Markets recover from day’s low; hold steady with modest gains

After dipping to day’s low and recovering thereafter, markets were holding steady with modest gains of over quarter of a percent, with both Sensex and Nifty trading above the crucial 25,250 and 7,500 levels respectively.  Meanwhile, broader indices outperforming frontline indices were trading with gains in the range of 0.85%-1.25%.  Positive report over monsoon mainly is keeping the sentiment positive for Dalal Street. As per weather report, the monsoon delivered this season's heaviest showers on Tuesday, drenching southern and central India with 50% more rainfall than normal, while international forecasters said the rain-disrupting El Nino phenomenon would be weaker than feared.

On the global front, Asian shares were set for a mixed close despite better than expected Chinese economy data. The Hang Seng Index rose after the world's second-largest economy grew by 7.5% in the second quarter-- slightly higher than street expectation of 7.4%. The result was a touch higher than the 7.4% growth in the first quarter of the year and suggests the world's second-largest economy may have stabilized after a slowdown earlier this year.

Closer home, majority of the sectoral indices on BSE were trading into positive territory; with prominent gainers being the stocks from Realty, banking and Oil & Gas counters. On the flip side, stocks from Consumer Durables, Power and Public Sector Undertaking (PSU) counters were the weak links of trade. Realty stocks edged higher after the Reserve Bank of India (RBI) announced incentives to raise long term bonds for infrastructure financing, including affordable housing. The RBI allowed banks to issue long-term bonds with a minimum maturity of seven years to raise resources for lending to long term projects in infrastructure sub-sectors and affordable housing. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1354:525; while 35 shares remained unchanged.

The BSE Sensex is currently trading at 25289.87, up by 61.22 points or 0.24% after trading in a range of 25246.75 and 25377.99. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices continued outperforming frontline indices; with BSE Mid cap index trading higher by 0.84%, Small cap soaring by 1.26%.

The gaining sectoral indices on the BSE were Realty up by 2.27%, Bankex up by 1.11%, Oil & Gas up by 0.79%, Auto up by 0.60%, FMCG up by 0.15% while, Consumer Durables down by 0.33%, Power down by 0.22%, PSU down by 0.08%, IT down by 0.06% were the losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 2.98%, Axis Bank up by 1.79%, Reliance Industries up by 1.34%, SBI up by 1.32% and Hindalco up by 1.15%. On the flip side, GAIL India down by 2.06%, HDFC down by 1.75%, Bajaj Auto down by 1.11%, Sesa Sterlite down by 0.83% and Coal India down by 0.80% were the top losers.

Meanwhile, in order to encourage infrastructure development and affordable housing, the Reserve Bank of India (RBI) has exempted long-term bonds from the mandatory regulatory norms such as the Cash Reserve Ratio (CRR), the Statutory Liquidity Ratio (SLR) and Priority Sector Lending (PSL), provided the funds raised from these bonds, which have minimum maturity of seven years, were utilized for lending to long-term projects in infrastructure sub-sectors and affordable housing.

According to RBI circular, the central bank intends to ease raising long-term funds by banks for infrastructure and allot infrastructure status for affordable housing projects. This is much in pursuance of Finance Minister Arun Jaitley’s budget speech in which he underscored the need to encourage banks to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure.

Under the 5/25 structure, bank may fix longer amortization period for loans to projects in infrastructure and core industries sectors, say 25 years, with periodic refinancing, say every five years. However, RBI in its circular did not prescribe ceiling or floor on repayment term. Also, no cap on the quantum of long-term bonds to be issued by banks was fixed.

But, RBI underscored that it would allot infra status for home loans up to Rs 50 lakh, though with some riders. Further, central bank also has allowed banks to issue infra bonds via private, public placement and eased priority sector norms for banks’ long-term bonds.

However, it barred the cross-holding of infra bonds among banks and maintained long-term bonds of banks being plain vanilla in form, not having call or put option. It further mandated banks to share data on long-term bonds soon after issuance and ordered them of not fixing infra loan amortization schedule at appraisal stage, exceeding 80 percent of project life. Additionally, RBI allowed banks to issue only rupee-denominated infra bonds, which may offer initial term of 5-7 years for infra, core loan.

The CNX Nifty is currently trading at 7547.65, up by 21.00 points or 0.28% after trading in a range of 7532.45 and 7571.35. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were IDFC up by 6.33%, ICICI Bank up by 3.03%, DLF up by 1.97%, Axis Bank up by 1.82% and Jindal Steel & Power up by 1.45%. On the flip side, GAIL India down by 1.86%, HDFC down by 1.77%, Bajaj Auto down by 1.19%, Power Grid Corpn. down by 1.15% and Sesa Sterlite down by 1.11% were the top losers.

Asian markets were trading mixed; KOSPI Index rising by 0.76 points or 0.04% to 2,013.48, Straits Times inching up by 5.47 points or 0.17% to 3,296.89; Hang Seng gaining 23.98 points or 0.10% to 23,483.94; Jakarta Composite surging by 54.36 points or 1.07% to 5,125.18. On the flip side, Taiwan Weighted was trading lower by 84.44 points or 0.88% to 9,484.73; Nikkei 225 sliding by 15.86 points or 0.10% to 15,379.30; Shanghai Composite declining by 3.4 points or 0.16% to 2,066.96 and FTSE Bursa Malaysia KLCI shedding 0.47 points or 0.02% to 1,884.40.

European Markets got off to a positive start; with France’s CAC 40 adding 0.50%; UK’s FTSE 100 rising.42% and Germany’s DAX advancing 36.18 points or 0.34%.