Benchmarks continue firm trade; Realty, Auto lead

Indian equity markets continued their firm trade in the late afternoon session on account of buying in frontline blue chip counters. The sentiments were optimistic from early trades ahead of the outcome of Fed’s two day meeting. Traders were seen piling positions in Realty, Auto and Metal while selling was witnessed in Bankex, Power and PSU sector stocks.  In scrip specific development, Oriental Bank of Commerce was trading in red after the banks’ bad loans increase to 3.29 percent of advances in Sept-quarter versus 3.11 percent in June quarter - company filing. Jubilant Life Sciences was trading weak after it reported dismal July-September quarter results. The drug company’s net loss widened to Rs 94.11 crore in Q2 from Rs 80.58 in year-ago period. The markets may remain volatile this week as traders may rollover positions in the Futures & Options (F&O) segment from the near month i.e. October 2014 series to next month i.e. November 2014 series. The near month October 2014 derivatives contract will expire on Thursday i.e. October 30, 2014.

On the global front, the Asian markets were trading in green while the European markets were trading on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,050 and 27,000 levels respectively. The market breadth on BSE was positive in the ratio of 1525:1264 while 105 scrips remained unchanged.

The BSE Sensex is currently trading at 27020.12, up by 139.30 points or 0.52% after trading in a range of 26971.16 and 27062.12. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.48%, while Small cap index up by 0.77%.

The gaining sectoral indices on the BSE were Realty up by 2.36%, Auto up by 1.72%, Metal up by 1.56%, Consumer Durables up by 1.17%, FMCG up by 1.06% while, Bankex down by 0.29%, Power down by 0.21%, PSU down by 0.10%, Capital Goods down by 0.09%, Infra down by 0.04% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 4.43%, Tata Steel up by 3.25%, Tata Motors up by 2.84%, Mahindra & Mahindra up by 2.53% and Infosys up by 1.74%. On the flip side, Dr. Reddy’s Lab down by 1.81%, BHEL down by 1.10%, Bharti Airtel down by 1.08%, Sun Pharma down by 0.76% and Gail India down by 0.74% were the top losers.

Meanwhile, in order to take advantage of the bullish Indian stock market sentiments, Finance Ministry has initiated measures to cut government stake in public sector banks to 51%. The move will help the PSU banks to expand their equity base by issuing fresh shares to the public.

The government is of the view that PSU banks should be well capitalized to meet the funding requirement  as several banks including State bank of India (SBI) will need more equity to meet the higher fund requirement of corporate and retail borrowers in coming years. A higher equity base will enable banks to issue more bonds and maintain capital adequacy ratio of around 12%. There are six state-run banks whose capital adequacy ratio stands below 12% because government holding in these banks stands around 60%.

The government has projected that state-owned banks will need around Rs 2.4 lakh crore till 2018. With government finances already stretched, it decided to give around over Rs 11,000 crore for recapitalizing banks and the rest of the funds are needed to be raised from the market. It has also asked the public sector banks to sell non-core assets and initiate several other measures to meet the funding needs.

Earlier in May, an RBI panel had suggested the government to cut its holding in public sector banks to below 50 percent. The panel has said that governance at the 26 PSU banks suffers due to several ‘externally imposed constraints’ like dual regulation by the Finance Ministry and RBI and external vigilance by agencies like the CVC and CAG among others. Further, the move would also benefit the government as it would continue to be the dominant shareholder and create a condition for its banks to compete more successfully.

The CNX Nifty is currently trading at 8066.50, up by 38.90 points or 0.48% after trading in a range of 8052.25 and 8081.05. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 4.67% and DLF up by 4.67% and Tata Steel up by 3.26% and Tata Motors up by 2.82% and Cairn India up by 2.63%. On the flip side, PNB down by 2.06%, Dr. Reddy’s Lab down by 1.85%, Bank of Baroda down by 1.36%, BHEL down by 1.10% and HDFC down by 0.91% were the top losers.

The Asian markets were trading in green; Straits Times increased 9.27 points or 0.29% to 3,220.92, FTSE Bursa Malaysia KLCI increased 11.46 points or 0.63% to 1,837.14, Shanghai Composite increased 35.16 points or 1.5% to 2,373.03, KOSPI Index increased 35.49 points or 1.84% to 1,961.17, Jakarta Composite increased 68.37 points or 1.37% to 5,069.68, Taiwan Weighted increased 130.13 points or 1.48% to 8,903.68, Nikkei 225 increased 224 points or 1.46% to 15,553.91 and Hang Seng increased 299.51 points or 1.27% to 23,819.87.

The European markets were trading in green; France’s CAC increased 12.98 points or 0.32% to 4,125.65, Germany’s DAX increased 74.51 points or 0.82% to 9,142.70 and UK’s FTSE 100 increased 32.65 points or 0.51% to 6,434.82.