The News International Team
9:55 am FII view: Nilesh Jasani, Jefferies says emerging market (EM) turmoil could engulf rupee and economy if RBI stays conservative.
“To break the usual “when currency is pressured, keep rates high” rule, RBI must provide thought leadership on fundamentals and importantly, show its belief by cutting rates proactively. Will they? The answer is uncertain. Worst case, Indian equities would still outperform but with a lost opportunity for the economy,” he adds.
9:45 am 2015 bets: Brokerage house CLSA sees the Sensex at 31,500 by December and sees corporate earnings being boosted by better margins and lower cost of funds. “Improving demand should boost pricing power, even as lower commodity costs help expand margins. We forecast EBITDA to increase from a 10 percent CAGR in FY11-15 to 16 percent over FY15-17 as margins widen by 189 basis points for our coverage universe,” said the CLSA note to clients. CLSA feels the market is not expensive at 15 times FY16 earnings as corporate-profitability cycle is on the brink of an upswing.
The brokerage expects domestic-orientated sectors such as banks, autos and building materials to benefit the most.
9:30 am Divestment: Government has said it has no desire to reduce its stake in public sector banks at “current valuation”.
“Do not see any need to reduce stake in PSBs as of now… It is undesirable to reduce stake in PSBs at current valuation,” Minister of State for Finance Jayant Sinha told a private news channel.
The Union Cabinet had recently decided to reduce the government stake in the 27 PSBs down till 52 percent as against the current red line of 56 percent. In the recently released Financial Stability Report, the Reserve Bank had flagged concerns over the compressed share prices of the state-run banks.
The need for dilution has arisen as a result of higher capital requirement for meeting the Basel-III norms by April 2019 and an overall pressure on government finances.
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The market has opened with massive losses. The Sensex is at 27351, down 498 points while the Nifty is 8236, down 137 points. About 231 shares have advanced, 909 shares declined, and 478 shares are unchanged.
Oil stocks are dragging with major losers like GAIL, ONGC and Cairn India. Nymex crude dropped over 5 percent to USD 50 a barrel, while Brent crude tumbled towards USD 53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports at near 35-year peaks.
Tata Motors, Tata Power and Hindalco are other losers in the Sensex.
Ashutosh Raina of HDFC Bank said, “The risk-off sentiment appears to have engulfed the global markets with oil prices hitting 5-year lows and political uncertainty in Greece forcing investors to move to safe havens.”
“The dollar strength continues with dollar index hitting 91.5 levels and gaining against most currencies. The USD-INR pair has been relatively rangebound in the 63-63.50/dollar range. The Rupee is likely to be in the 63-64/dollar range with suspected intervention expected to continue,” he said.
Even the Asian markets have opened sharply lower on the back of weak overnight cues following relentless fall in oil prices. Nikkei has opened down to a near three-week low as trading sentiment was hit by a double whammy of declining oil prices and a stronger yen. All Asian indices are down more than a percent each.
The US stocks declined sharply, with the S&P 500 extending losses into a fourth session, as energy companies took it on the chin as oil fell to its lowest since April 2009. The CBOE volatility index rose 12 percent to 19.92.
Even the European shares have closed sharply lower as concerns over the health of the eurozone resurfaced like the political uncertainty in Greece that weighed on markets.
From precious metals space, gold prices rose to above USD 1200 an ounce following weak equities and eurozone concerns.