Markets continue to trade in tight range in early noon session

Markets continue to trade rangebound in the early noon session with no major push in either direction in sight. The good global cues too are not making much impact on the local bourses, while the drag in some bluchips like RIL and SBI was restricting any major gains. Meanwhile, Finance Minister Arun Jaitley has said that there is 'no disconnect' with RBI, squelching growing talk of a rift between the government and Reserve Bank over a number of Budget proposals. Traders were getting some support with the strength in rupee which was trading up on increased selling of the American currency by exporters.  Also, a report on currency strategy has said that the US dollar rally is nearing its end, adding that India, Indonesia and Korea shares stand to gain from the halt in dollar rally. Sectoral indices on the BSE were showing mixed trend, while the IT and tech sector stocks were in somber mood due to strengthening dollar, the banking stocks have gained some strength with market regulator approving the Reserve Bank of India's (RBI's) proposal that banks be exempt from the market regulator's norms on pricing of shares, while converting debt into equity in defaulting companies. The broader markets were under performing the benchmarks.

The BSE Sensex is currently trading at 28329.12, up by 68.04 points or 0.24% after trading in a range of 28248.55 and 28385.14. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in red were underperforming the benchmarks; the BSE Mid cap index was down by 0.28%, while Small cap index lost 0.55%.

The top gaining sectoral indices on the BSE were INFRA up by 0.70%, Auto up by 0.68%, Power up by 0.65%, Bankex up by 0.20%, Capital Goods up by 0.16%, while IT down by 0.60%, Consumer Durables down by 0.52%, TECK down by 0.37%, Metal down by 0.36%, FMCG down by 0.21% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 2.31%, Mahindra & Mahindra up by 1.99%, NTPC up by 1.89%, Sun Pharma Inds up by 1.49% and GAIL India up by 1.42%. On the flip side, BHEL down by 2.71%, Reliance Industries down by 0.73%, Infosys down by 0.57%, Maruti Suzuki down by 0.53% and Coal India down by 0.45% were the top losers.

The Securities and Exchange Board of India (Sebi), by approving the Reserve Bank of India's (RBI's) proposal that banks be exempt from the market regulator's norms on pricing of shares while converting debt into equity in defaulting companies, has paved the way for lenders that are struggling with a surge in bad-loan provisions to wrest management control of defaulters and also in some cases allow distressed firms to improve their cash flows by lowering interest costs. The two regulators have been working together to bring in rules that could not only help banks lower their non-performing assets (NPAs), but also minimize the chances of insolvency for companies burdened with debt and protect their shareholders.

Now Indian banks will be able to convert debts of defaulting publicly traded borrowers into equity, previously there was no regulation for conversion of debt of companies into equity by their lenders, limiting the options for lenders to recover dues. Also, defaulting companies often found it tough to raise money from the market because of a loss of public trust in their financial strength, which in turn makes it even more difficult for such companies to repay their loans.

The market regulator has come up with 'Issue of Capital and Disclosure ICDR' guidelines, which require that companies make preferential issues based on a six-monthly average price and not the immediate market price. Sebi’s latest move to allow debt-for-equity swap will enable the creditor to get a controlling equity stake in the borrower company in exchange for full or partial cancellation of its debt claims against the company.

Sebi has however said that such debt-to-equity conversion by lenders will be subject to a pricing formula and the allotment price will be based on a fair price formula prescribed and cannot be less than the face value of shares. Bankers have said that conversion of debt into equity will enable them to bring about a change in management.

The CNX Nifty is currently trading at 8590.40, up by 19.50 points or 0.23% after trading in a range of 8559.70 and 8608.35. There were 31 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 2.69%, Mahindra & Mahindra up by 2.45%, Power Grid Corpn up by 2.26%, NTPC up by 1.82% and Sun Pharma Inds up by 1.72%. On the flip side, Jindal Steel & Power down by 8.42%, NMDC down by 2.93%, Tech Mahindra down by 2.85%, BHEL down by 2.36% and Cairn India down by 1.38% were the top losers.

Most of the Asian markets were in green, FTSE Bursa Malaysia KLCI was up by 1.7 points or 0.09% to 1,805.35, Straits Times gained 3.91 points or 0.11% to 3,416.35, Jakarta Composite added 4.13 points or 0.08% to 5,447.20, Taiwan Weighted increased by 8.4 points or 0.09% to 9,758.09, Shanghai Composite surged by 38.09 points or 1.05% to 3,655.41, Hang Seng was up by 83.91 points or 0.34% to 24,459.15 and Nikkei 225 gained 194.14 points or 0.99% to 19,754.36, while KOSPI Index tad lower by 0.65 points or 0.03% to 2,036.59 was the lone loser.