mumbai: Megastar Amitabh Bachchan on Tuesday denied links with any of the offshore shipping companies in which he is supposed to be a director according to the leaked "Panama Papers".
 
"I do not know any of the companies referred to by Indian Express - Sea Bulk Shipping Company Ltd, Lady Shipping Ltd, Treasure Shipping Ltd and Tramp Shipping Ltd," the actor said in a statement. 
 
"I have never been a director of any of the above stated companies," he said. "It is possible that my name has been misused." 
 
Amitabh added: "I have paid all my taxes, including on monies spent by me overseas. Monies that I have remitted overseas have been in compliance with law, including remittances through LRS, after paying Indian taxes. 
 
"In any event the news report in Indian Express does not even suggest any illegality on my part."
 
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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RBI rate cut: What are the notable changes for banks
For banks, there is a headroom to cut both deposit and lending rates by 25bps during the first quarter, says Religare in a report 
 
The Reserve Bank of India (RBI), in its first bi-monthly credit policy review on Tuesday for FY2016-17 has cut repo rate by 25 basis points (bps) to 6.50%. The central bank also decided to narrow the policy rate corridor from 100 bps to 50 bps by reducing the marginal standing facility (MSF) rate by 75 bps and increasing reverse repo rate by 25 bps. This will make banks to cut both deposit and lending rates, says a research note.
 
In the report, Religare Capital Markets Ltd, says, "There is headroom for banks to cut deposit rates post the recent cut in small savings rates. We expect banks to cut both deposits and lending rates by about 25bps in first quarter of FY17. The cut in lending rates would hurt net interest margins (NIMs) due to the lead and lag impact."
 
The central bank is also issuing a fresh discussion paper by this month end on large borrowers meeting their funding requirements from markets. "While this will hurt loan growth, it will ease the burden of banks to lend to large corporates or groups, and aid liquidity and asset quality management," the report says.
 
The Reserve Bank, in its policy review, decided to rationalise branch authorisation policy. This is positive, Religare says, adding, the RBI is aiming to redefine the branch authorisation policy to promote financial inclusion and provide flexibility on the choice of delivery channel. This includes, other permissible methods of outreach like extension counters, satellite offices, mobile branches and ultra-small branches as against only branches currently. The move would enable banks to meet their financial inclusion targets at lower investments, it said.
 
The RBI will put out a discussion paper for on-tap licensing and licensing differentiated banks, such as custodian banks and banks concentrating on wholesale and long-term financing. Religare feels that this move is positive for non-banking financial companies (NBFCs) looking to convert into a bank such as L&T Finance Holdings, in addition,  long-term financing banks can ease infrastructure funding pressures of the banking system.
 
The central bank has also deferred implementation of countercyclical capital buffers (CCCB) as it believes that its activation is not necessary at present. "This has come as a relief for public sector unit (PSU) banks, especially mid-size PSU banks which are struggling to maintain adequate core equity capital as per Basel III norms," Religare says.
 
The RBI will put out a concept note on P2P lending, which has shown robust growth in last one year and will issue final guidelines and framework on regulating P2P lending in consultation with market regulator Securities and Exchange Board of India (SEBI).
 
To keep a tab on BCs and strengthen their infrastructure, the RBI has requested the Indian Banks Association (IBA) to initiate a certification or training programme. This would enable BCs to go beyond deposit and remittance and execute tasks like delivery of financial products.
 
The RBI will issue a framework for credit counsellors who can act as facilitators between entrepreneurs and the formal financial system. These counsellors will not only assist micro, small and medium enterprises (MSME) in preparing project reports but will also aid banks in making informed decisions.
 

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COMMENTS

B. Yerram Raju

1 year ago

Credit counselling for MSMEs would help create trust in the sector for banks to increase their risk appetite.
RBI should also focus on some of the delivery channels of the banks that have stigmatized the small industry borrowers as high risk clients and ensure corrections.

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