Indian markets make soft start tracking weak global cues

The Indian equity markets have made soft start following weak performance from global peers. Europe and US markets closed in the red overnight amidst fears of Greece defaulting on restructuring of its debt this week while, all the Asian counters reeling under selling pressure at this point of time as investors grew more risk averse. Back home, Sensex dropped below its psychological 17,100 mark as investors saw economic reforms suffering after state polls dealt a political blow to the ruling Congress party. Meanwhile, metal stocks declined for the third consecutive day after China’s Premier Wen Jiabao on March 5, 2012, cut the country’s growth target to 7.5 percent for 2012, from an 8 percent goal in place since 2005. Index heavyweight Reliance Industries (RIL) edged lower in early trade. All the indices on the BSE barring consumer durables, software, healthcare and technology were trading in the red. The broader indices too were struggling to get some traction and the market breadth on the BSE was negative; there were 639 shares on the gaining side against 995 shares on the losing side while 74 shares remained unchanged. 

The BSE Sensex opened at 17,127.18; about 46 points lower compared to its previous closing of 17,173.29, and has touched a high and a low of 17,173.18 and 17,054.68 respectively.

The index is currently trading at 17,094.98 down by 78.31 points or 0.46%. There were 10 stocks advancing against 20 declines on the index.

The overall market breadth has made a negative start with 37.41% stocks advancing against 58.26% declines. The broader indices too were struggling to get some traction; the BSE Mid cap and Small cap indices rose by 0.30% and 0.29% respectively.

The only gaining sectoral indices on the BSE were, CG up by 0.14%, IT up by 0.13%, HC up by 0.12% and TECk up by 0.01%. While, Metal down by 1.17%, Bankex down by 0.88%, PSU down by 0.68%, FMCG down by 0.57% and Oil and Gas down by 0.57% were the top losers on the index.

The top gainers on the Sensex were Wipro up by 1.30%, Hero MotoCorp up by 1.16%, Tata Power up by 1.15%, Bajaj Auto up by 0.84% and Sun Pharma up by 0.60%.

On the flip side, Jindal Steel was down by 2.19%, HDFC Bank was down by 1.40%, SBI was down by 1.17%, Tata Motors was down by 0.98% and Coal India was down by 0.83% were the top losers on the Sensex.

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 opened at 5,207.05; about 15 points lower compared to its previous closing of 5,222.40, and has touched a high and a low of 5,221.65 and 5,183.50 respectively.

The index is currently trading at 5,207.05, lower by 15.35 points or 0.29%. There were 19 stocks advancing against 31 declines on the index.

The top gainers of the Nifty were Reliance Infra up by 2.27%, RPower up by 2.23%, Bajaj Auto up by 1.34%, Tata Power up by 1.29% and Wipro up by 1.23%.

On the flip side, Power Grid down by 2.75%, Jindal Steel down by 2.35%, JP Associates down by 1.58%, BPCL down by 1.55% and HDFC Bank down by 1.48%, were the major losers on the index.

All the Asian counters were trading in the red; Shanghai Composite was down 0.37 points or 0.02% to 2,410.07, Hang Seng was down 156.79 points or 0.75% to 20,649.46, Jakarta Composite was down 30.34 points or 0.76% to 3,936.74, KLSE Composite was down 12.98 points or 0.82% to 1,576.93, Nikkei 225 was down 78.24 points or 0.81% to 9,559.39, Straits Times was down 16.71 points or 0.57% to 2,915.30, Seoul Composite was down 17.10 points or 0.85% to 1,983.26 and Taiwan Weighted was down 40.44 points or 0.51% to 7,897.53.