Fear of China’s central bank tightening its lending norms pulled down Indian markets
Indian markets remained highly volatile today, following weak global cues and on concerns that China’s central bank may tighten its lending norms. At the end of the day, the Sensex declined 12 points from the previous day’s close at 17,474 while the Nifty closed at 5,222, down 4 points.
During the day, Asia’s key benchmark indices in Singapore, Japan, Taiwan, China and Hong Kong fell by between 0.25%-2.93%. However, indices in South Korea and Indonesia rose by between 0.04%-0.24%.
As per media reports, China’s banking regulator said that the nation’s banks were expected to grant fewer loans this year than in 2009. China’s top banking regulator Liu Mingkang said that Chinese banks were expected to issue about 7.5 trillion yuan ($1.1 trillion) in new loans in 2010 compared to 9.59 trillion yuan in 2009, reflecting efforts to rein in bank lending which nearly doubled last year.
On Tuesday, 19 January 2010, the Dow Jones gained 116 points while the S&P 500 and the Nasdaq Composite were up 14 points and 32 points respectively.
However, in premarket trading, the Dow was trading 40 points lower.
As per US media articles, a report released by a US mayors’ group showed that unemployment rates would likely peak in most US cities in 2010, but it would be many more years before jobless rates hit their lows of the last decade.
At 11 hrs IST, the Sensex was trading at 17,548, up 62 points from the previous day’s close, while the Nifty was up 18 points at 5,243.
At 14:00 hrs IST, the Sensex was trading up 2 points at 17,488 while the Nifty declined 1 point to 5,224.
Telecom stocks rose on reports that the latest policy flip-flop by the department of telecom could drive away foreign players from the upcoming 3G auctions by denying them a fair chance of getting 2G spectrum, vital for offering a full complement of telecom services. Absence of foreign players means Indian bidders could get the scarce airwaves for lesser amounts. Bharti Airtel was up 3% while Reliance Communications and Idea Cellular rose 1% each.
State-run oil marketing stocks declined on reports that the Government has no plans to raise fuel prices as of now. Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation were down 4%, 5% and 2% respectively.
Unitech, Omaxe, Indiabulls Real Estate and Phoenix Mills fell by between 0.23%-2.87% on reports that the finance ministry had rejected a proposal by the department of industrial policy and promotion that had suggested dropping the mandatory three-year lock-in for foreign direct investment in the real-estate sector, affecting the prospects of the sector raising overseas funds. DLF was down 2%.
NTPC rose 1% after the power minister said that the government would float a request for qualification for two ultra mega-power projects in 15 days.
NTPC reportedly plans to set up a new entity for acquiring coal assets abroad to secure fuel supplies for its coal-based plants. A proposal in this regard is likely to be moved before the company’s board soon.
During the day, finance minister Pranab Mukherjee said that the government was taking steps to contain inflation and the situation is constantly under review.
The finance ministry’s chief economic advisor Kaushik Basu said that food prices will cool off in one-two months and inflation will turn around.
On Tuesday, commerce and industry minister Anand Sharma said that economic growth will accelerate this year. He demanded greater access for goods into China, which comes amid a widening trade gap between the two countries. He also called for more Chinese direct investment in India, especially in infrastructure, while noting that Indian firms are already present in China.
In 2008, trade between India and China grew rapidly to $50 billion, making the neighbour India’s second-largest trading partner, but this figure fell back to $43 billion in 2009 as global trade declined.
Yesterday, we had said that Indian markets would stay down and they did so. Tomorrow, we expect them to continue to stay down.