Markets continue to trade in fine fettle ahead of outcome of Fed’s two day meet

Local equity markets continued to trade in fine fettle on the penultimate session of F&O expiry on sustained buying activities by funds and retail investors ahead of the outcome of Fed’s two day meeting. After bouncing off from day’s low in early deals, both Sensex and Nifty gathering momentum were trading above psychologically crucial 27,000 and 8,050 levels respectively, with gains of over half a percent. Meanwhile, broader indices also trading in sync with larger counterparts were up with gains in the range of 0.50%-0.75%.

On the global front, Asian pacific shares climbed to one-month highs on Wednesday, steered by a robust Wall Street on optimism over corporate earnings and prospects the U.S. Federal Reserve will reaffirm its willingness to wait for an extended period before raising interest rates. However, street is widely expecting Fed to announce on Wednesday it will end its two-year-old bond-buying stimulus, known as quantitative easing three, as the U.S. economy continues to gather momentum.

Closer home, most of the sectoral indices on BSE were reflective of the upbeat mood of markets, however stocks from Banking and Power counters were the only exceptions. On the flip side, stocks from Information Technology, Technology and Metal counters were the top gainers of the session. The losses of OBC stocks spelled pessimism for other banking stocks, especially PSU bank stocks. OBC stocks tanked over 5% despite reporting 15.91% rise in its net profit at Rs 291.42 crore for the quarter ended September 30, 2014 as compared to Rs 251.41 crore for the same quarter in the previous year. Additionally, Realty stocks, viz DLF, DB Realty, Housing Development & Infrastructure (HDIL) were trading lower ahead of Cabinet’s decision of the proposal of relaxing foreign direct investment (FDI) norms in construction sector. The Department of Industrial Policy and Promotion (DIPP), the nodal agency for FDI rules, proposed bringing down the minimum built-up area requirement for FDI in construction projects from 50,000 sq. metres to 20,000 sq. metres along with reducing the minimum capital requirement for such projects from $10 million to $5 million. The overall market breadth on BSE was in the favour of advances which have outpaced declines in the ratio of 1283:673; while 38 shares remained unchanged.

The BSE Sensex is currently trading at 27041.30, up by 160.48 points or 0.60% after trading in a range of 26971.16 and 27062.12. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.59%, while Small cap index up by 0.75%.

The gaining sectoral indices on the BSE were Auto up by 1.43%, IT up by 1.03%, Metal up by 1.01%, Oil & Gas up by 0.98% and TECK up by 0.95% while, Power down by 0.28% and Bankex down by 0.08% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 3.18%, Tata Motors up by 2.73%, Mahindra & Mahindra up by 2.30%, Tata Steel up by 2.06% and Infosys up by 1.71%. On the flip side, Dr. Reddys Lab down by 1.32%, NTPC down by 0.98%, GAIL India down by 0.71%, BHEL down by 0.71% and Sesa Sterlite down by 0.50% were the top losers.

Meanwhile, in the much awaited decision, the cabinet, in its meeting on Wednesday, may take on final call on the issue of relaxing foreign direct investment (FDI) norms in construction sector. Earlier, reports suggested government to ease norms for foreign direct investment in the construction sector ahead of Prime Minister Narendra Modi’s visit to the United States late in September. However, this did not fructify.

The Department of Industrial Policy and Promotion (DIPP), the nodal agency for FDI rules, proposed bringing down the minimum built-up area requirement for FDI in construction projects from 50,000 sq. metres to 20,000 sq. metres along with reducing the minimum capital requirement for such projects from $10 million to $5 million. Currently, the requirements are for built up area of 50,000 square metre and capital of $10 million.

The agency also has proposed additional relaxations for projects which commit at least 30% of the total project cost for low cost affordable housing. Such projects will be exempt from minimum built up area and capitalisation requirements. However, a decision on the minimum lock-in period for FDI, still needs to be firmed up. Notably, the proposal also remains silent on land-use rules for the sector including agricultural land. Nevertheless, the proposal, if approved would also help infuse more funds into the debt burdened sector and facilitate faster completion of projects.

Although, a 100% foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments, the government has imposed conditions. So far, in the period between April 2000 and August 2014, construction development, including townships, housing and built-up infrastructure in the country received FDI worth $23.75 billion or 10 per cent of the total FDI attracted by India during the period.

The CNX Nifty is currently trading at 8069.40, up by 41.80 points or 0.52% after trading in a range of 8052.25 and 8081.05. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.22%, Tata Motors up by 2.83%, Cairn India up by 2.19%, Mahindra & Mahindra up by 2.16% and Tata Steel up by 2.01%. On the flip side, PNB down by 1.40%, Bank of Baroda down by 1.22%, IDFC down by 1.16%, NTPC down by 1.05% and Dr. Reddys Lab down by 0.97% were the top losers.

Asian markets were trading in green; with Straits Times trading higher by 10.15 points or 0.32% to 3,221.80; FTSE Bursa Malaysia KLCI trading higher by 11.18 points or 0.61% to 1,836.86; Shanghai Composite trading higher by 27.95 points or 1.2% to 2,365.82; KOSPI Index trading higher by 35.49 points or 1.84% to 1,961.17; Jakarta Composite trading higher by 46.2 points or 0.92% to 5,047.50; Taiwan Weighted trading higher by 130.13 points or 1.48% to 8,903.68; Nikkei 225 trading higher by 224 points or 1.46% to 15,553.91 and Hang Seng trading higher by 289.69 points or 1.23% to 23,810.05