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BofA-ML said improvement in bank liquidity may pull down lending rates by another 50 basis points by March 2013
Mumbai: Within a couple of days of the country's largest lender State Bank of India (SBI) announcing an interest cut, Bank of America Merill Lynch (BofA-ML) on Thursday said lending rates will come down further by 0.5% before March end, reports PTI.
"Improvement in bank liquidity should pull down lending rates by 50 basis points (bps) by March atop the 25-75 bps done," its India economist Indranil Sen Gupta said in a note.
SBI cut its minimum rate of lending or the base rate by 0.25% on Tuesday, citing the cash reserve ratio (CRR) cut the previous day by the Reserve Bank of India (RBI) by a similar quantum and ease in liquidity.
BofA-ML expects the RBI to cut the CRR by a further 0.5% in its third quarter policy review on 30th October, the note said, adding, the central bank may also infuse an additional liquidity of Rs1 lakh crore by March through open market operations (OMOs).
This is likely to push up the deposit growth to 16% from the present 14%, it said.
However, the softening of rates will not result in an uptick of credit growth as the rates will still continue to be elevated, the note said. "High lending rates will likely continue to soften loan demand to 15% by December from the current 16.7%," it added.
The lending rate cuts are, however, key to economic recovery, Sengupta noted, adding growth will pick up in the March quarter to the 6.5% from the current 5% once the lending rates come down by up to 0.50%.
Welcoming the recent reform measures like diesel price increase and foreign holding liberalisation, the BofA-ML note said.
Though they will help boost sentiment, the real impact of those will be felt in the medium-term, it added.
Uptrend paused; market may go sideways move until it finds a direction once again
Resuming trade after a day’s break, the market settled in the red for the second day on political concerns and unsupportive global cues. On Tuesday we had mentioned that the uptrend is likely to remain intact if the Nifty manages to hold itself above the previous day’s low of 5,586. Today the index traded below this level for the entire day. We may see now the uptrend taking a breather and we may now see days of sideways move until it finds a direction once again. A decline below 5,550 will further confirm sideways movement of the index. The National Stock Exchange (NSE) saw a lower volume of 75.27 crore shares and the advance decline ratio of 660:1123.
The market opened in the red on concerns about the stability of the UPA-2 (United Progressive Alliance-2) government at the Centre after its ally Trinamool Congress (TMC) on Tuesday evening decided to withdraw support to the government over the opening of FDI in multi-brand retail and hike in diesel prices.
The Nifty opened 63 points lower at 5,537 and the Sensex started off at 18,292, a cut of 204 points from its previous close. The benchmarks dropped to their lows in initial trade itself with the Nifty going to 5,535 while the low on the Sensex was its opening figure.
Select buying soon helped the indices recover from their lows. The upmove saw the market hitting its intraday high in late morning trade. The Nifty rose to 5,581 and the Sensex went up to 18,443. But profit booking at the highs led the indices lower in subsequent trade.
A weak opening of the European indices kept the domestic market under pressure in the second half of trade. The countrywide strike against the government’s reformist policies also worried investors.
With the political uncertainty gaining momentum as the TMC ministers set to tender their resignations to the prime minister on Friday, the market settled in the negative for the second day, after a nine-day winning streak.
At the close, the Nifty fell 46 points to 5,554 and the Sensex settled 147 points down at 18,349.
Among the broader markets, the BSE Mid-cap index declined 0.65% and the BSE Small-cap index fell 0.53%.
BSE IT (up 0.84%); BSE TECk (up 0.73%) and BSE Fast Moving Consumer Goods (up 0.15%) ended higher while all other sectoral gauges were in the negative. They were led by BSE Metal (down 2.28%); BSE Capital Goods (down 1.94%); BSE Power (down 1.63%); BSE Oil & Gas (down 1.43%) and BSE Bankex (down 1.10%).
Ten of the 30 stocks on the Sensex closed in the positive. The key gainers were Bajaj Auto (up 2.31%); TCS (up 1.62%); ONGC (up 1.21%); Wipro (up 0.93%) and ITC (up 0.92%). The losers were led by BHEL (down 3.62%); GAIL India (down 3.58%); Coal India (down 2.99%); Sterlite Industries (down 2.80%) and Tata Steel (down 2.73%).
The top two A Group gainers on the BSE were—M&M Financial Services (up 6.70%) and HPCL (up 3.37%).
The top two A Group losers on the BSE were—TTK Prestige (down 5.99%) and GMR Infrastructure (down 5.45%).
The top two B Group gainers on the BSE were—NEPC India (up 20%) and Indian Acrylics (up 19.50%).
The top two B Group losers on the BSE were—Gennex Laboratories (down 13.16%) and GSL Nova Petrochemicals (down 13.07%).
Out of the 50 stocks listed on the Nifty, 14 stocks settled in the positive. The major gainers were BPCL (up 2.53%); Bajaj Auto (up 2.14%); TCS (up 1.24%); ONGC (up 1.19%) and Ranbaxy Laboratories (up 1.06%). BHEL (down 4.27%); GAIL (down 3.89%); Reliance Infrastructure (down 3.39%); Tata Steel (down 3.13%) and Axis Bank (down 3.11%) settled at the bottom of the index.
Markets across Asia closed weak on renewed signs of slowdown from within the region. The HSBC China Flash PMI for September stood at 47.8 from 47.6 in August. The index has remained below 50 for the 11th straight month. Also, Japanese exports fell 5.8% in August from a year earlier while manufacturers' sentiment hit its lowest since February. Meanwhile, The Bank of Japan boosted its asset buying and lending scheme by 10 trillion yen on Wednesday and its governor Masaaki Shirakawa warned economic recovery could get delayed by six months.
The Shanghai Composite tumbled 2.08%; the Hang Seng tanked 1.20%; the Jakarta Composite declined 0.64%; the KLSE Composite dropped 1.25%; the Nikkei 225 contracted by 1.57%; the Straits Times fell 0.42%; the Seoul Composite dropped 0.87% and the Taiwan Weighted settled 0.70% lower.
At the time of writing, the key European indices were down between 0.44% and 0.79% and the US stock futures were in the negative.
Back home, foreign institutional investors were net buyers of shares totalling Rs1,049.18 crore on Tuesday while domestic institutional investors were net sellers of equities amounting to Rs670.72 crore.
Glenmark Pharmaceuticals’ US arm Glenmark Generics Inc has received tentative approval from the US health regulator for its generic Rizatriptan Benzoate tablets used for treating migraine attacks. The tablets, which are generic version of drug major Merck's Maxalt tablets, achieved sales of $315 million for the 12 month period ending June 2012, as per IMS Health data. Glenmark rose 1.55% to settle at Rs418 on the NSE.
Gitanjali Gems, India’s leading branded jewellery producer and retailer, has created a separate e-commerce site for each of its existing brands in order to sell ornaments customized. Besides, the company has tied up with leading online jewellery retailers including myntra.com, yebhi.com and jabong.com to tap their lakhs of customer base. The company has targeted Rs150 crore worth of business by March 2013 from a mere Rs5 crore now. The stock closed at Rs342.95 on the NSE, down 2.28%.
Lanco Infratech has informed the BSE that Udupi Power Corporation, a subsidiary of the company, has declared the commercial operation of its 600 MW unit II located at Udupi in Karnataka. The 1200 MW thermal power project is based on imported coal. With this development, both the units of the project are in operation. Lanco Infratech tumbled 6.52% to settle at Rs12.90 on the NSE.