Benchmarks trade in fine fettle in early deals

After making flat start, Indian equity benchmarks are trading in fine fettle in early deals on Thursday as sentiments got some support from report that foreign investors were net buyers in equities to the tune of Rs 786 crore on Wednesday, as per provisional stock exchange data. Meanwhile, Finance Minister Arun Jaitley has said that India has the capacity to grow at 8-9 per cent and good governance would make economic expansion 'more exuberant'. However, gains remained capped as investors opted to remain on sidelines as October derivative contracts set to expire today.

On the global front, major US share indices ended flat with negative bias overnight after the US Federal Reserve Bank at its two-day meeting ended its monetary stimulus measures of bond purchases and remained confident that the economy is on a growth track. The Asian markets were trading mixed at this point of time with some of the indices trading marginally in red after the Fed’s decision that led the dollar moving higher.

Back home, shares of real estate companies remained on buyers’ radar after the government has relaxed the norms for allowing foreign direct investment (FDI) in the construction development sector.  The move will boost affordable housing projects and smart cities across the country. On the sectoral front, realty, software and technology witnessed the maximum gain in trade, while fast moving consumer goods, power and auto remained the top losers on the BSE sectoral space. The broader indices too were trading slightly in the green, while the market breadth on the BSE was positive; there were 1,077 shares on the gaining side against 775 shares on the losing side while 75 shares remain unchanged.

The BSE Sensex opened at 27098.94; flat as compared to its previous closing of 27098.17, and has touched a high and a low of 27186.68 and 27088.65 respectively. The BSE Sensex is currently trading at 27170.84, up by 72.67 points or 0.27%. There were 18 stocks advancing against 12 stocks declining on the index.

The overall market breadth remained in the favour of advances with 55.89% stocks advancing against 40.22% declines. The broader indices were trading in green; the BSE Mid cap index was up by 0.14%, while Small cap index up by 0.37%.

The gaining sectoral indices on the BSE were Realty up by 2.99%, IT up by 1.95%, TECK up by 1.41%, Consumer Durables up by 1.16% and Healthcare up by 0.65% while, FMCG down by 0.22%, Power down by 0.22%, Auto down by 0.09% and Bankex down by 0.09% were the few losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.08%, Dr. Reddys Lab up by 1.90%, TCS up by 1.38%, Wipro up by 0.94% and GAIL India up by 0.80%. On the flip side, Mahindra & Mahindra down by 1.18%, Hindalco down by 0.83%, Bharti Airtel down by 0.78%, Tata Power down by 0.72% and ITC down by 0.56% 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 opened at 8,085.20; around 5 points lower as compared to its previous closing of 8,090.45, and has touched a high and a low of 8,121.95 and 8,085.20 respectively.

The CNX Nifty is currently trading at 8116.20, up by 25.75 points or 0.32%. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 4.47%, DLF up by 3.72%, HCL Tech up by 3.28%, Infosys up by 2.19% and Dr. Reddys Lab up by 1.82%. On the flip side, Cairn India down by 1.73%, Mahindra & Mahindra down by 1.45%, Hindalco down by 0.96%, Tata Power down by 0.77% and Bharti Airtel down by 0.70% were the top losers.

Asian markets were trading mixed; Nikkei 225 surged by 106.32 points or 0.68% to 15,660.23, Straits Times improved 0.38 points or 0.01% to 3,224.41, Shanghai Composite gained 2.97 points or 0.13% to 2,376.00 and FTSE Bursa Malaysia KLCI was up by 3.15 points or 0.17% to 1,842.70.

On the flip side, Hang Seng tumbled by 110.07 points or 0.46% to 23,709.80, KOSPI Index decreased by 10.63 points or 0.54% to 1,950.54, Jakarta Composite contracted 24.78 points or 0.49% to 5,049.27 and Taiwan Weighted was down by 43.55 points or 0.49% to 8,860.13.