Benchmarks off day’s low post release of five year low August WPI data

After showing wee bit of recovery post the release of five year low August WPI data, Indian equity markets yet again have surrender to selling pressure and were trading with cut of over three fourth of a percent, shy of the crucial 26,850 and 8,050 levels respectively. However, bit of buying momentum which crept in early afternoon deals, post India's main inflation gauge, based on monthly WPI eased to 3.74% for the month of August as compared to 5.19% in the previous month, have mainly lifted benchmarks from day’s low. Meanwhile, broader indices continuing to stage a contrary trend were holding their heads above water and trading with gains in the range of 0.10%-0.50%.

On the global front, Asian pacific shares were set for mostly lower close, hurt by sluggish growth in China, which were seen as adding to the list of worries for investors that include the possibility of higher U.S. interest rates and signs that Europe was slowing. Meanwhile, European shares receiving a negative handover from their Asian counterparts, got off to a sluggish start.

Closer home, with across the broad selling pressure, none of the sectoral indices managed to show resilience, nevertheless the prominent losers were the stocks belonging from Metal, Information Technology and Oil & Gas counters. However, PSU banking stocks cut back some of their losses after August WPI data came in more lower than expectation. However, market-participants drew some solace from Reserve Bank of India (RBI) Governor Raghuram Rajan’s statements. Reserve Bank of India (RBI) Governor Raghuram Rajan said India's macroeconomic indicators are improving and inflation has been coming down consistent with the central bank's forecast, though highlighted that Asia's third-largest economy needs investment growth to pick up. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1569:1195: 97 shares remained unchanged.

The BSE Sensex is currently trading at 26847.93, down by 213.11 points or 0.79% after trading in a range of 26813.02 and 26998.07. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.09%, while Small cap index up by 0.47%.

The losing sectoral indices on the BSE were Metal down by 1.40%, IT down by 0.79%, Oil & Gas down by 0.74%, FMCG down by 0.72% and Capital Goods down by 0.71%.

The top gainers on the Sensex were Cipla up by 2.84%, Hero MotoCorp up by 1.01%, HDFC Bank up by 0.85%, Dr. Reddys Lab up by 0.71% and BHEL up by 0.11%. On the flip side, Hindalco down by 2.88%, GAIL India down by 1.85%, Tata Steel down by 1.85%, HDFC down by 1.84% and Wipro down by 1.70% 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 8046.55, down by 58.95 points or 0.73% 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 United Spirits up by 4.08%, Cipla up by 3.04%, PNB up by 1.90%, Bank of Baroda up by 1.42% and Hero MotoCorp up by 0.96%. On the flip side, Jindal Steel & Power down by 3.30%, Hindalco down by 2.91%, GAIL India down by 1.97%, Asian Paints down by 1.94% and HDFC down by 1.88% were the top losers.

Asian markets were trading mostly lower; Hang Seng down by by 181.21 points or 0.74% to 24,414.11; Straits Times down by 11.5 points or 0.34% to 3,334.05; Jakarta Composite down by 7.46 points or 0.14% to 5,136.25; FTSE Bursa Malaysia KLCI down by 7.41 points or 0.4% to 1,848.23; KOSPI Index down by 6.04 points or 0.3% to 2,035.82 and Taiwan Weighted down by 5.72 points or 0.06% to 9,217.46. On the flip side, Shanghai Composite up by 2.94 points or 0.13% to 2,334.89 and Nikkei 225 advanced 39.09 points or 0.25% to 15,948.29.

European markets got off to a negative start; with Germany’s DAX trading lower by 21.57 points or 0.22% to 9,629.56; UK’s FTSE 100 losing 23.86 points or 0.35% to 6,783.10 and France’s CAC shedding 13.76 points or 0.31% to 4,427.94.