Markets trade in fine fettle with gains of over 0.50%; Sensex just shy off the crucial 25800 level

After dropping to intra-day’s low and recovering lost ground subsequently, markets were trading higher with gains of over half a percent on persistent buying activities by funds and retail investors after reports suggested of monsoon deficit has come down by 31% with rains picking up in July across the country. Strong gains of market bellwether Reliance Industries after strong Q1 earnings also was supporting market’s uptrend, with Sensex trading shy off the psychological 25800 and Nifty comfortably sailing past the 7,700 levels respectively. Meanwhile, broader indices outperforming larger peers were rallying with gains of over one percent. Mukesh Ambani led Reliance Industries (RIL) reported a 5.5% growth in net profit to Rs 5,649 crore on a standalone basis for the quarter ended June 30, 2014.

On the global front, Asian pacific shares shed all its gains, seen in early deals on receding concerns over conflict in Eastern Europe and the Middle East. Meanwhile, European shares got off to a red start as sentiment remained subdued due to the ongoing tensions in Gaza and Ukraine.

Closer home, stocks from Oil & Gas, Fast Moving Consumer Goods (FMCG) and Banking counters garnered strong buying interest, while those from Information Technology, Technology and Banking counters were the weak links of trade.  The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1393:4799; while 15 shares remained unchanged.

The BSE Sensex is currently trading at 25795.54, up by 153.98 points or 0.60% after trading in a range of 25715.78 and 25861.15. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.13%, while Small cap index up by 1.41%.

The gaining sectoral indices on the BSE were Oil & Gas up by 1.18%, FMCG up by 0.98%, Bankex up by 0.90%, Consumer Durables up by 0.64%, Infra up by 0.53% while, IT down by 0.39%, TECK down by 0.16%, Capital Goods down by 0.11% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.80%, HDFC up by 2.65%, Maruti Suzuki up by 1.52%, Axis Bank up by 1.31% and ITC up by 1.28%. On the flip side, Hindalco down by 1.76%, Infosys down by 1.32%, GAIL India down by 0.83%, Wipro down by 0.75% and Tata Motors down by 0.46% were the top losers.

Meanwhile, with an objective of furthering financial inclusion, the Reserve Bank of India (RBI) has floated draft guidelines for setting up of two new types of banks -payment banks and small banks. While, small banks will disburse small-ticket loans to farmers and businesses, payment banks will cater to marginalized sections of society, including migrant labourers, for collecting deposits and remitting funds.

A Payment Bank though would be able to take deposits, but cannot lend and would have to invest all the funds in government securities. On the other hand, small Bank would be allowed to lend, but with restrictions on where they can operate. These two types of banks will have uniform capital requirement of Rs 100 crore as against Rs 500 crore required for normal commercial banks, according to the guidelines. However, of the minimum capital requirement of Rs 100 crore, the promoters’ initial minimum contribution will be at-least 40%, to be locked in for a period of five years. This shareholding would be later brought down to 40% within three years, 30% within a period of 10 years, and to 26% within 12 years from the date of commencement of business of the bank.

As per the guidelines, the proposed small banks will provide a whole suite of basic banking products such as deposits and supply of credit, but in a limited area of operation. On the other hand, payment banks will offer a limited range of products such as acceptance of demand deposits and remittances of funds. Payment Bank would have a widespread network of access points particularly in remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.

Meanwhile, in terms of eligibility, while existing non-bank pre-payment instrument issuers, non-banking finance companies (NBFCs), corporate BCs, mobile telephone companies, super-market chains, companies, real sector cooperatives and public sector entities may apply to set up a payments bank, resident individuals with 10 years of experience in banking and finance, companies and societies will be eligible as promoters to set up small banks. Besides, NBFCs, micro finance institutions (MFIs), and Local Area Banks (LABs) could also quality for conversion into small banks.

Notably, these guidelines come just days 10 after Finance Minister Arun Jaitley, in his budget speech, highlighted that RBI would create a framework for licensing small banks and other differentiated banks.

The CNX Nifty is currently trading at 7702.80, up by 38.90 points or 0.51% after trading in a range of 7681.35 and 7722.10. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 2.79%, HDFC up by 2.46%, Indusind Bank up by 2.31%, Grasim Industries up by 2.27% and ACC up by 1.82%. On the flip side, Hindalco down by 1.98%, Infosys down by 1.43%, DLF down by 1.29%, Ultratech Cement down by 1.14% and GAIL India down by 0.89% were the top losers.

Asian markets were mostly reeling under pressure; with Straits Times rising by 3.03 points or 0.09% to 3,313.56; Jakarta Composite adding 38.36 points or 0.75% to 5,125.38 and Taiwan Weighted advancing 40 points or 0.43% to 9,440.97. On the flip side, Nikkei 225 declining by 154.55 points or 1.01% to 15,215.71; Hang Seng shedding 11.77 points or 0.05% to 23,443.02; Shanghai Composite sliding by 4.88 points or 0.24% to 2,054.19; FTSE Bursa Malaysia KLCI dropping 1.87 points or 0.10% to 1,871.10 and KOSPI Index inching lower by 0.92 points or 0.05% to 2,018.50