Benchmarks end flat with positive bias

Indian equity benchmarks ended the choppy day of trade on quiet note with positive bias as investors turned cautious and booked profits at higher levels. Sentiments remained optimistic on report that overseas investors bought Indian shares worth 6.21 billion rupees on July 16, 2014. Some support also came on report that the deficit in monsoon rains is expected to narrow next week as the grain bowl in northwest, oilseed areas of central parts and cotton belt of the western region are set to get higher downpours. The monsoon rains were 15% below average in the past week, against 41% below average rainfall in the previous week.

However, upside remained capped as investors remained on sidelines ahead of important numbers of IT bellwether Tata Consultancy Services (TCS). The company is likely to report modest decline in net profit on Q-o-Q, weighed down by impact of salary increases and appreciation of rupee.

Global cues remained sluggish with Asian markets ending mostly in the red on Thursday, giving up earlier modest gains as Chinese shares fell, while the euro probed recent lows against the dollar amid speculation the U.S. Federal Reserve was tilting towards tighter monetary policy.

Back home, rally in capital goods shares aided the sentiments as stocks like, L&T and BHEL edged higher after Reserve Bank of India (RBI) announced incentives to raise long term bonds for infrastructure financing. Metal pack witnessed heavy buying with Hindalco and Tata Steel followed by Coal India and Sesa Sterlite on the back of positive Chinese GDP growth data. Power stocks too remained investors’ choice after Delhi Electricity Regulatory Commission (DERC) approved tariff hike of 8.32 percent for all three discoms Reliance ADAG-owned discom BSES Yamuna Power (BYPL), BSES Rajdhani Power (BRPL), Tata Power Delhi Distribution Company (TPDDL).

Export oriented stocks too remained on buyers’ radar, as Federation of Indian Exports Organisations (FIEO) has said that export momentum is likely to continue in the coming months on the back of higher demand helped by an uptick in global economies and measures announced in the Union Budget. Additionally, public sector oil marketing companies (OMCs) too edged higher on reports that losses on sale of diesel have fallen by nearly a rupee to Rs 2.49 per litre as international oil rates have moderated. On the flip side, auto pack ran out of steam after Bajaj Auto’s net profit rose marginally 0.31% to Rs 739.98 crore in first quarter ended June 2014 over the corresponding quarter in the previous year.

The NSE’s 50-share broadly followed index Nifty ended higher by over fifteen points to end above its psychological 7,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex edged higher by over ten points to end above the psychological 25,550 mark. The broader markets outperformed benchmarks and ended the session with a gain of around one and a half percent. The market breadth remained in favour of advances, as there were 1,746 shares on the gaining side against 1,188 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex added 11.44 points or 0.04%, to 25561.16, while the CNX Nifty gained 16.05 points or 0.21%, to 7,640.45.

The BSE Sensex touched a high and a low of 25613.03 and 25494.46, respectively. The BSE Mid cap index was up by 1.37%, while Small cap index gained 1.35%.

The top gainers on the Sensex were Hindalco Inds up by 3.91%, Tata Power up by 3.53%, Tata Steel up by 2.99%, Coal India up by 2.86% and NTPC up by 2.63%. On the flip side, the key losers were Mahindra & Mahindra down by 3.18%, Bajaj Auto down by 2.27%, Gail India down by 0.91%, Maruti Suzuki down by 0.87% and TCS down by 0.84%.

On the BSE sectoral front, Metal up by 2.46%, Power up by 2.36%, Consumer Durables up by 2.11%, Capital Goods up by 1.16% and PSU up by 0.89% were the top gainers, while Realty down by 0.77%, Oil & Gas down by 0.42%, Auto down by 0.16% and Bankex down by 0.01% were the losers in the space.

Meanwhile, the government will formulate credit guarantee fund to support its over Rs 40,000-crore new Financial Inclusion Mission. About 60 percent of the population in India does not have bank accounts and the Financial Inclusion Mission envisages making two bank accounts per family mandatory. The mission envisages giving a Rs 5,000 overdraft facility to around 8 crore new account holders and credit guarantee fund will provide a cushion to banks and cover defaults in overdraft accounts.

The government is likely to set up leverage ratio for such a fund in the range of 1:10 or 1:20. Over a period of 4-5 years, credit guarantee fund will have an estimated corpus of Rs 6,000 crore. Further, banks will put an initial limit of Rs 1,000 under the overdraft scheme, which will then be increased if the borrower does not default on payments.

Further, the government scheme could also be extended to over 15 crore present account holders, which may put a burden of over Rs 75,000 crore on the banking system.  Prime Minister Narendra Modi is slated to launch the mission on Independence Day.

Financial Inclusion Mission particularly is aimed to empower the weaker sections of the society, including women, small and marginal farmers and labourers. Under the scheme, every new customer will get a RuPay debit card with an in-built accident insurance cover of Rs 1 lakh. However, the banking industry is of the view that the scheme would enhance the non-performing assets (NPAs) of banks.

The CNX Nifty touched a high and low of 7,655.65 and 7,612.70 respectively.

The major gainers of the Nifty were Tata Power Company up 3.72%, Grasim Industries up by 3.27%, Kotak Mahindra Bank up by 3.18%, ACC up by 3.06% and Hindalco Industries up by 3.02%. On the flip side, the key losers were Mahindra & Mahindra down by 3.28%, IDFC down by 2.48%, Bajaj Auto down by 2.34%, DLF down by 1.66% and ONGC down by 1.20%.

European markets were trading in red; UK’s FTSE 100 down by 0.39%, Germany’s DAX down by 0.44% and France’s CAC 40 was down by 0.58%.

The Asian markets concluded Thursday’s trade mostly in red, with Japanese stocks losing, as brokerages fell with shipping companies and the yen advanced. Japan’s Cabinet Office is due to release its monthly economic update today. It will raise its outlook on the world’s third-biggest economy for the first time in six months. China’s stocks fell the most in a week amid concerns new share sales will divert funds from existing equities and auto demand may slump after the government stated that it would stop providing cars to junior officials. China faces what would be the second default in the nation’s onshore bond market after a builder stated that it may fail to make a payment next week, the latest sign of stress in the world’s biggest corporate debt load. Companies in China are facing tougher operating conditions as growth looks set to cool to 7.4% this year, the slowest in more than two decades. Hong Kong Unemployment Rate rose to a seasonally adjusted 3.2%, from 3.1% in the preceding month.