Nifty may be headed below 7,700
We had mentioned in Tuesday’s closing report that Indian benchmarks Nifty and Sensex are headed lower and that Nifty decline will end, only if it goes above 7,860. Major indices in the domestic stock markets fell further on Wednesday after last day’s trading and the losses at the end of the day were 0.50%-0.68%. The trends in the major indices during the day’s trading are given in the table below:
Geo-political tensions, coupled with caution over upcoming macro-data and quarterly results, depressed Indian equity markets on Wednesday. Initially, the bellwether indices opened on a flat-to-negative range in the wake of two days of consecutive falls, disappointing domestic macro-data and global uncertainties. Nevertheless, both the indices soon pared their losses on the back of short-covering, value-buying and positive Asian markets' close.
Finance Minister Arun Jaitley's comments on Tuesday regarding further reforms in the infrastructure sector also buoyed sentiments. However, the benchmarks soon receded, as investors were spooked over the rising geo-political tensions in the Far East following North Korea's reported testing of a thermo-nuclear device. In addition, volatility was stoked by the upcoming US non-farm payroll figures scheduled for release on late Thursday India time, along with minutes of latest FOMC (Federal Open Market Committee) meeting. Both the events could provide indications on future US rate hikes. Besides, caution prevailed over the upcoming domestic macro-data on industrial output, retail inflation and the third-quarter earnings results which start coming in from 12th January.
The Indian cabinet on Wednesday approved setting up of a credit guarantee fund for loans of Micro Units Development & Refinance Agency Ltd or MUDRA Bank. The fund is expected to guarantee loans worth more than Rs1 lakh crore to micro and small units in the first instance, the government said. The cabinet meeting chaired by Prime Minister Narendra Modi also gave its nod to covert MUDRA Ltd to MUDRA Small Industries Development Bank of India (MUDRA SIDBI Bank), a wholly owned subsidiary of SIDBI.
Finance Minister Jaitley in his budget speech for 2015-16 had said MUDRA Bank and a credit guarantee fund was proposed to be set up with a refinance corpus of Rs20,000 crore and Rs3,000 crore, respectively. Prior to the launch of the Pradhan Mantri MUDRA Yojana (PMMY) in April 2015, MUDRA Ltd was set up as a subsidiary of SIDBI in March 2015. The Reserve Bank of India (RBI) has allocated Rs20,000 crore and the first tranche of Rs5,000 crore has been received by MUDRA as refinance. The credit guarantee fund is set up to guarantee loans given under Pradhan Mantri Mudra Yojana. This is done to reduce the credit risk to banks, non-banking finance companies and others who are member lending institutions. The guarantee would be provided on portfolio basis to a maximum extent of 50% of amount in default in the portfolio.
The union cabinet also approved a proposal for taking up Hybrid Annuity based Public Private Partnership (PPP) model under Namami Gange Programme that aims to reform the wastewater sector in the country. "Hybrid Annuity based PPP model will now be adopted to ensure performance, efficiency, viability and sustainability," an official statement said.
"In this model, a part of the capital investment (upto 40%) will be paid by government through construction linked milestones and the balance through an annuity over the contract duration upto 20 years," it added.
Keeping in view the specialised nature of this model and to scale it up in future on sustainable basis, the government is establishing a Special Purpose Vehicle (SPV) to plan, structure, procure concessionaires, monitor implementation of such PPP projects and develop market for treated waste water through appropriate policy advocacy under overall guidance of National Mission for Clean Ganga (NMCG). The SPV will be established under the Indian Companies Act 2013 for providing required governance framework and enabling functional autonomy. The SPV would enter into a Tripartite Memorandum of Agreement (MoA) with participating state governments and concerned Urban Local Bodies (ULBs) for taking up individual projects.
India's largest textile park will come up in Telangana's Warangal town, Chief Minister K Chandrasekhar Rao announced on Wednesday. He said the proposed 'cotton-to-garment' park will be set up in an area of 2,000-3,000 acres. The Warangal district collector has already released Rs100 crore for acquiring land for the textile cluster. The chief minister said that while textile parks in different parts of the country like Solapur, Tirupur and Surat were engaged in manufacturing specific categories of garments, the proposed park in Warangal will cover all segments.
Coming back to Indian stock markets, here are Wednesday’s top gainers and losers on major indices:
Chinese stocks closed higher on Wednesday, with the benchmark Shanghai Composite Index up 2.25%, at 3,361.84 points. The smaller Shenzhen index gained 2.24% to close at 11,724.88 points, Xinhua reported. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, jumped 2.14% to close at 2,468.37 points.
Japanese shares ended the trading Wednesday lower as sentiment was hit by the hydrogen bomb test conducted by North Korea and by the yen's advance against the US dollar. The 225-issue Nikkei Stock Average shed 182.68 points, or 0.99%, from Tuesday at 18,191.32, a roughly 11-week closing low, Xinhua reported. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 15.87 points, or 1.05%, to 1,488.84. The decliners were led by oil and coal products, mining and miscellaneous products sessions. The turnover was about 2,430.7 billion yen ($20.48 billion).
The closing values of major Asian indices are given in the table below: