Benchmarks continue weak trade; Consumer Durables drag

Indian equity benchmarks trimmed loses but continued their weak trade in the late afternoon session on account of profit booking in frontline blue chip counters. Investors turned concerned that the current rally has exceeded the outlook for earnings. They took no note of heavy monsoon rains which reduced rainfall deficit by 11% points to 25% from 36% a week ago. Traders were seen piling up positions in Metal, Realty and FMCG while selling was witnessed in Consumer Durables, Oil & Gas and HealthCare sector stocks. In scrip specific development, Ipca Laboratories dropped after the company temporarily suspended shipments to the United States from one of its drug ingredient manufacturing plants after the USFDA expressed concerns regarding the unit. Hectic activity was witnessed in insurance related stocks such as Max India, Reliance Capital and Exide Industries after the Cabinet approved the hike of the foreign direct investment in the insurance sector to 49% from the current level of 26%.

On the global front, the Asian markets were trading mixed, while the European markets traded mostly on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 7,800 and 26,200 levels respectively. The market breadth on BSE was negative in the ratio of 1379:1397 while 122 scrips remained unchanged.

The BSE Sensex is currently trading at 26136.72, down by 10.61 points or 0.04% after trading in a range of 26190.81 and 26077.70. There were 18 stocks advancing against 12 stocks declining on the index. The broader indices were trading mixed; the BSE Mid cap index was down by 0.03%, while Small cap index up by 0.27%.

The gaining sectoral indices on the BSE were Metal up by 1.17%, Realty up by 0.58%, FMCG up by 0.28%, PSU up by 0.28% and IT up by 0.11% while, Consumer Durables down by 0.81%, Oil & Gas down by 0.44%, HealthCare down by 0.37%, Power down by 0.34% and India Infrastructure Index down by 0.30% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco Industries up by 1.81%, Tata Steel up by 1.54%, Hindustan Unilever up by 0.87%, SSLT up by 0.80% and Wipro up by 0.79%. On the flip side, GAIL India down by 1.82%, Dr. Reddy’s Lab down by 1.17%, HDFC down by 0.99%, Hero MotoCorp down by 0.85% and Cipla down by 0.83% were the top losers.

Meanwhile, the cabinet has approved the hike of foreign direct investment limit to 49 percent in insurance sector from the prevailing 26 percent. The government has cleared that it would take up the Insurance Amendment Bill as soon as possible in the Parliament. The bill is likely to pass easily in Parliament as the country’s second largest party, Congress, has indicated that it will support the bill. The Insurance Amendment Bill, which has been pending in the Parliament since 2008, proposed to enhance FDI limit to 49% with full management and control through Foreign Investment Promotion Board (FIPB) route.

Presently, most of the insurance companies particularly private players are facing severe shortage of funds. If the bill gets passed in parliament, most of the insurance companies, barring the public sector insurance companies, would benefit from higher FDI cap.

An increase in the ceiling for the insurance sector will automatically translate into a similar limit for the pension business. The government expects inflows of $6-7 billion into the pension and insurance sectors, which in turn will also generate long-term funds to finance infrastructure projects as individuals invest in insurance and pension schemes with a 20-30 year horizon. Accordingly, same investment is further invested in long-term instruments such as government securities and corporate bonds with a small portion also flowing into the stock markets.

The insurance sector was opened up to the private sector in 2000. Since then, the number of private players in the insurance sector has gone up from seven to 53 as on March 31, 2014, operating in the life, non-life, and re-insurance segments.

The CNX Nifty is currently trading at 7788.75, down by 7.00 points or 0.09% after trading in a range of 7807.20 and 7771.65. There were 25 stocks advancing against 22 stocks declining while 3 stocks remained unchanged on the index.

The top gainers on Nifty were Bank of Baroda up by 2.26%, HCL Technologies up by 2.10%, Tata Steel up by 1.80%, Hindalco Industries up by 1.63% and Asian Paints down by 1.25%. On the flip side, Cairn India down by 6.60%, GAIL India down by 1.77%, IndusInd Bank down by 1.35%, Dr Reddy’s Lab down by 1.24% and HDFC down by 1.08% were the top losers.

The Asian markets were trading on a mixed note, Straits Times added 0.21%; Shanghai Composite rallied by 1.28%; Taiwan Weighted advanced 0.30% and Hang Seng too rose by 0.71%.

On the flip side, FTSE Bursa Malaysia KLCI inched lower by 0.01%; Jakarta Composite lost 0.20%; Nikkei 225 declined by 0.29% and KOSPI Index was down by 0.08% were the losers among Asian pack.

The European markets were trading mostly in green; Germany’s DAX was up by 0.17%, France’s CAC 40 added 0.35% while, UK’s FTSE 100 lost 0.08%.