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Markets continue to trade in negative territory

( 15:00, 22-Aug-16)

Indian equity benchmarks continues to trade in negative territory in afternoon session on account of heavy selling in Auto, IT, TECK, Metal and Bankex stocks amid weak global cues. Further, weakness in Indian rupee too dampened sentiment. The rupee was trading weak at 67.19 against the dollar, down by 13 paise, as the dollar bounced back in the wake of hawkish comments from a Federal Reserve official boosting the likelihood of a U.S. interest rate hike this year. However, losses remain capped with the appointment of Urjit Patel, a known inflation warrior, as Raghuram Rajan’s successor at the Reserve Bank of India. Patel’s appointment is also an indirect acknowledgment of Raghuram Rajan’s work and legacy. In scrip specific development, Power Grid Corp rose after its board approved three investment proposals worth Rs 733.32 crore for power transmission related projects, while Apollo Tyres slid half a percent on a report it will invest Rs 1,700 crore in its Chennai facility. 

On the global front, Asian markets were trading mostly in red, tracking the modest losses on Wall Street Friday after comments from Federal Reserve officials raised concerns about a near-term interest rate hike.

The BSE Sensex is currently trading at 27937.06, down by 139.94 points or 0.50% after trading in a range of 27918.05 and 28143.28. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.38%, while Small cap index was down by 0.15%.

The top gaining sectoral indices on the BSE were FMCG up by 0.47%, Consumer Durables up by 0.26% and Realty up by 0.16%, while Auto down by 0.90%, IT down by 0.88%, TECK down by 0.85%, Metal down by 0.84% and Bankex down by 0.65% were the losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.85%, ITC up by 0.94%, HDFC up by 0.34%, GAIL India up by 0.33% and Power Grid up by 0.28%. On the flip side, Sun Pharma down by 1.80%, Tata Steel down by 1.72%, Lupin down by 1.69%, TCS down by 1.53% and NTPC down by 1.35% were the top losers.

Meanwhile, the government has announced Urjit Patel as the next governor of the Reserve Bank of India (RBI) for a three-year term. This signals continuity in monetary policy, as Urjit Patel and Raghuram Rajan are on same view on inflation.  

The idea of setting up a Monetary Policy Committee (MPC) was mooted by an RBI-appointed committee led by deputy governor Urjit Patel in February 2014 that suggested the 2% to 6% inflation target range and also recommended that interest rate decisions should be taken by the RBI governor along with a group of members.

The government has already started the process of finalising three members for Monetary Policy Committee, which will fix the benchmark interest rate of the RBI and set inflation targets. The Governor will have a casting vote once the country shifts to the panel system. Three members of the committee will be from the RBI, while three others will be appointed by the government. Those appointments are yet to be made. 

Further, the appointment of Urjit Patel indicated that the government wants RBI to maintain inflation on a tight leash and did not want to experiment with a new face from outside the central bank. The government also hinted that the expectations of immediate rate cut will not be possible in near term, as there is no change in the 2% to 6% target.

The CNX Nifty is currently trading at 8618.50, down by 48.40 points or 0.56% after trading in a range of 8614.00 and 8684.85. There were 11 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 2.11%, BHEL up by 2.08%, BPCL up by 1.64%, ITC up by 1.16% and Power Grid up by 0.44%. On the flip side, Sun Pharma down by 2.11%, Ambuja Cement down by 2.08%, Aurobindo Pharma down by 2.05%, Hindalco down by 1.86% and Grasim Industries down by 1.76% were the top losers.

The Asian markets were trading mostly in red, Hang Seng decreased 106.65 points or 0.46% to 22,830.57, Taiwan Weighted decreased 52.46 points or 0.58% to 8,981.81, KOSPI Index decreased 14.08 points or 0.68% to 2,042.16 and Shanghai Composite decreased 13.41 points or 0.43% to 3,094.69. On the flip side, FTSE Bursa Malaysia KLCI increased 0.9 points or 0.05% to 1,688.58, Jakarta Composite increased 3.63 points or 0.07% to 5,419.67 and Nikkei 225 increased 52.37 points or 0.32% to 16,598.19.

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