BANK STOCKS DROP AS RBI RELEASES BASEL-III CAPITAL RULES
DATE: 03/05/2012
Key benchmark indices trimmed losses after hitting fresh intraday lows in mid-morning trade after a survey showed the services sector activity inched up April 2012. The 50-unit S&P CNX trimmed losses after hitting its lowest level in nearly one week. The barometer index, BSE Sensex, was down 93.77 points or 0.54%, up about 60 points from the day's low and off close to 65 points from the day's high. The market breadth was weak. Index heavyweights Reliance Industries (RIL) trimmed initial losses.
FMCG giant Hindustan Unilever (HUL) extended Wednesday's gains triggered by strong Q4 earnings. Sugar stocks rallied after government decided to free sugar exports from any quantity restrictions for the time being to expedite shipments from the world's second-largest producer. Banks stocks declined as the Reserve Bank of India's final guidelines to implement the Basel-III capital rules require banks to steadily build up their capital buffers through March 2018. Hero MotoCorp plunged more than 6% on profit taking after good Q4 results.
The market edged lower in early trade on weak Asian stocks. The market extended initial losses to hit fresh intraday low in morning trade. The market trimmed intraday losses after hitting fresh intraday low in mid-morning trade.
At 11:20 IST, the BSE Sensex was down 93.77 points or 0.54% to 17,208.14. The index declined 153.25 points at the day's low of 17,148.66 in mid-morning trade, its lowest level since 28 April 2012. The index fell 30.14 points at the day's high of 17,271.77 in early trade.
The S&P CNX Nifty was down 35.15 points or 0.67% to 5,204. The index hit a low of 5,189.45 in intraday trade, its lowest level since 27 April 2012. The Nifty hit a high of 5,217.30 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,356 shares fell and 769 shares rose. A total of 99 shares were unchanged.
From the 30-share Sensex pack, 22 declined while the rest rose. Bajaj Auto, Coal India and Maruti Suzuki India shed by between 1.7% to 2.79%. Wipro, Cipla and Bhel rose by between 0.67% to 1.69%.
Index heavyweight Reliance Industries (RIL) declined 0.34% to R 740.80, off the day's low of R 737.15. RIL on 20 April 2012 reported 21.2% fall in net profit to R 4236 crore on 16.7% growth in turnover to R 87833 crore in Q4 March 2012 over Q4 March 2011. The company reported GRM (gross refining margin), the difference between the price of petroleum products and crude oil, of $7.6 per barrel in Q4 March 2012 compared with GRM of $6.8 per barrel in Q3 December 2011 and $9.2 per barrel in Q4 March 2011.
India's largest motorcycle maker by sales Hero MotoCorp declined 6.24% to R 2,105 on profit booking. The stock had hit a record high of R 2278.50 in intraday trade on Wednesday, 2 May 2012. The company said at the fag end of the trading session on Wednesday that its net profit rose 20.33% to R 603.59 crore on 12.22% growth in total income to R 6139.90 crore in Q4 March 2012 over Q4 March 2011. The company said it has raised prices of most of its products by R 500 to R 1000 per unit with immediate effect, in order to partially offset rising input costs.
Banks stocks declined as the Reserve Bank of India's final guidelines to implement the Basel-III capital rules require banks to steadily build up their capital buffers through March 2018. India's largest private sector bank by net profit ICICI Bank declined 2.33%. India's second largest private sector bank by net profit HDFC Bank fell 0.45%. India's largest bank by branch network State Bank of India (SBI) dropped 1.84%. Among other banking stocks, Bank of India, Bank of Baroda and Punjab National Bank shed by between 1.31% to 1.81%.
As per the Basel-III rules, banks will have to achieve a minimum shareholder equity ratio or common equity as a percentage of their total risk-weighted assets of 4.5% by Jan. 1, 2013 and progressively build it to 5.5% by March 31, 2018. Banks will also have to increase their Tier-I capital ratios from 6% to 7% over the same period. Throughout the transition period until 2018, banks will be required to maintain a total capital adequacy ratio of 9%.
In addition to the standard capital requirements, Indian banks will have to build a capital conservation buffer equalling 2.5% of their total risk-weighted assets by March 31, 2018 to guard against losses during periods of stress.
The Basel Committee on Banking Supervision (BCBS) issued a comprehensive reform package entitled Basel III: A global regulatory framework for more resilient banks and banking systems in December 2010, with the objective to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. The reform package relating to capital regulation, together with the enhancements to Basel II framework and amendments to market risk framework issued by BCBS in July 2009, will amend certain provisions of the existing Basel II framework, in addition to introducing some new concepts and requirements.
FMCG giant Hindustan Unilever (HUL) rose 1.46% to R 431.20, with the stock extending Wednesday's 2.08% gains triggered by strong Q4 results. The stock had hit record high of R 433.90 on Wednesday, 2 May 2012. The company said on Tuesday, 1 May 2012, its net profit rose 20.63% to R 686.61 crore on 16.05% rise in total income to R 5835.86 crore in Q4 March 2012 over Q4 March 2011.
Sugar stocks rallied after government decided to free sugar exports from any quantity restrictions for the time being to expedite shipments from the world's second-largest producer and to help cash-strapped mills quickly pay farmers. Bajaj Hindusthan, Balrampur Chini Mills and Shree Renuka Sugars rose by between 2.99% to 4.86%. The decision was taken at a meeting chaired by Prime Minister Manmohan Singh which included the farm minister, food minister, trade minister and finance minister.
Carborundum Universal lost 1.29% as growth in bottom line lagged topline growth in Q4 March 2012, with a fall in the core operating profit margin. Carborundum Universal's consolidated net profit rose 9.3% growth in profit to R 54.04 crore on 20.7% growth in net sales to R 497.05 crore in Q4 March 2012 over Q4 March 2011. Net profit rose 28.4% to R 219.30 crore on 23.7% growth in net sales to R 1968.53 crore in the year ended 31 March 2012 over the year ended 31 March 2011.
India's services sector growth accelerated a touch in April thanks to a rise in new business, and optimism hit its highest level since June 2011, a survey showed. HSBC's Business Activity Index, compiled by Markit, rose to 52.8 in April from 52.3 in March. The services index has stayed above the 50-mark that separates growth from contraction for six months now
Foreign institutional investors (FIIs) bought shares worth R 237.47 crore on Wednesday, 2 May 2012 as per provisional data from the stock exchanges. FIIs have bought shares worth R 723.17 crore in three trading sessions from 28 April 2012 to 2 May 2012.
The pace of growth in India's factory sector inched up in April, supported by bulging order books, but slower output growth and increasing price pressures dampened sentiment, a business survey showed on Wednesday. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, rose to 54.9 in April from 54.7 in March. The index has remained above the 50-mark that divides growth from contraction for more than three years.
India's exports in March fell for the first time since the 2009 global financial crisis as demand weakened in the United States and Europe, further clouding the outlook for the country's balance of payments. Exports fell 5.7% to $28.7 billion in March 2012 over March 2011. Imports rose 24.3% to $42.6 billion in March.
Investors are closely watching India Inc's Q4 March 2012 and year ending March 2012 (FY 2012) earnings. Focus is on the guidance provided by the management for the year ending March 2013 (FY 2013) to gauge the earnings outlook.
Bank of Baroda unveils Q4 results tomorrow, 4 May 2012. Grasim Industries announces FY 2012 results on Saturday, 5 May 2012. Housing finance major HDFC announces FY 2012 results on 7 May 2012. Hindalco and Asian Paints unveil Q4 results on 8 May 2012. Kotak Mahindra Bank announces FY 2012 results on 8 May 2012.
Punjab National Bank and Ranbaxy Laboratories unveil quarterly results on 9 May 2012. NTPC announces FY 2012 results on 10 May 2012. Cipla announces Q4 results on the same day. Dr Reddy's Laboratories announces FY 2012 results on 11 May 2012. L&T announces FY 2012 results on 14 May 2012. Bajaj Auto announces FY 2012 results on 17 May 2012. BPCL unveils FY 2012 results on 25 May 2012. Mahindra & Mahindra (M&M) unveils FY 2012 results on 30 May 2012.
Most Asian shares slipped on Thursday, 3 May 2012, after disappointing data from both sides of the Atlantic rekindled concerns about the strength of the global economic recovery. Key benchmark indices in China, Hong Kong, Taiwan and South Korea fell by between 0.18% to 0.43%. Key benchmark indices in Indonesia and Singapore rose by between 0.05% to 0.06%. Japanese financial markets remain closed for public holidays today and tomorrow.
The euro zone's manufacturing sector slipped further into decline last month as a downturn that started in the periphery appears to be taking root among core members France and Germany, a survey showed on Wednesday. Manufacturers in the euro zone cut workers at the fastest pace in more than two years in April after new orders fell for the 11th straight month, suggesting a gloomy outlook for the sector, which drove a large part of the block's recovery from the last recession. Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 45.9 in April from 47.7 in March.
The European Central Bank meets Thursday to decide on interest-rate levels, which the market widely expects to stay at 1% for another month. The meeting takes place ahead of the weekend presidential run-off vote in France and elections in Greece. This month, the ECB and the Bank of England are holding interest-rate meetings on different dates, with the BOE not due to meet until next Thursday.
Trading in US index futures indicated a flat opening of US stocks on Thursday, 3 May 2012. US stocks fell on Wednesday, 2 May 2012, a day after the Dow Jones Industrial Average closed at its highest level in more than four years, as data showed private sector hiring has slowed down. Private employers added 1,19,000 jobs in April, well short of expectations, the ADP report showed. That sparked market rumors that Friday's payrolls data will show the economy added just 125,000 to 150,000 jobs last month, well below market expectations.
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