Bank stocks hammered

Key benchmark indices dropped after Federal Reserve Bank of St. Louis President James Bullard said on Friday, 20 September 2013, that the Federal Reserve could make a small stimulus reduction at its next meeting in October 2013. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year. The market sentiment was also hit by the Reserve Bank of India's hawkish tone at its latest monetary policy review on Friday, 20 September 2013.

The barometer index, the 30-share S&P BSE Sensex, fell below the psychological 20,000 mark. The 50-unit CNX Nifty fell below the psychological 6,000 level. Both these indices closed at their lowest levels in almost a week. The Sensex fell 362.75 points or 1.79%, up close to 75 points from the day's low and off about 299 points from the day's high. The market breadth, indicating the overall health of the market, was negative.

The Sensex has fallen 745.68 points or 3.61% in two trading sessions from a recent high of 20,646.64 on Thursday, 19 September 2013. The barometer index had lost 1.85% on Friday, 20 September 2013, after the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review. The Sensex has gained 1,281.24 points or 6.88% in September 2013 so far (till 23 September 2013). The Sensex has risen 474.25 points or 2.44% in calendar 2013 so far (till 23 September 2013). From a 52-week high of 20,739.69 on 19 September 2013, the Sensex has declined 838.73 points or 4.04%. From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 2,452.25 points or 14.05%.

Coming back to today's trade, interest rate sensitive banking and realty stocks extended Friday's losses as the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013, and as the central bank retained hawkish tone at the latest monetary policy review. Most pharma stocks declined.

The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month September 2013 series to October 2013 series. The September 2013 F&O contracts expire on Thursday, 26 September 2013.

The S&P BSE Sensex lost 362.75 points or 1.79% to settle at 19,900.96, its lowest closing level since 17 September 2013. The index declined 437.41 points at the day's low of 19,826.30 in mid-afternoon trade. The index fell 63.90 points at the day's high of 20,199.81 in early trade.

The CNX Nifty lost 122.35 points or 2.04% to 5,889.75, its lowest closing level since 17 September 2013. The index hit a low of 5,871.40 in intraday trade. The index hit a high of 5,989.40 in intraday trade.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,314 shares fell and 1,000 shares rose. A total of 142 shares were unchanged.

The BSE Mid-Cap index lost 1.27% and the BSE Small-Cap index lost 0.58%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 1779 crore, lower than Rs 2550.88 crore on Friday, 20 September 2013.

Among sectoral indices on the BSE, the S&P BSE Bankex (down 4.41%), the S&P BSE Realty index (down 4.33%), the S&P BSE Capital Goods index (down 3.28%), the S&P BSE PSU index (down 2.56%) and the S&P BSE Power index (down 2.26%), underperformed the Sensex.

The S&P BSE Oil & Gas index (down 1.78%), the S&P BSE FMCG index (down 1.26%), the S&P BSE Auto index (down 1.16%), the S&P BSE Healthcare index (down 0.74%), the S&P BSE Metal index (down 0.01%), the S&P BSE Teck index (up 0.43%), the S&P BSE IT index (up 0.91%) and the S&P BSE Consumer Durables index (up 2.36%), outperformed the Sensex.

Among the 30-share Sensex pack, 22 stocks fell and rest of them rose.

Bank stocks extended Friday's losses as the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013, and as the central bank retained hawkish tone at the latest monetary policy review.

PSU banking major State Bank of India dropped 5.39% to Rs 1652.45, with the stock extending intraday losses. The state-run bank on 18 September 2013 said it has raised the base rate by 10 basis points (bps) to 9.8% per annum (pa) from 9.7% and the benchmark prime lending rate by 10 bps to 14.55% from 14.45% with effect from 19 September 2013. The bank also raised interest rates for retail term deposits.

Among other PSU bank stocks, Union Bank of India (down 9.51%), Bank of Baroda (down 6.95%), Oriental Bank of Commerce (down 6.87%), Bank of India (down 6.82%), Punjab National Bank (down 6.24%), UCO Bank (down 5.29%), Allahabad Bank (down 4.83%), Central Bank of India (down 4.33%) and Dena Bank (down 4.21%), edged lower.

