We had mentioned in Friday’s closing report that Nifty, Sensex were stalling on lower volumes. The major indices of the Indian stock markets suffered a minor correction on Monday and closed around 0.40% lower than Friday’s close. Investors were cautious and the lower NSE volumes were a clear indicator of uncertainty. The trends of the major indices in the course of Monday’s trading are given in the table below:
Key equity indices traded in the red, as selling pressure was witnessed in automobile, information technology (IT) and healthcare stocks. The BSE market breadth was slightly tilted in favour of the bears -- with 1,463 declines and 1,254 advances and 202 unchanged. On the NSE, on Monday, there were 702 advances, 889 declines and 264 unchanged.
The indices opened on a flat note with a slightly negative bias following cues from negative Asian markets. The markets also traded with apprehension as caution prevailed ahead of a speech by Federal Reserve Chair Janet Yellen later in the week. Further, investors were seen cautious after government's decision on Saturday to appoint economist and banker Urjit R Patel as the next Governor of the Reserve Bank of India (RBI). Moreover, a weak rupee and lower crude oil prices also dented investors' sentiments.
The appointment of Urjit Patel, as Governor of the Reserve Bank of India (RBI), effective from September 4, has naturally raised expectation among those who were critical of outgoing Governor Raghuram Rajan for not easing enough the monetary policy by cutting rates. Since January 2015, Rajan has cut lending rates by 150 basis points (bps) but banks have only cut their interest rates by about half of that. To nudge banks to transfer the benefit of rate cuts, Rajan even announced a shift to the marginal cost of lending (MCLR) regime. Under the MCLR, banks need to consider their marginal cost of funds, or the cost incurred on incremental deposits across different maturities, to decide on interest rates. However, three months after the MCLR was launched on April 1 this year, banks have hardly cut their lending rates. A lower interest rate regime is likely to push the bulls in the stock market forwards.
Coal India on Saturday said its workers will go on a nationwide strike on September 2 to protest against divestment and strategic sale in the nationalised coal sector and to demand higher social security measures and recruitment drives. "We have received a communication of strike notice... for general strike on September 2. Efforts are being made for conciliation process," the coal behemoth said in a regulatory filing to the Bombay Stock Exchange. "In case they resort to strike, it will affect product and dispatch of coal," the filing said. Almost five lakh bank union staff and officers are likely to join the strike on September 2 to protest against the "anti-people policies of the Modi government and labour reforms". Last year, coal production took a substantial hit due to a strike called by trade unions. Major trade unions like INTUC, AITUC and CITU called for the one-day strike. The unions demanded a stop to the disinvestment of Coal India, end to allocations of coal blocks to private companies, settlement of wage revision of contact workers as well as outsourcing workers working in the coal industry. Coal India shares closed at Rs335.40, up 0.36% on the BSE on Monday.
In the Goods and Services Tax (GST) regime, exporters will need to adapt as exemptions and incentives given to promote exports will go away, a senior official said on Saturday. "Once the GST is implemented, exemptions and incentives will have to go away," Union Commerce Secretary Rita Teaotia said. "Philosophically, we are moving in the direction of creating a conducive policy and economic environment for everybody across the country and that is the intention of the GST law," she added. "In a fragmented system, there could be cascading effect of taxes and local duties, but to offer a level-playing field "the requirement of incentives and subsidies would certainly need to be moderated and modified". But that would be taken up subsequently," she said at a session organised by the Engineering Export Promotion Council, Federation of Indian Export Organisations, Assocham, Bengal Chamber of Commerce and Industry and Gem Jewellery Export Promotion Council. She said the GST law would be framed by the Revenue Department, not by the Commerce Department. With the rupee stabilising against the dollar, there would be no need to promote exports or have excess protectionism on the part of the government in its policies and the stock market would also not give higher weightage to exports over domestic sales in the case of listed companies.
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: