Bank stocks soar on fresh measures by new RBI chief

Key benchmark indices surged and the rupee rose against the dollar after the new central bank Governor Raghuram Rajan announced plans late on Wednesday to bolster the financial industry and stabilize the rupee. The barometer index, S&P BSE Sensex, and the 50-unit CNX Nifty, both, settled at over three-week high. The Sensex jumped 412.21 points or 2.22%, up 132.74 points from the day's low and off 137.76 points from the day's high. The market breadth, indicating the overall health of the market, was strong. The Sensex fell below the psychological 19,000 mark, after regaining that mark in early trade.

Indian stocks gained for the second straight day today, 5 September 2013. The Sensex has garnered 745.10 points or 4.09% in two trading days from a recent low of 18,234.66 on 3 September 2013. The Sensex has gained 360.04 points or 1.93% in September 2013 so far (till 5 September 2013). The Sensex has declined 446.95 points or 2.3% in calendar 2013 so far (till 5 September 2013). From a 52-week high of 20,443.62 on 20 May 2013, the Sensex has fallen 1,463.86 points or 7.16%. From a 52-week low of 17,250.80 on 5 September 2012, the Sensex has risen 1,728.96 points or 10.02%.

Realty stocks jumped on renewed buying. IT stocks fell on profit booking as the rupee strengthened against the dollar. Bank stocks jumped after Rajan said that RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country and also said that there is need to reduce the requirement for banks to invest in government securities in a calibrated way so as to ensure the flow of credit to the productive sectors of the economy. Axis Bank jumped after the bank said its total direct and indirect exposure to the National Spot Exchange (NSEL) is insignificant and that the bank has adequate collateral to back these exposures.

PSU OMCs rose on firm rupee and as crude oil prices traded near one-week low. Metal and mining stocks extended Wednesday's gains triggered by a private survey showing growth in China's services sector hitting five-month high in August. Auto and capital stocks also participated in the rally.

The market sentiment was also boosted after the Lok Sabha on Wednesday, 4 September 2013, passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector.

In the foreign exchange market, the rupee strengthened against the dollar after the new head of the central bank on Wednesday, 4 September 2013, announced fresh steps to stabilize the currency and sought to reassure investors. The partially convertible rupee was hovering at 66, sharply higher than its close of 67.065/075 on Wednesday, 4 September 2013. Banks can swap dollars raised from foreign-currency deposits by overseas Indians for rupees with the central bank an annual interest of 3.5%, Reserve Bank of India Governor Raghuram Rajan said late on Wednesday. The RBI also doubled what banks can raise through overseas bonds and allowed them to hedge those dollars at a special rate with the RBI.

The market sentiment was boosted by data showing that foreign funds were net buyers of Indian stocks on Wednesday, 4 September 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 107.60 crore from the secondary equity markets on Wednesday, 4 September 2013, as per data from Securities & Exchange Board of India.

The S&P BSE Sensex jumped 412.21 points or 2.22% to settle at 18,979.76, its highest closing level since 14 August 2013. The index spurted 549.97 points at the day's high of 19,117.52 in early trade. The index rose 273.47 points at the day's low of 18,847.02 in mid-afternoon trade.

The CNX Nifty surged 144.85 points or 2.66% to 5,592.95, its highest closing level since 14 August 2013. The index hit a high of 5,625.75 in intraday trade. The index hit a low of 5,552.70 in intraday trade.

The total turnover on BSE amounted to Rs 2056 crore, higher than Rs 1938.81 crore on Wednesday, 4 September 2013.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,488 shares rose and 848 shares fell. A total of 138 shares were unchanged.

The BSE Mid-Cap index rose 1.69% and the BSE Small-Cap index rose 1.52%. Both these indices underperformed the Sensex.

Among the sectoral indices on BSE, the S&P BSE Bankex (up 9.3%), the S&P BSE Realty index (up 5.41%), the S&P BSE Consumer Durables index (up 4.54%), the S&P BSE PSU index (up 4.5%), the S&P BSE Capital Goods index (up 3.48%), the S&P BSE FMCG index (up 2.78%), outperformed the Sensex.

The S&P BSE Oil & Gas index (up 2.02%), the S&P BSE Power index (up 1.74%), the S&P BSE Metal index (up 1.16%), the S&P BSE Auto index (up 0.85%), the S&P BSE Healthcare (down 0.22%), the S&P BSE Teck index (down 2.19%), the S&P BSE IT index (down 2.95%) underperformed the Sensex.

Among the 30-share Sensex pack, 21 stocks rose and rest of them fell.

Index heavyweight and cigarette maker ITC jumped 3.74%.

Reliance Industries rose 1.02% to Rs 858.

PSU OMCs rose on firm rupee and as crude oil prices traded near one-week low. HPCL (up 2.68%), BPCL (up 6.64%) and Indian Oil Corporation (up 6.94%) gained.

The firmness in rupee eased concerns about increasing costs of importing oil. PSU OMCs import about 70-75% of their crude oil needs and rely heavily on foreign currency borrowings, which largely remain unhedged. The recent sharp fall in rupee had heightened concerns about increased costs of importing oil.

US crude oil futures fell 1.21% at $107.23 per barrel on Wednesday.

In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.

Capital goods pivotals rose on renewed buying. Shares of L&T gained 4.08%.

Bhel surged 8.24%.

NTPC was down marginally by 0.04%. The stock turned ex-dividend today, 5 September 2013, for a total dividend of Rs 2 per share for the year ended 31 March 2013. This includes a special dividend of Rs 1.25 per share.

Rural Electrification Corporation (REC) rose 3.33% after the company said during market hours today, 5 September 2013, that REC Transmission Projects Company (RECTPCL) a 100% subsidiary of REC has transferred its wholly owned subsidiary, namely Kudgi Transmission (KTL) incorporated for development of Transmission System required for evacuation of power from Kudgi TPS (3 x 800 MW in Phase-I) of NTPC to L&T Infrastructure Development Projects, the successful bidder selected through Tariff Based Competitive Bidding Guidelines for Transmission services issued of Ministry of Power, Government of India. RECTPCL has received an acquisition price of Rs 15.19 crore from L&T Infrastructure Development Projects towards acquisition of KTL along with its all assets and liabilities.

GAIL (India) fell 1.54% as the stock turned ex-dividend today, 5 September 2013, for a final dividend of Rs 5.60 per share for the year ended 31 March 2013.

Power Grid Corporation of India shed 1.14%. The stock turned ex-dividend today, 5 September 2013, for a final dividend of Rs 1.14 per share for the year ended 31 March 2013.

Sadbhav Engineering rose 1.47% after the company said its step down subsidiary viz. Ahmedabad Ring Road Infrastructure (ARRIL), the special purpose vehicle incorporated for undertaking of improvement and widening of then existing 2 Lane Sardar Patel Ring Road around Ahmedabad City to 4 lane carriageway, has received sanction of Rs 632.90 crore including existing debt of Rs 379.90 crore towards securitization of the project. This means that the company has received sanction of additional facility over and above existing facility to the tune of Rs 253 crore out of securitization proceeds of surplus toll revenue of the project. Door to door tenure of the total facility including existing facility is for a period of 11 years and 9 months at interest rate of 11% per annum linked to base rate of Senior Lenders of the project facility. These proceeds will be used for part funding of ongoing BOT projects of the company. ARRIL is in the process of executing the financing documents with the lenders.

The project is on DBFOT (toll) basis with a concession period of 20 years including the construction period of 18 months with effect from 1 January 2007. Commercial Operation Date of the project was achieved on 31 May 2008.

Shares of state-run coal miner Coal India (CIL) jumped 7.02% to Rs 266.50 on reports that credit rating agency CRISIL has reaffirmed ratings on Coal India's bank facilities and short term debt program at AAA and A1+ respectively. CRISIL's corporate credit rating on CIL continue to reflect the strategic role that CIL plays in helping India meet its energy requirements. The ratings also factor in the company's near-monopoly status in India, healthy profitability levels, and strong financial risk profile. These rating strengths are partially offset by CIL's exposure to the influence of socio-political factors, to regulatory risks, and to constraints in the coal distribution and evacuation infrastructure in the coal mining industry in India.

CRISIL expects CIL to maintain its dominant market position in the domestic coal market and its healthy cash accruals and strong liquidity, over the medium term. The outlook may be revised to 'Negative' if CIL's market position deteriorates and its profitability declines significantly, most likely due to changes in India's coal policy.

Meanwhile, CIL has reportedly signed agreements to supply coal to 16 private power projects worth Rs 84500 crore with a generation capacity of over 14,000 megawatts. The coal ministry has expedited the signing of these pacts in view of the Centre's drive to revive investor sentiment by jumpstarting large stalled investments, reports suggest.

Union Minister of Coal Mr. Sriprakash Jaiswal said to the member of Parliamentary Consultative Committee attached to the Ministry of Coal today, 5 September 2013, that the Ministry of Coal is making concerted efforts to increase the availability of coal in the country. In spite of various constraints, Coal India has produced 31.67 million tonnes in the month of August 2013, registering a growth of about 11% over the corresponding period of the previous year. He said that during the period April-august, 2013, the cumulative coal production has been 167.32 million tonnes registering a growth of about 3% over the corresponding period of the previous year. The off-take to the power sector at 25.9 million tonnes in August 2013 from CIL indicates a growth of 5.5% over the corresponding period of the previous year. Similarly the cumulative off-take to the power sector during the period April-August 2013 at 140.6 million tonnes from CIL indicates a growth of 6.6% over the corresponding period of the previous year. Coal companies are putting their best of efforts in meeting the requirements of different sectors of the economy, he asserted.

Jaiswal said that the exploration is the critical activity in enhancing the coal reserve base. With the efforts of the various exploration agencies in the country, the geological coal resources have reached a level of 299 billion tonnes and lignite resources 43 billion tonnes. However, only about 41% of coal resources and 14% of lignite resources are in the proved category and remaining need to be brought into proved category. He said that the Government is laying emphasis to bring more and more area in proven category so that mining could be taken up in bigger way.

Auto stocks also participated in the rally. Tata Motors rose 1.37%. The company's total sales (including exports) of Tata commercial and passenger vehicles fell 30.93% to 49,611 units in August 2013 over August 2012. Total domestic sales fell 33.71% to 44,717 units in August 2013 over in August 2012. The company's sales from exports jumped 11.91% to 4,894 units in August 2013 over August 2012.

Ashok Leyland rose 1.97%. The company's total sales declined 24% to 7,139 units in August 2013 over August 2012. Ashok Leyland's sales of commercial vehicles excluding small commercial vehicle (SCV) Dost fell 25% to 4,939 units in August 2013 over August 2012. Sales of SCV Dost declined 22% to 2,200 units in August 2013 over August 2012.

Maruti Suzuki India gained 1.39%. The company's total sales spurted 61.2% to 87,323 units in August 2013 over August 2012. Domestic sales rose 51.6% to 76,018 units in August 2013 over August 2012. Exports spurted 180.9% to 11,306 units in August 2013 over August 2012.

Mahindra & Mahindra (M&M) fell 0.49%. The company's total auto sales declined 17% to 37,897 units in August 2013 over August 2012. M&M's sales of Passenger Vehicles segment (which includes the UVs and Verito) declined 28% to 15,821 units in August 2013 over August 2012. The company's domestic sales declined 18% to 35,159 units in August 2013 over August 2012. The sale of four-wheeler commercial segment which includes passenger and load vehicles fell 4% to 13,718 units while that of three-wheelers declined 14% to 5,149 units in August 2013 over August 2012. Exports declined 9% to 2,738 units in August 2013 over August 2012.

M&M's domestic tractor sales rose 9% to 12,394 units in August 2013 over August 2012. Export sales dropped 27% to 840 units in August 2013 over August 2012. Total tractor sales rose 7% to 13,234 units in August 2013 over August 2012.

Two-wheeler major Hero MotoCorp rose 0.74%.

Bajaj Auto gained 1.57%. The company's total sales fell 9% to 3.12 lakh units in August 2013 over August 2012. Motorcycle sales declined 8% to 2.78 lakh units in August 2013 over August 2012. Commercial vehicles sales declined 17% to 33,605 units in August 2013 over August 2012. Exports rose 10% to 1.44 lakh units in August 2013 over August 2012.

IT stocks fell on profit booking as the rupee strengthened against the dollar. IT stocks had surged recently on a sharp fall in rupee against the dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

Infosys (down 3.41%) and Wipro (down 3.6%), edged lower.

HCL Technologies dropped 2.24%. The company after market hours on Wednesday, 4 September 2013, said that Direct Energy, a leading energy and energy services company in North America, has reached an agreement with the company to implement and manage its residential billing and customer care operations in the Alberta market. The underlying solution will leverage a variety of leading technologies, including multiple technologies from SAP. HCL will provide infrastructure hosting, application management and business process services.

Tata Consultancy Services (TCS) fell 3.48%. The company announced after market hours on Wednesday, 4 September 2013, that it has been selected by CTM, the leading telecom service provider in Macau, for a multi-year and multi-million agreement for an IT and business transformation project, whereby TCS will deploy a new convergent rating and billing system for CTM. Currently, CTM uses different billing systems for each of its corresponding telecom service. In order to meet its needs of next-generation integrated multimedia telecom services, CTM sought to implement an converged billing system to provide a more instantaneous response to market demands, hence further strengthening its market competitiveness. CTM chose TCS as its service partner to deliver its new convergent rating and billing system.

Bank stocks jumped after new Reserve Bank of India (RBI) chief Raghuram Rajan on Wednesday, 4 September 2013, said that RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country and also said that there is need to reduce the requirement for banks to invest in government securities in a calibrated way so as to ensure the flow of credit to the productive sectors of the economy. Among PSU bank stocks, State Bank of India (up 9.65%), Bank of Baroda (up 8.54%), Canara Bank (up 7.57%), Union Bank of India (up 7.91%), Bank of India (up 5.93%) and Punjab National Bank (up 6.99%) edged higher.

Among private bank stocks, Yes Bank (up 21.55%), Kotak Mahindra Bank (up 9.26%), ICICI Bank (up 8.82%), Federal Bank jumped (up 12.38%), and HDFC Bank (up 7.8%), edged higher.

In an unexpectedly detailed and wide-ranging briefing, new RBI Governor Raghuram Rajan on Wednesday outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk. He made clear his intention to liberalise markets, including pushing for more rupee trade settlement, introducing new financial products such as overnight interest rate swaps and removing curbs on opening new branches by Indian banks. Rajan, in his remarks, outlined the plan to attract more funds from non-resident Indians (NRIs) as part of a broader push to lure inflows. Under the plan, the central bank will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians. India has the world's second-biggest diaspora, according to the Ministry of Overseas India Affairs, and the country has turned to overseas Indians for help in past financial crises. The central bank will also offer forex swap into rupees at a concessional rate below market levels for banks who raise dollar funds through overseas borrowings.

Rajan said banks should gradually be allowed to decrease their mandatory holdings of government securities, which would free up capital for lending. He also said new bank licences should be awarded on an ongoing basis. The central bank is now in the process of awarding the first new bank licences in a decade. Rajan also proposed the issue of inflation-indexed bonds linked to the consumer price index, an indication that the central bank may soon shift its inflation benchmark from the wholesale price index. Rajan also pushed back the date of the RBI's next monetary policy review by two days to 20 September 2013. That will give the central bank more time to consider the outcome of what is expected to be a pivotal two-day meeting of the US Federal Reserve, ending on 18 September 2013

Axis Bank jumped 15.63% after the bank said its total direct and indirect exposure to the National Spot Exchange (NSEL) is insignificant and that the bank has adequate collateral to back these exposures. Axis Bank issued the clarification amid media reports that it and two other private sector banks viz. ICICI Bank and HDFC Bank have the highest exposure to NSEL.

Another trigger for the rally in the Axis Bank counter was the removal of restrictions by the Reserve Bank of India (RBI) on foreign institutional investors (FIIs) on buying shares of Axis Bank as the overall foreign share holding in Axis Bank fell below the prescribed limit of 49%. Foreign share holding in Axis Bank under the portfolio investment scheme have gone below the prescribed threshold limit stipulated under the extant FDI Policy, the RBI said in a statement. Hence, the restrictions placed on the purchase of shares of Axis Bank are withdrawn with immediate effect, the central bank said.

Total foreign holding in Axis Bank was 48.96% as at 30 June 2013, of which 40.70% was held by FIIs.

The NSEL had to shut down its operation since 1 August 2013 following the government direction in the wake of violation of certain rules. NSEL is grappling with the problem of payment settlement after the suspension. It has given eight-month plan to settle Rs 5574.31 crore to investors. NSEL is scheduled to make a payout every Tuesday for 30 weeks, ending in March 2014. Financial Technologies (India) is one of the two promoters of the NSEL.

Shares of Financial Technologies jumped 16.39%.

Metal and mining stocks extended Wednesday's gains triggered by a private survey showing growth in China's services sector hitting five-month high in August. China is the world's largest consumer of copper and aluminum. Jindal Steel & Power (up 0.16%), Hindustan Zinc (up 1.35%), NMDC (up %), Sail (up 0.63%), JSW Steel (up 4.08%), edged higher. But, Tata Steel fell 0.28%. Hindalco Industries slipped 0.92%.

Sesa Goa tumbled 6.58%, with the stock falling sharply in late trade. The stock was the biggest loser from the Sensex pack.

