Markets trade firm led by banking, capital goods stocks

Indian equity benchmarks continue to trade firm in afternoon session on the back of buying witnessed in frontline blue chip stocks such as ICICI bank, SBI and BHEL among others. Sentiment got a boost as retail inflation eased to a 29-month low of 7.31% and WPI inflation fell to a four-month low of 5.43%, raising hopes of a rate cut by the RBI at its policy review next month. Almost all the sectoral indices on the BSE were trading in green and bankex was the top gaining index up by around 2.6%. Apart from the blue chips, broader indices too equally participated in the rally with both mid cap and small cap indices were trading up by over 1.50%. Further positive global cues also provided support to domestic equity benchmarks. However, investors were seen selling stocks of healthcare and FMCG sectors. Stock specific, TVS Motor Company, extending its previous day’s rally, has surged around 6% to Rs 169 after the company's market share rose to 12.6% from 12.1% in June quarter, first time in two years. City Union Bank was up nearly 1% as bank's Qualified Institutions Placement issue has reportedly oversubscribed by two times.

On global front, Asian equity indices were trading in green with Hang Seng up by 0.34% and Nikkei 225 up by 0.58% as the Bank of Japan kept the monetary policy stable before Federal Reserve Chair Janet Yellen addresses US lawmakers. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 7,500 and 25,000 levels respectively. The market breadth on BSE was negative, out of 2,447 stocks traded, 1,631 stocks advanced, while 745 stocks declined on the BSE.

The BSE Sensex is currently trading at 25,206.24 up by 199.26 points or 0.80% after trading in a range of 25,236.66 and 25,100.14. There were 20 stocks advancing against 10 stocks declining on the index. The broader indices were trading in green; the BSE Mid cap index was up by 1.51%, while Small cap index up by 1.77%.

The gaining sectoral indices on the BSE were Bankex up by 2.06%, Capital Goods up by 2.05%, Oil and Gas up by 1.57%, Infrastructure up by 1.55% and Realty up by 1.33%. On the flip side, Healthcare down by 0.25% and FMCG down by 0.21% were the losing indices on BSE.    

The top gainers on the Sensex were ICICI Bank up by 3.19%, SBI up by 2.86%, BHEL up by 2.43%, L&T up by 2.21% and Gail India up by 2.16%. On the flip side, Dr Reddy’s Lab down by 2.65%, SSLT down by 1.48%, NTPC down by 0.98%, Tata Power down by 0.96% and Hero Motocorp down by 0.83% were the top losers on the BSE.

Meanwhile, the government has rejected P J Nayak committee recommendations of lowering government holding in banks below 50 percent. Department of Financial Services Secretary G S Sandhu has asserted that the government wants to maintain public sector character of the banks and thus want to keep shareholding of the government at minimum 51 percent in PSU banks. However, the government is considering issues related to greater autonomy to bank including raising tenure of Chairman and Managing Directors (CMDs) of banks to five years and better quality of independent directors with domain knowledge for strengthening of board. In order to comply with Basel-III norms, public sector banks requires Rs 2,40,000 crore of equity capital over next 5 years. Further, G S Sandhu added that the government would disinvest in two or three PSU banks in the current fiscal and would come out with detailed blue print for disinvestment within the next two months.

The RBI has set-up a committee under chairmanship of former Axis Bank chairman P J Nayak to Review Governance of Boards of Banks in India. The panel’s report criticized the way in which the lenders are currently being governed and suggested the government to cut its holding in public sector banks to below 50 percent. 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. 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.

The CNX Nifty is currently trading at 7,514.10 up by 59.95 points or 0.80% after trading in a range of 7,524.20 and 7,490.55. There were 40 stocks advancing against 10 declining on the index.

The top gainers of the Nifty were ICICI Bank up by 3.25%, SBI up by 2.94%, NMDC up by 2.93%, Bank of Baroda up by 2.75% and L&T up by 2.38%. On the flip side, Dr Reddy’s Lab down by 2.78%, SSLT down by 1.37%, Asian Paints down by 1.32%, Tata Power down by 1.29% and NTPC down by 1.15% were the major losers on the index.

Asian equity indices were trading in green; Hang Seng up by 0.34% to 23,425.03, Nikkei 225 up by 0.58% to 15,385.42, Taiwan Weighted up by 0.51% to 9,569.17 and Jakarta Stock Index up by 0.54% to 5,047.96. While, Shanghai Composite down by 0.24% to 2,061.64 and Straits Times down by 0.05% to 3,289.57