Selling in Auto and Realty stocks drags Indian equities to day’s lows

Indian equity markets continued to lose steam in Wednesday afternoon trades as investors lacked conviction to take larger bets a session after witnessing a sharp close to three percent rally. The benchmark indices have slipped by around half a percent to the session’s lows and are gradually inching closer to the important psychological 4,700 (Nifty) and 15,750 (Sensex) levels amid hefty selling pressure in the rate sensitive Automobile and Real Estate stocks. Meanwhile reports that India’s resilient service sector expanded in Dec at sharpest pace since July on the back of strong new business and output growth went unnoticed by market participants. Leads from the Asian space too remained mixed as some markets rallied on the back of encouraging US economic reports while the rest plunged after Chinese Premier’s remarks that China faces relatively difficult business conditions. Meanwhile, the European futures too indicated that the markets there would start on a negative note ahead of German and Portugal’s bond auction. Back home, on the BSE sectoral space, the PSU index remained the top gainer in the space with over a percent gain followed by the beaten down Capital Goods and defensive - Healthcare pockets which traded about half a percent gains. On the other hand, the Rate sensitive Auto index plummeted over a percent followed by the high beta Realty counter that slipped by around a percent.

Moreover, the broader markets bucked the pessimistic trend that their larger peers exhibited and traded with a positive bias with marginal gains. The bourses slipped on good volumes of over Rs 0.50 lakh crore. The market breadth on BSE was in favor of advances in the ratio of 1366:1052 while 120 scrips remained unchanged.

The BSE Sensex is currently trading at 15,877.74 up by 61.62 points or 0.39% after trading as high as 15,992.16 and as low as 15,839.70. There were 12 stocks advancing against 18 declines on the index.

The broader indices were trading on an optimistic note; the BSE Mid cap index gained 0.20% and Small cap rose 0.14%.

On the BSE sectoral space, PSU up 1.07%, Capital Goods up 0.50%, Healthcare up 0.28%, Bankex up 0.18% and Power up 0.15% were the major gainers while Auto down 1.32%, Realty down 0.85%, TECk down 0.67%, Consumer Durables down 0.60% and IT down 0.35% were the major losers in the space.

ICICI Bank up 1.94%, BHEL up 1.63%, Tata Motors up 1.42%, Cipla up 1.22% and ONGC up 0.99% were the major gainers on the Sensex, while Bajaj Auto down 4.46%, Hero Motor down 2.75%, M&M down 2.74%, HUL down 2.66% and DLF down 2.56% were the major losers in the index.

Meanwhile, the Securities and Exchange Board of India (SEBI) in its board meeting on January 3 announced two new means through which local firms could sell shares without floating a public issue. The move is likely to prove helpful in expediting the government's disinvestment programme and also fast tracking the sale of promoters' equity in listed companies to meet minimum public shareholding norms. The new mechanisms, which are comparatively speedier, less expensive and secure methods of raising money for promoters, are expected to simplify the process of increasing public shareholding for domestic firms.

One of the mechanism created by SEBI for share sales is the institutional placement programme (IPP), which will allow promoters to sell up to 10 percent of their capital till they comply with the minimum public shareholding requirement of 25%. The IPP, which can be used for both fresh issuance of capital and dilution of stakes by the promoters, is a route through which shares can be offered only to qualified institutional buyers (QIBs) while at least 25% has to be reserved for mutual funds and insurance firms.

The other mechanism introduced by the market regulator is offer for sale through stock exchanges which allows promoters to sell shares on the stock exchanges but from a separate window for auction that would be open during normal trading hours. Under this mechanism, the promoters will only be allowed to offer shares for sale while the bidders will be have to pay 100% margin in cash upfront against every buy order.

Amid the recent volatile stock market situation, the finance ministry had to abstain from divesting stakes in many state-owned companies like Oil and Natural Gas Corporation, Steel Authority of India and Indian Oil Corporation. But with the new norms in place, government can now look to reduce its fiscal deficit via stake sale of public sector units.

Moreover, in its bid to substantially reduce the time taken for completion of share buyback, the SEBI has revised the timeline for various activities involved in the share buyback process. Shareholders will be allowed to tender over-and-above their entitlement but acceptance of shares shall first be based on the entitlement of each shareholder. If any shares are still left to be bought back, acceptance of additional shares tendered over-and-above the entitlement shall be in proportion to the excess shares tendered by the shareholder.

The S&P CNX Nifty is currently trading at 4,744.45, lower by 20.85 points or 0.44% after trading as high as 4,780.55 and as low as 4,733.05. There were 18 stocks advancing against 32 declines on the index.

The top gainers on the Nifty were HCL Tech up 4.90%, IDFC up 2.07%, SAIL up 2.03%, ICICI Bank up 1.83% and Tata Motors up 1.60%.

Bajaj Auto down 4.37%, ACC down 3.33%, Ambuja down 3.23%, HUL down 2.67% and M&M down 2.66% were the only losers on the index.

Asian markets were trading mixed; Jakarta Composite surged 1.45%, Nikkei 225 soared 1.24%, Straits Times advanced 0.41% and Taiwan Weighted gained 0.42%.

On the flipside, Shanghai Composite plunged 1.26%, Hang Seng shed 0.62% and Seoul Composite declined 0.49%.