Ranbaxy Laboratories fell 1.58%. The company said during market hours today, 5 September 2013, that the company has completed 20 successful years in Russia. The company established its operations in the Russian market in 1993 with the launch of its key brand, Cifran. Since then, Ranbaxy has grown to become a number one player with a market share of 15.4% in the represented market segment in Russia (IMS, May 2013).

Idea Cellular lost 2.94%. The stock turned ex-dividend today, 5 September 2013, for a final dividend of 30 paise per share for the year ended 31 March 2013.

Realty stocks jumped on renewed buying. DLF (up 8.58%), Indiabulls Real Estate (up 7.53%), HDIL (up 9.55%), Unitech (up 3.34%), Godrej Properties (up 1.75%) and Parsvnath Developers (up 1.08%) gained.

Sobha Developers jumped 8.69% on bargain hunting after the stock tumbled 14.02% in the preceding four sessions to Rs 218.05 on Wednesday, 4 September 2013, from a recent high of Rs 253.60 on 29 August 2013.

The Lok Sabha on Wednesday passed the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, an important economic legislation that will pave the way for foreign investment in the sector. The Bill allows 26% foreign investment in the Pension sector and gives statutory backing to the interim pension authority that had been functioning on executive authority for over a decade now. It also gives legal backing to the pensions regulator to create a social security architecture that channels savings of households into the financial sector. The PFRDA manages the New Pension System, a defined contribution scheme for the central government that many states have joined and is also now open to private individuals.

Global credit rating agency Moody's Investors Service on Wednesday, 4 September 2013, said that India's inflation and fiscal metrics remain weaker than peers. A higher subsidy burden and lower growth will weaken the country's fiscal metrics, analyst Atsi Sheth said in a presentation. The agency, however, said the country's current reserves can finance the current account and external debt payment needs. Moody's has an investment grade rating on India with a stable outlook.

European stock reversed initial decline on Thursday. Key benchmark indices in UK, France and Germany were up 0.35% to 0.55%.

The Bank of England on Thursday offered no surprises, leaving the size of its bond-buying program unchanged and holding its key lending rate at a record low of 0.5%, where it has stood since March 2009. The central bank's Monetary Policy Committee left its asset purchases, the centerpiece of its quantitative-easing strategy, at 375 billion pounds ($585 billion). The minutes from the September 4 meeting will be published on September 18. The central bank has said it aims to keep rates low at least until the UK unemployment rate drops below 7%, which it doesn't expect will happen until 2016.

Meanwhile, the ECB is also expected to leave monetary policy unchanged after a monthly review today, 5 September 2013.

Asian stocks rose on Thursday, 5 September 2013, following gains on Wall Street overnight. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by 0.08% to 1.22%. Key benchmark indices in Indonesia and China were down by 0.24% to 0.55%.

The Bank of Japan upgraded its assessment of the economy, saying a moderate recovery is underway, reinforcing Governor Haruhiko Kuroda's message that Japan can weather a sales-tax increase due in April. The central bank will expand the monetary base at an annual pace of 60 trillion yen ($602 billion) to 70 trillion yen, it said in Tokyo today, leaving policy unchanged.

Trading in US index futures indicated a flat opening of US stocks on Thursday, 5 September 2013. US stocks jumped on Wednesday after surging US auto sales pointed to robustness in the manufacturing sector. Federal Reserve data released overnight showed that the US economy grew at a "modest to moderate" pace in July and August, according to the central banks "beige book".

The influential US nonfarm payroll report for August 2013 is due for release tomorrow, 6 September 2013. The employment numbers will be keenly watched given the implications for the timing of the Federal Reserve's plan to begin slowing the pace of its monetary stimulus.

Investors across the globe are eyeing the next policy meeting of the Federal Open Market Committee (FOMC) scheduled this month, with their focus squarely on the timing of tapering of Federal Reserve's bond purchases. The FOMC holds a two-day policy meeting on 17-18 September 2013 to decide on interest rates in the United States. The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.

Meanwhile, a summit of leaders from the Group of 20 major economies begins in St. Petersburg today, 5 September 2013. The meeting of leaders from the Group of 20 largest industrialized and developing nations in Russia is expected to be dominated by issues over Syria.

On Wednesday, US President Barack Obama reiterated the need for a global response on Syria as a US Senate panel approved a resolution authorising US military intervention. The Senate Foreign Relations Committee on Wednesday, in a 10-7 vote, approved a resolution allowing Obama to conduct military strikes against Syria. Obama is seeking full congressional approval for "limited" strikes in Syria. There are allegations that the Syrian government used chemical weapons against civilians late last month.