Among private bank stocks, Yes Bank (down 8.15%), ICICI Bank (down 4.39%), IDBI Bank (down 3.94%), Kotak Mahindra Bank (down 3.83%) and Federal Bank (down 3.22%), edged lower.

HDFC Bank declined 2.55% to Rs 642.25, off the day's low of Rs 633.

Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, said in a statement on Friday, 20 September 2013, that the calibrated withdrawal of the exceptional measures that the RBI had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market will provide a boost to growth, reduce the financing distortions that are emerging in the market and reduce the strain on corporate and bank balance sheets. In an attempt to tame high inflation, which is partly fueled by the currency's recent slump against the dollar, the RBI raised its policy rate viz. the repo rate after a monetary policy review on Friday, 20 September 2013. The central bank, however, eased some of the liquidity-tightening measures it had taken to prop up the rupee. The RBI reduced the rate at which it lends funds to banks through its marginal standing facility, by three quarters of a percentage point, to 9.5%. The marginal standing facility is an emergency funding facility for banks. On net, the RBI's latest measures will reduce the cost of bank financing substantially while allowing the RBI to take an appropriately precautionary stance on inflation, Dr. Rajan said on Friday, 20 September 2013.

The minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said after a monetary policy review. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.

"Over the next few weeks, together with the government, we will take a close look at corporate distress and bank NPAs to see how we can accelerate the process of resolution", Dr. Rajan said. The RBI Governor said that the RBI has implemented the full liberalization of bank branching, with some safeguards to encourage inclusion.

Indian Overseas Bank fell 2.74% to Rs 46.20 after the bank's board approved raising capital by way of issue of equity shares to the Government of India. The announcement was made after market hours on Friday, 20 September 2013. Indian Overseas Bank's (IOB) board of directors at a meeting held on Friday, 20 September 2013, approved raising capital by way of issue of equity share of Rs 10 each at a price determined under Sebi (ICDR) Regulations of 2009 to the Government of India (GoI) to the extent of capital infusion by GoI under preferential allotment. The board has also accorded its approval to the bank to issue equity shares of Rs 10 each to Qualified Institutional Buyers (QIBs) by way of private placement for the shortfall in Tier I capital requirements of Rs 2100 crore assessed by the bank and the capital infusion by GoI. The exact amount of government support for infusion of capital and the quantum and size of issue for QIP will be known in due course, IOB said.

Interest rate sensitive realty stocks extended Friday's losses triggered by the Reserve Bank of India, in a surprise decision, raising its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013, and as the central bank retained hawkish tone at the latest monetary policy review. Purchases of both residential and commercial property are largely driven by finance.

DLF (down 6.46%), Indiabulls Real Estate (down 5.7%), HDIL (down 5%), Prestige Estates Projects (down 4.68%), Unitech (down 4.64%), Godrej Properties (down 3%), Peninsula Land (down 2.72%), Phoenix Mills (down 2.49%), Sunteck Realty (down 1.5%), Oberoi Realty (down 1.17%), D B Realty (down 0.97%), Sobha Developers (down 0.77%) and Parsvnath Developers (down 0.38%), edged lower.

Most pharma stocks declined. GlaxoSmithKline Pharmaceuticals (down 2.25%), Biocon (down 2.12%), Sun Pharmaceutical Industries (down 1.38%), Wockhardt (down 1.2%), IPCA Laboratories (down 0.94%), Cipla (down 0.83%), Cadila Healthcare (down 0.26%), Aurobindo Pharma (down 0.13%) and Divi's Laboratories (down 0.01%), edged lower.

Lupin declined 1.56% to Rs 854.10. A block deal of 3.21 lakh shares was executed in the counter on BSE at Rs 860.50 per share at 11:42 IST. Lupin announced after market hours today, 23 September 2013, that it has signed a strategic co-promotion agreement with US-based Onset Dermatologics, LLC (Onset) that grants Lupin exclusive rights to promote Onset's Locoid Lotion (hydrocortisone butyrate 0.1%) to Pediatricians in the US. Locoid is the most highly prescribed mid-potency steroid brand in the US. Locoid Lotion is a corticosteroid indicated for the topical treatment of mild to moderate Atopic Dermatitis in patients 3 months of age and older, Lupin said in a statement.

