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Market drops as auto, banks tumble
06-Dec-2019 (17:07)

Key market barometers tumbled amid wide spread selling pressure on Friday. After starting the session in the green, the market reversed trend as trading progressed and hit day's low in mid-afternoon trade. Banks and auto shares witnessed major selling pressure. Shares of state-run banks collapsed.

The barometer index, the BSE Sensex, fell 334.44 points or 0.82% to 40,445.15. The Nifty 50 index fell 96.90 points or 0.81% to 11,921.50.

In the broader market, the S&P BSE Mid-Cap index slipped 1.26% while the S&P BSE Small-Cap index fell 0.86%.

The market breadth was weak. On the BSE, 872 shares rose and 1652 shares fell. A total of 185 shares were unchanged.

Selling was triggered by the Reserve Bank of India (RBI) unexpectedly leaving interest rates unchanged on Thursday. In a surprise move, the RBI decided to hold the rates after delivering five consecutive rate cuts in 2019. The move was driven by the rising inflationary pressure and gradual improvement in monetary transmission.

RBI revised GDP growth downwards to 5% for 2019-20 from 6.1% projected in its October policy. The CPI inflation projection has also been revised upwards to 4.7-5.1% for the second half of FY20 and 3.8-4% for the first half of FY21.

Meanwhile, RBI's consumer confidence survey (CCS) released on Thursday reported a further drop in consumer confidence in November as households remained pessimistic about jobs and the general economic situation. The current situation index (CSI) dropped to 85.7 last month from 89.4 in September. The future expectations index (FEI) also fell to 114.5, down from 118 in September.

Consumers' sentiments on the general economic situation and the employment scenario weakened, but their one-year ahead expectations remained in the optimistic terrain for all parameters, except prices; expectations on income one-year ahead improved marginally over the previous survey round, said the RBI survey.

Buzzing Index:

Banking stocks came under pressure after Vodafone Idea chairman Kumar Mangalam Birla said the company would have to shut shop if no relief is given to it in the wake of the Supreme Court judgement of 24 October that asked companies like his to pay dues of up to Rs 92,000 crore to department of telecommunications (DoT) in three months.

If Vodafone Idea opts for insolvency route, it may have a significant bearing on the banking sector. Some of the leading Indian banks may take a hit if their exposures turn sour.

The Nifty Bank index fell 1.17% to 31,341.55. The index fell 1.99% two consecutive sessions.

Among public sector banks, Central Bank of India (down 5.73%), Union Bank of India (down 5.42%), Bank of Baroda (down 4.99%), State Bank of India (down 4.89%), UCO Bank (down 4.41%), Bank of India (down 4.37%), Canara Bank (down 4.28%), Corporation Bank (down 4.15%), Punjab National Bank (down 3.53%) and IDBI Bank (down 3.35%) declined.

Among private sector banks, IndusInd Bank (down 3.05%), Federal Bank (down 2.88%), Axis Bank (down 1.64%) and ICICI Bank (down 0.6%) declined. Kotak Mahindra Bank (up 1.48%), City Union Bank (up 0.30%) and HDFC Bank (up 0.06%) advanced.

Yes Bank tanked 9.82% to Rs 56. Yes Bank said Moody's Investors Service downgraded its long term foreign currency issuer rating to B2 from Ba3. Moody's has also downgraded the bank's long-term foreign and local currency bank deposit ratings to B2 from Ba3, foreign currency senior unsecured MTN program rating to (P)B2 from (P)Ba3, and Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from b1. The outlook on the bank's ratings, where applicable, is negative. Moody's expects Yes Bank's common equity tier 1 (CET1) ratio of 8.7% at the end of September 2019 to come under significant pressure, unless the bank can raise new capital in the next few quarters.

RBL Bank fell 7.28% to Rs 338.80. The private sector bank said its qualified institutional placement (QIP) of equity shares ended on Thursday, 5 December 2019. It has approved allocation of 5.77 crore equity shares at an issue price of Rs. 351 per share.

Bajaj Finance slipped 0.61% to Rs 3962.90. The NBFC said it participated in QIP of RBL Bank and have been allotted 42.73 lakh equity shares at a price of Rs. 351 per equity shares aggregating to approximately Rs 150 crore.

Shares of CSB Bank corrected 7.86% at Rs 274.25 on profit booking after strong listing gains. The stock debuted on Wednesday, 4 December 2019, at Rs 275, a premium of 41.02% to the initial public offer (IPO) price of Rs 195.

The IPO of CSB Bank received bids for 100.44 crore shares as against 1.15 crore shares on offer. The issue was subscribed 86.93 times. The issue opened for bidding on 22 November 2019 and closed on 26 November 2019. The price band was fixed at Rs 193 to Rs 195 per share.

The Nifty Auto index fell 1.70% to 7,806.60. The index has fallen 2.38% in two sessions.

