Benchmarks continue to tread water ahead of TCS’ Q1 earnings

In absence of any positive domestic triggers, somber regional counterparts and prevailing caution ahead of Q1FY15 earnings of country’s largest exporters, Tata Consultancy Service (TCS), local equity markets continued treading water, with both Sensex and Nifty, hovering above the crucial 25,500 and 7,600 levels respectively. Meanwhile, broader indices outperforming frontline indices were trading with hefty gains of over a percent. Nevertheless, some positive report over monsoon is mainly preventing any sharp slide of barometer gauges. As per latest weather report, with most parts of India now seeing decent rainfall, the monsoon deficiency is expected to be wiped out and reduced to 25% by July-end.

On the global front, while most of Asian pacific shares looked set for a red close, giving up earlier modest gains amid speculation the U.S. Federal Reserve was tilting towards tighter monetary policy. Additionally, European shares were trading slightly lower on Thursday as investors paused for breath awaiting cues from earnings and a slew of U.S. data slated for release later in the day.

Closer home, majority of the sectoral indices on BSE were holding into positive territory in the lackluster session of trade, with stocks from Power, Consumer Durables and Metal counters outperforming their peers. On the flip side, stocks from Oil & Gas, Auto and Realty counters were the weak links of trade. Meanwhile, IT stocks also were in demand ahead of TCS’ earnings. On the flip side, Auto stocks lost steam after Bajaj Auto's net profit rose just 0.31% to Rs 739.98 crore on 7.57% increase in total income to Rs 5471.68 crore in first quarter ended June 2014 over the corresponding quarter in the previous year. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1269:608; while 32 shares remained unchanged.

The BSE Sensex is currently trading at 25530.61, down by 19.11 points or 0.07% after trading in a range of 25494.46 and 25610.47. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.10%, while Small cap index up by 1.00%.

The gaining sectoral indices on the BSE were Power up by 1.56%, Consumer Durables up by 1.47%, Metal up by 1.42%, IT up by 0.95%, Capital Goods up by 0.86% while, Oil & Gas down by 0.80%, Auto down by 0.57%, Realty down by 0.53%, Bankex down by 0.30% and PSU down by 0.06% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 2.20%, Tata Steel up by 2.01%, Coal India up by 1.49%, Infosys up by 1.44% and Cipla up by 1.44%. On the flip side, Mahindra & Mahindra down by 3.13%, Bajaj Auto down by 2.58%, ONGC down by 2.34%, Maruti Suzuki down by 1.37% and SBI down by 0.86% were the top losers.

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 is currently trading at 7627.35, up by 2.95 points or 0.04% after trading in a range of 7612.70 and 7643.60. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Kotak Mahindra Bank up by 2.94%, Grasim Industries up by 2.75%, Jindal Steel & Power up by 2.63%, Tata Steel up by 2.06% and ACC up by 2.04%. On the flip side, Mahindra & Mahindra down by 2.95%, Bajaj Auto down by 2.39%, ONGC down by 2.37%, IDFC down by 1.96% and DLF down by 1.20% were the top losers.

Asian markets were trading mostly into negative territory; Taiwan Weighted slid by 76.49 points or 0.81% to 9,408.24; Hang Seng tumbled 37.98 points or 0.16% to 23,485.30; Jakarta Composite shed 29.14 points or 0.57% to 5,084.79; Shanghai Composite declined by 13.46 points or 0.65% to 2,053.81; Nikkei 225 inched lower by 9.04 points or 0.06% to 15,370.26; Straits Times lost 2.93 points or 0.09% to 3,301.50 and FTSE Bursa Malaysia KLCI also was trading lower by 2.91 points or 0.15% to 1,883.80. On the flip side, KOSPI Index rose by 7.42 points or 0.37% to 2,020.90;

European markets got off to a negative start; with France’s CAC shedding 0.75%; UK’s FTSE 100 losing0.75% and Germany’s DAX sliding by 0.53%