The addition of Locoid Lotion will enable Lupin to strengthen its US Brand business and expand its product portfolio for the US Pediatrics segment. "We are very pleased with the addition of Locoid Lotion to our brand portfolio and are committed to bring meaningful products to the US Pediatric community," said Vinita Gupta, CEO, Lupin Pharmaceuticals Inc. and Lupin. Bob Moccia, President of Onset Dermatologics said: "This partnership will give pediatricians greater opportunity to utilize Locoid lotion in their patients while Onset maintains its focus on promoting Locoid to the dermatology community. We are confident that Locoid will continue to be the most prescribed mid-potency steroid brand in the US".

Glenmark Pharmaceuticals dropped 5.78% to Rs 494.80. The company announced during market hours today, 23 September 2013, that Glenmark Generics Inc., USA, a subsidiary of Glenmark Generics, has been granted final abbreviated new drug approval (ANDA) from the USFDA for Desoximetasone Ointment USP, 0.25% their generic version of Topicort by Taro Pharmaceuticals USA Inc and shipping will commence immediately. According to IMS Health sales data for the 12 month period ended June 2013, Desoximetasone Ointment garnered annual sales of about $40 million. Desoximetasone Ointment is indicated for the relief of the inflammatory and pruritic manifestations of corticosteroid responsive dermatoses.

Dr Reddy's Laboratories rose 1.06%, with the stock reversing intraday losses.

Ranbaxy Laboratories rose 0.87% to Rs 336.35, with the stock recovering after Friday's slide triggered by the company receiving a Paragraph IV certification notice of filing from Watson Laboratories Inc. for a generic version of Absorica. Shares of Ranbaxy Laboratories had declined 4.86% to settle at Rs 333.45 on Friday, 20 September 2013, after the company after market hours on 19 September 2013, said it received a Paragraph IV certification notice of filing from Watson Laboratories Inc. for a generic version of Absorica.

Ranbaxy Laboratories Inc. (RLI), a wholly owned subsidiary of Ranbaxy Laboratories, has received a Paragraph IV Certification Notice of filing from Watson Laboratories Inc. of an Abbreviated New Drug Application (ANDA) to the US Food and Drug Administration (FDA) for a generic version of Absorica (isotretinoin capsules), a product that is licensed from Cipher Pharmaceuticals Inc. (Cipher) of Mississauga, Ontario.

RLI and Cipher intend to vigorously defend Absorica's intellectual property rights and pursue all available legal and regulatory pathways in defense of the product, RLI said in a statement. Absorica is currently protected by two issued patents listed in the FDA's Approved Drug Products List (Orange Book), which expire in September 2021. RLI shall take appropriate actions in response to the Paragraph IV notice letter, and FDA approval of the ANDA shall then be governed by the Hatch-Waxman Act, RLI said. Absorica was approved by the FDA in May 2012, and granted a three-year market exclusivity period, which expires in May 2015.

Hotel Leelaventure rose 1.71% to Rs 14.85 after the company said its board of directors has approved preferential allotment of equity shares to Rockfort Estate Developers -- a promoter group entity.

Mahindra & Mahindra (M&M) fell 1.37% to Rs 860.65. M&M announced during trading hours today, 23 September 2013, the appointment of Dr. Pawan Goenka to the board of the company as Executive Director (ED), the first ED appointment to the board since 1992. He will now be designated Executive Director and President (Automotive & Farm Equipment Sectors), with effect from today, 23 September 2013.

Shares of public sector oil marketing companies (PSU OMCs) declined as the weakness of the rupee against the dollar could raise cost of crude oil imports. HPCL (down 5.71%), BPCL (down 3.22%) and Indian Oil Corporation (down 1.67%), edged lower. PSU OMCs meet most of their crude oil requirements through imports.

