Benchmarks languish at day’s low; negative European markets start aggravates selling pressure

Amidst persistent selling pressure, local equity markets have magnified their losses and are currently sulking near day’s low with loss of over half a percent, below the crucial 22,400 (Sensex) and 6700 (Nifty) levels respectively. While, the mood was already downbeat tailing negative regional counterparts, a negative European markets’ start have further aggravated the selling pressure. In this accentuated selling pressure, broader indices too have pared some of their early gains, with bother small-cap and midcap index trading with gains of over two tenths of a percent.

On the global front, Asian shares stumbled to a one-month low against the dollar on Wednesday as the heightened possibility of Ukraine slipping into civil war depressed risk appetite. Meanwhile, European shares too getting a negative handover from Asian counterparts, got off to a dismal start, further hit by German engineering giant Siemens posted a weaker-than-expected 16 percent increase in operating profit on Wednesday.

Closer home, gains in stocks from Consumer Durables, Healthcare and Power counters were counterbalanced by losses in Information Technology, Metal and Auto counters. IT counter’s losses were led by Infosys stocks, which tumbled over 2% after brokerage house UBS downgraded the stock to Sell from Buy and cut its target price to Rs 2,750/share from Rs 4,050/share. The overall market breadth on BSE is in the favour of declines which thumped advances in the ratio of 1186:1156; while 140 shares remained unchanged.

The BSE Sensex is currently trading at 22381.35, down by 127.07 points or 0.56% after trading in a range of 22,532.82 and 22365.36. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices pared some of its early gains; the BSE Mid cap index was up by 0.34%, while Small cap index up by 0.22%.

The gaining sectoral indices on the BSE were Consumer Durables up by 1.44%, Healthcare up by 0.61%, Power up by 0.41%, PSU up by 0.40% and Oil and Gas up by 0.29%. While, IT down by 2.02%, Teck down by 1.82 %, Metal down by 0.48%, Auto down by 0.30% and Realty down by 0.12% were the losing indices on BSE.   

The top gainers on the Sensex were Sun Pharma up by 1.64%, NTPC up by 0.54%, Cipla up by 0.82%, BHEL up by 0.70%, SBI up by 0.63% and ONGC up by 0.24%. On the flip side, Infosys down by 2.81%, Bharti Airtel down by 2.74%, Wipro down by 2.16%, HDFC down by 1.90% and TCS down by 1.35%.

Meanwhile, the government has sought Reserve Bank (RBI)’s assistance to form a committee to look into the insurance regulator's concerns of some instruments issued by banks for raising tier-II capital being perpetual and illiquid in nature. The Insurance Regulatory & Development Authority (IRDA) has alleged that some of these instruments are breaching its investment norms.

As per Basel-III norms, banks can cancel interest or dividends on instruments raised under tier-II capital or write off such investments in times of stress. So, the committee being formed by Apex Bank would look into issue of and subscription to tier-II instruments under the new Basel-III capitalization guidelines.

Life Insurance Corporation (LIC), the country's biggest insurer, has invested around Rs 10,000 crore in Tier-II bonds of public sector banks, which are typically unsecured and cannot be converted into equity. In view of the substantial need for raising additional capital by banks to meet the new regulatory norms, insurance regulator though allowed certain instruments, but found them violating investment norms.

According to RBI's estimate, public and private sector banks will together need an additional capital of Rs 5 lakh crore to comply with the Basel-III regulations. Of this, equity capital requirement will be of Rs 1.75 lakh crore and non-equity capital of Rs 3.25 lakh crore. However, the government is backing significantly on the insurers and is hoping to channelize pension and insurance funds in banks to meet the huge capital requirements. Meanwhile, government has allocated Rs 11,200 crore towards bank capitalization this fiscal, which is substantially less than the amount infused in the last few years. 

The CNX Nifty is currently trading at 6,675.80, down by 39.50 points or 0.59% after trading in a range of 6,718.75 and 6,672.25. There were 19 stocks advancing against 30 declining on the index, while 1 stock remained unchanged.

The top gainers of the Nifty were BPCL up by 1.95%, Sun Pharma up by 1.65%, Lupin up by 1.50%, NTPC up by 1.36% and SBI up by 0.68%. On the flip side, Infosys down by 2.92%, Bharti Airtel down by 2.67%, Wipro down by 2.30%, Ultratech Cement down by 2.16% and HDFC down by 2.05% were the major losers on the index.

Asian equity indices were trading in red; Hang Seng plummeted 1.27%, Nikkei 225 plunged 2.93%, Straits Times lost 0.51%, Shanghai Composite slid 0.91% and Taiwan Weighted shed 0.22%. While, Jakarta Composite up by 0.25% was the only gainer among Asian pack.

European markets too got off to a weak start; with France’s CAC 40 declining by 0.78%, United Kingdom’s FTSE 100 losing 0.35% and Germany’s DAX dropping 0.65%