Benchmarks eke out slender gains

Indian equity benchmarks ended the volatile day of trade slightly in the green on Tuesday on supportive global cues. Local equity markets, which started on optimistic note failed to sustain the early euphoria and slipped into negative territory in afternoon deals. While, the mood remained downbeat for most of the afternoon, recovery, which emerged in the last hour of trade, mainly acted as saving grace for markets.

Overall, the domestic sentiment remained upbeat as foreign funds and retail investors engaged in enlarging positions on expectations of acceleration in economic reforms by the government after the expansion of the Union Cabinet. Some support also came in from international ratings agency Moody’s quarterly Global Macro Outlook report that it expects India to witness ‘sustained robust growth’ over the next two years. However, gains remained capped as prevailing caution ahead of October Consumer Price Index (CPI) data to be released today. Meanwhile, as per some reports the consumer inflation rate for the month of October is expected cool down to 5.8% from 6.4% in the previous month due to a sharp fall in food and oil prices. The fall in Brent Crude prices to a four-year low of $81.23, which is likely to help lower the fiscal deficit, also boosted sentiments.
 
Global cues too remained supportive with European markets making a positive start and were trading in the green. The Asian markets ended mixed with Nikkei outperforming its Asian peers and closed up around 2% on reports that Prime Minister Shinzo Abe may postpone a planned sales tax increase, while Shanghai Composite ended lower on account of profit booking.

Back home, sentiments got some support from report that foreign portfolio investors (FPIs) bought shares worth a net Rs 355.30 crore on November 10, 2014, provisional data released by the stock exchanges showed. Meanwhile, rally in stocks related to infra segment aided the sentiments. Scrips like Hindustan Construction Company (HCC), PBA Infrastructure, Madhucon Projects, IRB Infrastructure Developers edged higher after the Ministry of Road Transport & Highways and the Ministry of Railways signed a Memorandum of Understanding (MoU) on policy related to constructions of Road Over/Under Bridges (ROBs/RUBs) on National Highway corridors. Moreover, shares of public sector oil marketing companies remained on buyers’ radar as global crude oil prices dropped. Lower crude oil prices could reduce under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices.

The NSE’s 50-share broadly followed index Nifty gained around twenty points to end above the psychological 8,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over thirty to end above the psychological 27,900 mark. Broader markets too were traded in-line with benchmarks and ended the session with a gain of around half a percent. The market breadth remained in favour of advances, as there were 1579 shares on the gaining side against 1433 shares on the losing side while 108 shares remain unchanged.

Finally, the BSE Sensex gained 35.33 points or 0.13%, to 27910.06, while the CNX Nifty added 18.40 points or 0.22% to 8,362.65.

The BSE Sensex touched a high and a low of 27996.92 and 27790.40, respectively. The BSE Mid cap index was up by 0.72%, while the Small cap index was up by 0.24%.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.35%, Tata Steel up by 1.84%, GAIL India up by 1.63%, Axis Bank up by 1.42% and HDFC up by 1.09%. On the flip side, BHEL down by 2.41%, ITC down by 1.91%, Bharti Airtel down by 1.43%, Infosys down by 1.09% and Coal India down by 1.03% were the top losers in the index.

On the BSE Sectoral front Realty up by 1.05%, Bankex up by 0.74%, Auto up by 0.68%, Capital Goods up by 0.63% and Oil & Gas up by 0.44% were the top gainers, while Consumer Durables down by 1.20%, FMCG down by 0.69%, IT down by 0.37%, TECK down by 0.30% and Metal down by 0.13% were the top losers in the space.

Meanwhile, with an objective to mitigate risk in the sector, the Reserve Bank of India (RBI) has tightened rules for NBFCs, also known 'shadow banks', by raising capital adequacy requirement and net owned fund limit, among others. India’s Apex Bank also has restricted deposits with a set of changes that it hopes will protect consumers and the market without stifling growth.

As per the latest directives, the RBI has raised the limit for NBFCs to maintain the Net Owned Fund (NOF) requirement to four times by 2017 to Rs 2 crore. Prior to this, the NOF requirement stood at Rs 25 lakh. NBFCs, in a phased manner, would be required to raise it to Rs 1 crore by March 2016 and further double it to Rs 2 crore by 2017.

Also, it directed NBFCs, primarily engaged in lending against gold jewellery, to maintain a minimum tier I capital (or equity capital) of 12% with effect from April 1, 2014 as against existing requirement of 10%. For deposit and non-deposit taking NBFCs, Capital to Risk (Weighted) Assets Ratio or CRAR, which includes tier I capital of 7.5%, stands at 15% at present. But as per new rules, NBFCs have to raise the tier I capital to 8.5% by end of March 2016 and 10 percent by March 31, 2017.

On provisioning front, RBI has ordered NBFCs to raise provisioning of standard assets to 0.3% by end of March 2016; 0.35% by March 2017 and to 0.4% by end of March 2018. At present, every NBFC is required to make a provision for standard assets at 0.25% of the outstanding. Importantly, to create a level playing field, RBI has mandated similar asset classification norms for NBFCs-ND-SI and NBFCs-D as that for banks.

Further, tightening the loop, RBI has mandated that NBFCs failing to achieve the prescribed ceiling within the stipulated time period would not be eligible to hold the CoR (Certificate of Registration) as NBFCs.

According to RBI, NBFCs being financial entities are as exposed to risks arising out of counterparty failures, funding and asset concentration, interest rate movement and risks pertaining to liquidity and solvency, as any other financial sector player. This risk, therefore needs to be addressed by RBI, without impeding the dynamism displayed by NBFCs in delivering innovation and last mile connectivity for meeting the credit needs of the productive sectors of the economy.

The CNX Nifty touched a high and low of 8,378.70 and 8,321.85 respectively.

The top gainers on Nifty were PNB up by 3.60%, Bank of Baroda up by 3.14%, IDFC up by 2.68%, Mahindra & Mahindra up by 2.61% and UltraTech Cement up by 2.24%. On the flip side, BHEL down by 2.01%, ITC down by 1.87%, NMDC down by 1.73%, Bharti Airtel down by 1.69% and Cairn India down by 1.35% were the top losers.

European markets were trading in the green, United Kingdom’s FTSE 100 was up by 0.21%, France’s CAC 40 was up by 0.43% and Germany’s DAX was up by 0.31%.

Asian markets ended mixed on Tuesday, with Nikkei hitting a new seven-year high due to weaker yen and following another record close on Wall Street. Indonesia’s benchmark stock index gained for the first time in seven days on speculation President Joko Widodo will improve regional trade ties and secure enough support from parliament to push through reforms. Widodo is on a nine-day trip to attend the Asia Pacific Economic Cooperation summit in Beijing, prompting speculation he’ll attract more foreign direct investment to Southeast Asia’s biggest economy. Since starting work on October 27, Jokowi’s ministers have promised to cut fuel subsidies and overhaul permits for investors. Jokowi’s biggest test will be in pushing through plans to increase the price of subsidized fuel.

Japan’s economy watchers current index fell unexpectedly last month. The Japan’s Economy Watchers Current Index fell to a seasonally adjusted 44.0, from 47.4 in the preceding month. Japan posted its third consecutive monthly surplus in September of $8.1 billion, as a weaker yen lifted the value of overseas investment income, despite continuing trade deficits while Japanese Household Confidence rose to a seasonally adjusted annual rate of 38.9. Malaysian Industrial Production fell to a seasonally adjusted annual rate of 5.4%, from 6.5% in the preceding month.