Bears make a strong comeback; banking stocks remained under pressure... - Ajcon Global

It was a weak start to the expiry week. The Nifty lost 122.35 points or 2.04 percent to 5889.75. The Sensex closed below the psychological 20000-mark, at 19900.96, down 362.75 points or 1.79 percent from previous close in the wake of a surprise rate hike Friday by the Reserve Bank of India. S&P Sensex which opened at 20,060.82 points, closed (provisionally) at 19,883.07 points, down 380.64 points or 1.88 percent from its previous day's close at 20,263.71 points. The benchmark Sensex surged to a high of 20,199.81 points and a low of 19,826.30 points in the day's trade. The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) also lost heavily. It slid 128.85 points or 2.14 percent at 5,883.25 points. RBI on Sep 20 increased the repurchase or repo rate by 0.25 percent to 7.5 percent. Repo rate is what commercial banks pay when they borrow short-term money from the RBI. The reverse repo rate, or the interest rate that RBI pays to the commercial banks on their short-term deposits, is adjusted to 6.5 percent from the earlier 6.25 percent. The RBI move will make home, auto and other loans costlier and worsen the industrial and overall growth situation which is already sluggish. Sector-wise bank, capital goods, oil and gas, automobile and fast moving consumer goods (FMCG) stocks sustained heavy losses. However, consumer durables, information technology, technology, entertainment and media (TECk) stocks gained. The S&P BSE bank index lost 558.44 points, capital goods index was down 271.99 points, followed by oil and gas index by 160.56 points, automobile index was down 140.74 points and fast moving consumer goods (FMCG) index was down 83.66 points. Healthy buying took place in consumer durables stocks.

Gold importers in India are hoping their old stocks lying at airports would get customs clearance by Tuesday, following a meeting with government officials last week, before they ship more for exporters ahead of the peak Christmas season. Gold shipments into India, the world's biggest buyer of the metal, came to a virtual halt after the Reserve Bank of India told importers on July 22 that a fifth of their purchases would have to be turned around for export and 80 percent would be available for domestic use. The rule had created confusion among most government agencies over its implementation and as a result about a tonne of gold meant for exporters was stuck at the airports, prompting a high-level meeting of officials from the commerce and finance ministries, importing banks and the Gems and Jewellery Export Promotion Council. "We have approached Bombay customs to get our old shipments cleared. Hopefully they should get cleared by today or tomorrow. The Bombay customs is waiting for instructions from Delhi," said an official from a Mumbai-based private importing bank, who did not wish to be quoted as he was not authorised to speak to the media. "We have lots of orders. Unless our shipments are getting cleared, we won't import more," said the official. Once the imports resume, exporters who have been facing cancellations of orders could start shipments again, after which domestic traders would also receive supplies under the new rule. Another bank official, who was part of Friday's meeting, said the customs department has been asked to "ensure speedy turnaround time" for imports meant for exports. On the Multi Commodity Exchange (MCX), gold for October delivery was 0.68 percent lower at 29,709 rupees per 10 grams, extending losses for the third straight session. The contract has shed about 15 percent from its record of 35,074 hit on August 28.

Meanwhile, the rupee closed at 62.60 against the US dollar, down 37 paise from previous close.

Globally, Asian markets closed mixed with the Chinese PMI lifting sentiment. Shanghai Composite gained 1.3 percent as HSBC flash PMI for China hit a 6-month high for September. European markets were flat.

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, refuses to call September monetary policy moves either tightening or loosening. According to him, what the central bank did was more of a rebalancing act. He feels that the RBI and the government need to do a lot more to revive growth. But the RBI can't cut long-term rates by tinkering with shortterm rates, he cautions. He says lower long-term rates are a key to growth and expects growth to pick up in the second half of FY14. Meanwhile, he informs that the government does not intend to cut planned expenses. On talks of one-time major hike in diesel rates, he advises to progressively phase out diesel subsidies.

Source : Equity Bulls

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