Benchmarks snap four days winning streak; Nifty closes unchanged

Snapping four days gaining streak, Indian equity benchmarks witnessed consolidation on Wednesday with nifty closing absolutely flat, while Sensex ended in the red with a cut of around quarter a percent as investors opted to book profit ahead of final results of elections on May 16. A bout of volatility was witnessed during the session with key benchmark indices slipping into the red after opening in green. Sentiment remained down beat with Organisation for Economic Cooperation and Development (OECD) saying that India, China and other major emerging economies are expected to see weak growth even as momentum remains stable in the developed world. Investors’ sentiment also remained subdued as Consumer price inflation (CPI) numbers released on Monday showed that retail inflation rose from 8.3 per cent in March 2014 to 8.6 per cent in April 2014.

Sluggish opening in European counters too dampened the sentiments. CAC, DAX and FTSE eased from multi-year highs in early deals and the euro licked its wounds after declining to a five-week low, as the focus shifted to an economic outlook from the Bank of England for clues on when UK interest rates will rise. Though, the Asian markets shut shop mostly in the green but Chinese market ended marginally in red after country’s central bank called on the biggest lenders to accelerate the granting of mortgages.

Back home, selling in healthcare counters too dampened the sentiments, led by over three and a half percent fall in Dr Reddy’s Laboratories after reporting a lower than 15.6% year on year (yoy) drop in consolidated net profit at Rs 482 crore for the quarter ended March 31, 2014 (Q4FY14), mainly due to higher operating expenses. Meanwhile, shares of public sector oil marketing companies like BPCL, HPCL and IOC edged lower after oil prices extended gains in Asian trade.

On the flip side, shares related to public sector undertakings (PSU) banks viz. Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Andhra Bank, Allahabad Bank, State Bank of India, Bank of Baroda etc. edged higher after a committee appointed by the Reserve Bank of India (RBI) made some radical suggestions regarding the government’s control over nationalised banks. Moreover, shares of infrastructure and real estate companies remained on buyers’ radar amid expectations that a new government at the centre would give the much-needed thrust to economy recovery.

The NSE’s 50-share broadly followed index Nifty ended unchanged and managed to hold its psychological 7,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over fifty points to end below the psychological 23,850 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of over one and a half percent. The market breadth remained in favour of advances, as there were 1,692 shares on the gaining side against 1,218 shares on the losing side while 132 shares remain unchanged.

Finally, the BSE Sensex declined by 56.11 points or 0.24%, to 23,815.12, while the CNX Nifty ended unchanged at 7,108.75.

The BSE Sensex touched a high and a low of 23,964.67 and 23,753.36, respectively. The BSE Mid cap index was up by 1.12%, while the Small cap index rose by 1.24%.

The top gainers on the Sensex were Tata Steel up by 5.91%, Coal India up by 3.39%, Bajaj Auto up by 3.10%, NTPC up by 2.20% and SSLT up by 2.18%. While Dr Reddys Lab down by 3.51%, Mahindra & Mahindra down by 2.91%, HDFC down by 2.01%, HDFC Bank down by 1.52% and RIL down by 1.49% were the top losers in the index.

On the BSE Sectoral front, Realty up by 4.32%, Metal up by 3.22%, Consumer Durables up by 2.28%, PSU up by 1.84% and Power up by 0.83% were the top gainers, while Oil & Gas down by 0.78%, Capital Goods down by 0.36%, IT down by 0.31%, Healthcare down by 0.30% and Auto down by 0.03% were the losers in the space.

Meanwhile, the Reserve Bank of India (RBI) panel, in its latest report has stated that the government should cut its holding in public sector banks to below 50 percent. Criticizing the way in which the lenders are currently being governed, the panel has said that governance at the 26 Public Sector Banks (PSBs) suffers due to several ‘externally imposed constraints’ like dual regulation by the Finance Ministry and RBI and external vigilance by agencies like the CVC and CAG among others.

The panel further highlighted that if the Government reduces its stake to less than 50 percent, together with certain other executive measures, all these external constraints would disappear. Further, the move would also benefit the government as it would continue to be the dominant shareholder and create a condition for its banks to compete more successfully. The Panel report further added that the government should repeal the present Bank Nationalisation Acts of the 1970 and 1980, together with the SBI Act and the SBI (Subsidiary Banks) Act, and all banks should be incorporated under the Companies Act. Further, the report added that bank Investment Company should be constituted where the government holding in all the banks should be transferred. The panel also recommended the government to take some radical reforms to improve the selection process for directors in the state run banks.

Further, the panel also recommended expanding single investor shareholding caps to beyond the current practice by making a new category of investors called 'authorised bank investors' (ABI). As per the panel report, ABI should be permitted a 20 percent equity stake without regulatory approval or 15 percent if it also has a seat on the bank board. All other financial investors should be permitted to invest up to 10 percent in banks.

Indian banking industry is the most dominant segment of the country’s financial sector and plays an important role in the economic development of the country. Banks help to boost economic growth by allocating savings to investments that have potential to yield higher returns. The CNX Nifty touched a high and low of 7,142.25 and 7,080.90 respectively.

The top gainers of the Nifty were Bank of Baroda up by 9.60%, Jindal Steel & Power up by 6.51%, Tata Steel up by 5.95%, DLF up by 5.45% and NMDC up by 5.07%. On the other hand, Mahindra & Mahindra down by 3.67%, Dr. Reddy's Laboratories down by 3.48%, HDFC India down by 1.91%, Reliance Industries down by 1.74% and HDFC Bank down by 1.71% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.20%, Germany's DAX was down by 0.15% and United Kingdom's FTSE 100 was down by 0.13%.

The Asian markets concluded Wednesday’s trade mostly in green, following a record close for the Dow and S&P 500 on Wall Street. Southeast Asian currencies rallied as US economic data that trailed estimates weakened the greenback, and political developments in Indonesia spurred the rupiah to its biggest gain since March. A set of unexpectedly weak activity data for April pointed toward a stalling economic recovery in China, reviving expectations that the government will continue policies aimed at nurturing growth. New home sales in China declined at a faster rate in the first four months of this year, by both value and volume, as the lack of enthusiasm among homebuyers continued. The value of new homes sold across the country dropped 9.9% from the same period a year earlier to 1.53 trillion yuan ($246 billion) during the January-April period. In the first quarter, the value fell 7.7% year on year. Japan’s Corporate Goods Price Index rose to a seasonally adjusted annual rate of 4.1%, from 1.7% in the preceding month. South Korean Unemployment Rate rose to a seasonally adjusted annual rate of 3.7%, from 3.5% in the preceding month.