Meanwhile, as per media reports that the government has turned cautious about the proposal to increase diesel prices sharply and raise them every week as top Congress leaders and the party's allies are worried about the political fallout of such a move ahead of the festive season and elections in five states.

Yes Bank clocked a highest turnover of Rs 108.44 crore on BSE. State Bank of India (Rs 85.08 crore), Tata Motors (Rs 68.59 crore), Tech Mahindra (Rs 62.40 crore) and ICICI Bank (Rs 56.16 crore), were the other turnover toppers on BSE in that order.

SMS Techsoft (India) reported highest volume of 2.25 crore shares on BSE. Reliance Power (53.07 lakh), Cals Refineries (38.95 lakh), SpiceJet (37.14 lakh) and Yes Bank (32.04 lakh), were the other volume toppers on BSE in that order.

The government has no plan to offer a special window to lend funds at lower interest rates to companies in some sectors, economic affairs secretary Arvind Mayaram said on Monday, 23 September 2013. Mayaram was reacting to media reports that the finance ministry and the central bank are considering a selective stimulus plan that involved a debt-buying programme for eligible companies.

In the foreign exchange market, the rupee dropped against the dollar. The partially convertible rupee was hovering at 62.60, weaker than its close of 62.23/24 on Friday, 20 September 2013. Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit.

Mayaram today, 23 September 2013, said that the intrinsic value of the rupee is between 58 and 60 against the dollar. He said that overseas speculators were partly responsible for the sharp fall in the currency over the past few months. He also said that a fall in bulk diesel demand this fiscal year will save the government about $1 billion. Mayaram said he expected foreign direct investment (FDI) flows of about $36 billion for the fiscal year ending on 31 March 2014 if the current trend continues. Net FDI in the first quarter of this fiscal year rose to $9 billion from $5 billion in the same period a year earlier, Mayaram said last week.

Bond prices declined sharply as the government is likely to unveil its market borrowing programme via dated securities for the period from October 2013 to March 2014 today, 23 September 2013. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.8505%, higher than its close of 8.5777% on Friday, 20 September 2013. Bond prices and bond yields are inversely related.

European stock markets edged lower in choppy trade on Monday, 23 September 2013, after a round of mixed euro-zone purchasing managers' indices. Key benchmark indices in UK and Germany were down 0.12% to 0.31%. France's CAC 40 was flat.

Chancellor Angela Merkel's conservative party won Germany's election, but finished just short of an absolute majority. Merkel's Christian Democrats (CDU) bloc took about 42% of the vote. But she might yet have to seek a grand coalition with the Social Democrats (SPD) who won about 26% of the vote. Mrs Merkel's preferred liberal partners have not made it into parliament. The results showed that the liberal Free Democrats (FDP) won only 4.8%, leaving it with no national representation in parliament for the first time in Germany's post-war history. Mrs Merkel has made clear she would be prepared to work with the Social Democrats (SPD) in a grand coalition, as she did in 2005-09.

Preliminary euro-zone PMI data showed the manufacturing sector expanded less than expected in September. The composite PMI for the region, however, climbed to a 27-month high.

Asian stocks were mixed on Monday, 23 September 2013. Key benchmark indices in Indonesia, Hong Kong and Singapore were off 0.46% to 0.72%. Key benchmark indices in South Korea, China and Taiwan rose 0.19% to 1.33%. Japanese markets were closed for a holiday.

A Chinese manufacturing index rose to a six-month high in September, signaling that a rebound in the world's second-largest economy is gaining steam. The preliminary reading of 51.2 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics. The gauge was at 50.1 in August.

Trading in US index futures indicated that the Dow could gain 11 points at the opening bell on Monday, 23 September 2013. US stocks fell on Friday, 20 September 2013, after Federal Reserve Bank of St. Louis President James Bullard said that the Fed could make a small stimulus reduction at its next meeting in October. Bullard said tapering is more likely if the labor market continues to improve. The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013.

On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus. Kansas City Fed President Esther George on Friday, 20 September 2013, said markets were ready for reduced stimulus to begin, and the central bank's failure to follow through on expectations hurt its credibility on Wall Street.