Escorts (down 2.49%), Eicher Motors (down 2.4%), TVS Motor Company (down 1.56%), Hero MotoCorp (down 1.43%) and Bajaj Auto (down 1.09%) tumbled.

Maruti Suzuki India fell 1.77%. The company will recall for certain petrol Smart Hybrid (SHVS) variants of Ciaz, Ertiga and XL6 vehicles manufactured between 1 January 2019 to 21 November 2019. The announcement was made during trading hours today, 6 December 2019.

Mahindra & Mahindra (M&M) fell 2.73%. The company said it has completed acquisition of 36.63% stake in Meru Travel Solutions in the first tranche as part of its Rs 201.5-crore deal to acquire 55% shareholding in the radio taxi operator.

M&M said it has invested Rs 44.71 crore (in cash consideration) for the acquisition of 36.63% of the equity share capital of Meru. The company has also earned the right to appoint majority of the directors on the board of Meru. Consequently, Meru has become a subsidiary of the company with effect from 5 December 2019. Also subsidiary companies of Meru - Meru Mobility Tech, V-Link Automotive Services, V-Link Fleet Solutions - have in turn become subsidiaries of M&M, it added.

Tata Motors fell 2.77%. The company's board approved allotment of 20.16 crore ordinary shares at Rs 150 each and 23.13 crore convertible warrants at Rs 150 each on preferential basis to Tata Sons. The announcement was made after market hours yesterday, 5 December 2019.

Stocks in Spotlight:

Index major HDFC fell 2.64% to Rs 2264. Another index giant ITC fell 1.46% to Rs 243.30.

Vodafone Idea fell 5.34% to Rs 6.92 after chairman Kumar Mangalam Birla's comment on insolvency. Birla was responding to a query, posed at an event, about the company's course of action going forward in the absence of government relief. Birla said the Aditya Birla Group will not invest any money in the company in the absence of relief from the government. Birla said the company will have to opt for insolvency route in the absence of relief.

Bharti Airtel declined 0.55% to Rs 444.75. S&P maintained its 'BBI' rating on long term-facilities with negative implications due to Rs 34,00 crore setback from Department of Telecom (DoT) litigation will adversely affect the company's growth prospects.

Omaxe was locked in the lower circuit limit of 20% at Rs 143.95. The stock of real estate company was trading at its lowest level since April 2016.

Eris Lifesciences surged 7.81% to Rs 476.95, in a falling market. Earlier this week, the company announced acquisition of the trademark Zomelis, for Vildagliptin-based formulations, and its associated trademarks from Novartis AG, Switzerland, for a consideration of $13 million.

Vascon Engineers rose 3.69% to Rs 12.63. The company has received work order amounting to Rs 132.69 crore from Airports Authority of India.

Dr Reddy's Laboratories rose 0.76% to Rs 2891.95. The company announced the launch of Deferasirox tablets for oral suspension in the U.S. market. This drug is used to treat ongoing high levels of iron in the body.

Crude and Currency:

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 71.20, compared with its close of 71.29 during the previous trading session.

In the commodities market, Brent crude for February 2020 settlement was down 36 cents at $63.03 a barrel. The contract rose 0.61% or 39 cents to settle at $63.39 a barrel during the previous trading session.

Oil prices rose Thursday after OPEC members agreed in principle to another cut to output during the first quarter of 2020. OPEC members are starting their second day of talks on Friday.

Foreign Markets:

Shares in Europe and Asia edged higher as investors await employment data out of the U.S. and monitor trade developments between Beijing and Washington.

Media reported on Friday that China's finance ministry said the country will waive import tariffs for certain soybean and pork shipments from the U.S., without providing further detail. The decision came ahead of a closely watched date of December 15 when additional tariffs on Chinese exports to the U.S. go into effect.

As per reports, Washington and Beijing are still in disagreement over the size of China's agriculture purchases. Meanwhile, China has given little indication on how negotiations with the U.S. are progressing. Earlier in the week, markets were sent into a frenzy after U.S. President Donald Trump said he may delay a trade deal with China till after the 2020 U.S. presidential election.

In US, stocks moved higher on Thursday as investors remained optimistic about prospects for a US-China trade deal despite a looming deadline for the imposition of fresh import tariffs by President Donald Trump.

In economics news, the US Labor Department released a report on Thursday showing an unexpected decrease in first-time claims for U.S. unemployment benefits in the week ended November 30th. The report said initial jobless claims slipped to 203,000, a decrease of 10,000 from the previous week's unrevised level of 213,000. With the unexpected decrease, jobless claims fell to their lowest level since hitting 193,000 in the week ended April 13th.

US new orders for manufactured goods rose by 0.3% in October after falling by a revised 0.8% in September, according to a report released by the Commerce Department on Thursday.

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