Indian equities trim gains to trade in red in late afternoon session

Indian equities trimmed its gains to trade in red in the late afternoon session as market participants grew increasingly worried on the ideal outcome of assembly elections. The market was volatile today as counting of votes for assembly elections held in five states was under way. Investors took some profits off the table since Congress’ poor showing in UP elections may not prove fruitful for the government at the centre as it may fail to revive stalled reforms. Traders were seen piling up positions in Consumer Durables, Realty and FMCG sector while selling was witnessed in Metal, Capital Goods and Power sector. Hindalco, Tata Steel, Sterlite, SAIL, Jindal Steel and Sesa Goa from Metal pack were seen trading in red pulling the market down. L&T and BHEL from Capital Goods space were seen trading in red with cut of around more than one percent exerting pressure on the market. On the global front, Asian markets were trading in red while the European markets were too trading in red on pessimistic note. Investors are awaiting the outcome of Greek private investors’ willingness to participate in the bond swap deal. It is not clear how the credit default swaps will be treated by the industry association because under the Greek laws any acceptance rate below 66% will trigger the collective action clause and under the UK law the trigger is set below 75% acceptance rate. Investors have March 8 deadline to accept or reject the debt swap. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,300 and 17,300 levels respectively. The market breadth on BSE was in favor of declines in the ratio of 1171:1426 while 143 scrips remained unchanged.

The BSE Sensex is currently trading at 17,283.16 down by 79.71 points or 0.46% after trading as high as 17,691.96 and as low as 17,185.24. There were 10 stocks advancing against 20 declines on the index.

The broader indices were trading on a mixed note; the BSE Mid cap index added 0.07% while Small cap shed 0.20%.

On the BSE sectoral space, Consumer Durables up 1.94%, Realty up 1.52%, FMCG up 0.56%, PSU up 0.43% and Auto up 0.40% were the major gainers, while Metal down 1.43%, Capital Goods down 0.92%, Power down 0.91%, Oil & Gas down 0.79% and Bankex down 0.20% were the top loser in the space.

DLF up 3.82%, SBI up 1.46%, Maruti Suzuki up 1.43%, Coal India up 1.36% and ITC up 1.35% were the major gainers on the Sensex, while Hindalco Industries down 2.93%, Tata Power down 2.69%, Tata Steel down 2.67%, Bharti Airtel down 2.29% and Cipla down 1.92% were the major losers in the index.

Meanwhile, an infrastructure development fund (IDF) has been set up jointly by four banking and financial giants namely ICICI, Bank of Baroda, Citicorp Finance India (Citigroup) and Life Insurance Corporation of India (LIC). The IDF which has been set up as a non-banking finance company (NBFC) is aimed at catering to the special long term needs of the infrastructure sector.

The IDF will have an equity capital of Rs 300 crores with the option of raising an equal amount of tier-II capital through instruments such as bonds. While serving as a catalyst to channelise domestic savings and global liquidity, the fund will attempt to attract capital from local and international investors. It will invest in projects which are already under implementation and have completed at least one year of operations.

ICICI Bank (together with a wholly-owned subsidiary) will hold 31%, while Bank of Baroda, Citicorp and LIC are to take 30%, 29% and 10% respectively in the fund. Taking into account Tier-II capital and the ability to borrow, it can raise about $2 billion. The fund will seek to raise debt capital from domestic and foreign resources in the form of long-term pension, insurance funds and sovereign wealth funds. It is expected to start operations in FY’13.

As per the FM, India needs investments to the tune of $1 trillion to meet its infrastructure requirements in the next five years. 50% of this is expected to come from the private sector in terms of public private partnership (PPP). In the last budget, Mukherjee had announced the reduction of withholding tax on interest payments on borrowings by the IDFs from 20% to 5% to attract offshore funds into IDFs.

It has been felt that banks alone cannot meet the requirements of the infrastructure sector given the long gestation periods Involved. Hence an appropriate body needs to be created for the same. An announcement to create IDFs was made by the Finance Minister, Pranab Mukherjee in his last budget in February 2011 and the framework for the same was announced by the finance ministry in June 2011. RBI issued the regulations for IDFs to be set up as a NBFC in November, 2011 while SEBI issued regulations governing an IDF structured as a mutual fund in August, 2011.

The S&P CNX Nifty is currently trading at 5,258.35, lower by 22.00 points or 0.42% after trading as high as 5,382.05 and as low as 5,222.70. There were 18 stocks advancing against 32 declines on the index.

The top gainers on the Nifty were DLF up 3.78%, Siemens up 2.04%, HCL Tech up 1.38%, Maruti Suzuki up 1.37% and IDFC up 1.35%.

Reliance Infrastructure down 3.37%, Tata Power down 3.30%, Hindalco Industries down 3.22%, Tata Steel down 2.78% and Sterlite Industries down 2.57% were the major losers on the index.

In the Asian space, Shanghai Composite plunged 1.41%, Hang Seng plummeted 2.16%, Jakarta Composite sank 0.87%, KLSE Composite shed 0.12%, Nikkei 225 declined 0.63%, Straits Times got pummeled by 2.22%, Seoul Composite shrank 0.78% and Taiwan Weighted slumped 0.83%.

The European markets were trading in red with, France’s CAC 40 descended 0.58%, Germany’s DAX dropped 0.92% while Britain’s FTSE 100 shed 0.54%.