Benchmarks trim losses; August WPI eases to five year low at 3.74%

Indian equity benchmarks trimmed losses but continued to trade in red in the late afternoon session on account of selling in frontline blue chip counters. The sentiments were on pessimistic note from the early trades as India’s industrial output growth hit a four-month low in July when it grew much slower-than-expected at 0.5 percent year-on-year. Investors however took some comfort after India’s main inflation gauge, based on monthly WPI, softened more than expected at 3.74% for the month of August, as compared to 5.19% (Provisional) for the previous month of July. Street widely was expecting a number above 4% for the month under review. Traders were seen selling in Metal, Capital Goods and Bankex sector stocks. In scrip specific development, Fortis Healthcare was trading firm touching 52-week high after it sold its Singapore-based diagnostics business RadLink-Asia for Singapore $137 million.

On the global front, the Asian markets were trading mostly in red. Back home, the NSE Nifty and BSE Sensex were trading below psychological 8,050 and 26,900 levels respectively. The market breadth on BSE was positive in the ratio of 1519:1167 while 89 scrips remained unchanged.

The BSE Sensex is currently trading at 26885.52, down by 175.52 points or 0.65% after trading in a range of 26813.02 and 26998.07. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.03%, while Small cap index up by 0.48%. The losing sectoral indices on the BSE were Metal down by 1.30%, Capital Goods down by 0.69%, Bankex down by 0.67%, IT down by 0.61%, Oil & Gas down by 0.59%.

The top gainers on the Sensex were Cipla up by 2.83%, Hero MotoCorp up by 1.02%, Dr. Reddy’s Lab up by 0.78%, HDFC Bank up by 0.74% and NTPC up by 0.40%. On the flip side, Hindalco down by 2.79%, GAIL India down by 2.17%, HDFC down by 1.88%, Tata Steel down by 1.87% and ICICI Bank down by 1.47% were the top losers.

Meanwhile, clearing the way for corporates to enter differentiated banks segments, the Reserve Bank of India (RBI) is likely to issue final guidelines on small and payments banks within two-three months. The final norms will allow micro finance institutions, telecom players, non-banking finance companies (NBFCs) and public sector companies eligible to apply for bank licences once RBI invites applications for the same.

India’s central bank, which back in July floated draft guidelines for small and payment banks, had sought comments until August 28. RBI presently is in the process of examining the suggestions received and is in the process of finalising the norms for such banks.

With an objective of furthering financial inclusion, the Reserve Bank of India (RBI) 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.

According to the guidelines, 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.

The CNX Nifty is currently trading at 8055.40, down by 50.10 points or 0.62% after trading in a range of 8030.00 and 8077.30. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Cipla up by 2.93%, United Spirits up by 2.78%, Bank of Baroda up by 1.14%, Tech Mahindra up by 1.12% and Dr. Reddy’s Lab up by 1.04%. On the flip side, Jindal Steel & Power down by 3.07%, Hindalco down by 2.91%, GAIL India down by 2.27%, HDFC down by 1.93% and Asian Paints down by 1.75% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 134.96 points or 0.55% to 24,460.36, Jakarta Composite decreased 12.54 points or 0.24% to 5,131.17, Straits Times decreased 10.7 points or 0.32% to 3,334.85, FTSE Bursa Malaysia KLCI decreased 8.73 points or 0.47% to 1,846.91, KOSPI Index decreased 6.04 points or 0.3% to 2,035.82 and Taiwan Weighted decreased 5.72 points or 0.06% to 9,217.46.

On the other hand, Shanghai Composite increased 4.88 points or 0.21% to 2,336.83 and Nikkei 225 increased 39.09 points or 0.25% to 15,948.29.