Indian equities trade on a firm note; Nifty above 8000 mark

Indian equity benchmarks were trading on a firm note in late morning trades on Friday, maintaining the one and half percent gain, on expectations that the Reserve Bank of India (RBI) will have scope to cut its key lending rate later this month after the US Federal Reserve kept its interest rates unchanged.  Sentiments got a boost with Minister of State for Finance Jayant Sinha’s statement that the government is aiming for an 8-10 percent annual economic growth through supply-side measures to increase the capacity of Asia`s third-largest economy rather than risk higher inflation by stimulating demand. Some support also came with the Economic Affairs Secretary Shaktikanta Das’ statement that US Fed decision to hold rates gives more room to emerging markets for policy adjustment. Traders had feared a rate hike on Thursday would have sparked volatility in emerging markets and kept the RBI from cutting the repo rate for a fourth time this year at its policy review on September 29. Meanwhile, some investors still remained cautious about weak monsoon, which has fallen short for two consecutive years, and the winter sown crop suffered due to unseasonal rains just before the harvest. Kharif foodgrain production is expected at 124.05 million tonnes this season, 1.79% less than last year.

On global front, Asian stock markets were mostly higher on Friday, recovering from early losses, after the US Federal Reserve ended weeks of speculation by deciding to keep interest rates at record lows on global economic worries. However, gains were muted in most of the markets. Overnight, the Wall Street gave up its early gains to end lower on Fed's cautious commentary on US economy and global growth. Back home, Indian rupee strengthened by 32 paise to 66.14 against the US dollar in early trade after the American currency tumbled against major world currencies as the Federal Reserve decided again not to increase interest rates.

Back on street, all BSE sectoral indices were trading in the green. Among them, realty index gained the most by 3.71 per cent, followed by Banking 3.18 per cent, PSU 1.96 per cent and Power 1.61 per cent. In scrip specific development, shares of UltraTech Cement have gained after the company received Environment Ministry's nod to expand capacity at its Awarpur facility in Maharasthra, which would entail an investment of Rs 248 crore. On the flip side, shares of SKS Microfinance have declined after the micro-finance major remained unsuccessful in obtaining small bank license.

The market breadth on BSE was positive, out of 2094 stocks traded, 1580 stocks advanced, while 445 stocks declined on the BSE. 

The BSE Sensex is currently trading at 26379.42, up by 415.45 points or 1.60% after trading in a range of 26130.36 and 26430.78. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.46%, while Small cap index gained 1.42%.

There were no losers on the BSE Sectoral front, however, prominent gainers on the BSE Sectoral front were Realty up by 3.71%, Bankex up by 3.18%, PSU up by 1.96%, Power up by 1.61% and Capital Goods up by 1.59%

The top gainers on the Sensex were Axis Bank up by 4.48%, ICICI Bank up by 3.55%, Mahindra & Mahindra up by 3.39%, SBI up by 3.19% and HDFC Bank up by 3.08%. On the flip side, Tata Motors down by 2.74%, Hindustan Unilever down by 0.91%, GAIL India down by 0.87% and Bharti Airtel down by 0.01% were the top losers.

Meanwhile, Reserve Bank of India (RBI) has accorded 'in-principal' approval for 10 small finance banks that will focus on small geographies for operations but with a strong capital base. The selection of these small banks was on the basis of the recommendations from three different committees, backed by a detailed case study for each applicant, including that by an External Advisory Committee chaired by former deputy governor Usha Thorat.

Those selected includes Au Financiers, Capital Local Area Bank, Disha Microfin, Equitas Holdings, ESAF Microfinance, Janalakshmi Financial Services, RGVN (North East) Microfinance, Suryoday Micro Finance, Ujjivan Financial Services and Utkarsh Micro Finance. According to a statement by the central bank, the in-principle approval granted will be valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfil other conditions as may be stipulated by the RBI.

As per the RBI guidelines these new type of banks should generate at least 75% of their business from the priority sector (largely agriculture) and mainly from areas where large banks are not present. Besides, 50% of their loans should be of ticket sizes under Rs 25 lakh. The minimum paid-up equity for small finance banks is also fixed at Rs 100 crore. For small banks, promoters' initial contribution should be at least 40%, which could be brought down to 26% over the next 12 years.

The RBI has said that it has selected these applicants after three different committees contributing to the final decision. A preliminary scrutiny of all the applications involving prima facie eligibility including the ability to raise the minimum initial capital and the status of ownership and control by residents as per the Guidelines was carried out by the RBI team. The detailed scrutiny involved assessment of financial soundness, proposed business plan, fit and proper status based on due diligence reports received from the regulators, investigative agencies, banks, etc. Finally, an Internal Screening Committee (ISC), consisting of the Governor and the four Deputy Governors of the RBI thereafter examined the applications. The central bank said that an important factor was proposed reach into unbanked areas and underserved sections of the population.

In 2009, a Committee on Financial Sector Reforms under Raghuram Rajan, now the RBI governor, had examined the relevance of small banks in the Indian context. The panel felt there was sufficient change in the environment to experiment with small banks. It recommended the entry of private well-governed deposit-taking small finance banks to offset their higher risk from being geographically focussed, by requiring a higher capital and strict norms.

The CNX Nifty is currently trading at 8026.95, up by 127.80 points or 1.62% after trading in a range of 7958.75 and 8043.20. There were 44 stocks advancing against 6 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 4.50%, Bank of Baroda up by 3.94%, ICICI Bank up by 3.65%, PNB up by 3.52% and Mahindra & Mahindra up by 3.21%. On the flip side, Tata Motors down by 2.29%, GAIL India down by 1.18%, Hindustan Unilever down by 1.00%, Cairn India down by 0.80% and Bharti Airtel down by 0.19% were the top losers.

Most of the Asian markets were trading in green, Shanghai Composite was up by 0.4%, KOSPI Index gained 0.82%, Taiwan Weighted added 0.43%, Straits Times was up by 0.56%, Jakarta Composite increased by 0.77% and Hang Seng moved higher by 0.42%. On the other hand, Nikkei 225 slumped by 1.37% and FTSE Bursa Malaysia KLCI declined by 0.37%.