Benchmarks trim gains; trade continues in green

Indian equity benchmarks paired some early gains and were trading in a narrow range with a positive bias in late afternoon session on the back of buying in blue chip counters. The sentiments got some support with India’s services sector activity touched an eight-month high in October driven by a significant rise in new business orders even as growth in manufacturing output eased. The Nikkei/Markit Services Purchasing Managers' Index rose to 53.2 in October from September's 51.3, marking a fourth month above the 50-level that separates growth from contraction. Some support also came with report of India topping in the Nielsen’s global confidence index. The country’s confidence level was unchanged from the preceding quarter at 131 points, though the survey revealed that citizens are actually saving more than before in a continuing trend of caution, and their spending habits haven’t changed much over the past two quarters. However, investors remained cautious on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 449.84 crore on November 03, 2015. Further, Indian rupee also pared its initial gains, but was still higher by 6 paise to 65.58 against the US currency in afternoon trade on sustained bouts of dollar selling by banks and exporters.

On the global front, European equities were trading higher Wednesday with sentiment lifted by a rally in U.S. and Asian markets. Asian stocks rose sharply as a confluence of factors including a stellar market debut from Japan Post's units in Tokyo and news of a Shenzhen-Hong Kong stock connect fueled risk appetite in the region. Back on street, stocks from Auto, Realty and PSU counters were supporting the markets’ uptrend, while those from IT, TECK and Capital Goods counters were adding to the underlying cautious undertone. Further, Metal stocks continued to trade higher on rebound in the commodity prices amid surge in the China markets. In scrip specific development, Shares of PTC India have gained after the company posted 4.52 per cent rise in its net profit at Rs 100.60 crore for the quarter ended September 30, 2015. On the other hand, Share price of Finolex Cables slid after the company reported a 17.77 per cent dip in standalone net profit at Rs 64.91 crore for the second quarter ended September 30, 2015.

The market breadth on BSE was positive, out of 2688 stocks traded, 1352 stocks advanced, while 1188 stocks declined on the BSE. 

The BSE Sensex is currently trading at 26632.28, up by 41.69 points or 0.16% after trading in a range of 26610.81 and 26800.06. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.30%, while Small cap index up by 0.05%.

The top gaining sectoral indices on the BSE were Auto up by 1.77%, Realty up by 0.88%, PSU up by 0.57%, Consumer Durables up by 0.44% and Metal up by 0.41%, while IT down by 0.53%, TECK down by 0.50%, Capital Goods down by 0.10%, Bankex down by 0.10% and Power down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 5.75%, Bajaj Auto up by 1.81%, Hero MotoCorp up by 1.60%, Mahindra & Mahindra up by 1.27% and SBI up by 1.08%. On the flip side, ICICI Bank down by 1.29%, GAIL India down by 0.96%, TCS down by 0.79%, Sun Pharma Inds. down by 0.61% and Reliance Industries down by 0.53% were the top losers.

Meanwhile, the finance Ministry has stepped in to resolve differences between Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (Irda) over whether the insurance companies should invest in the additional tier-1 (AT-1) capital instruments issued by banks. The Ministry further stated that 'It is being examined. We are looking to bring both regulators on board given the burgeoning capital needs of PSBs to be compliant with Basel III norms'.

Public sector banks (PSBs) will need to raise Rs 1.10 lakh crore from the markets to meet more than half of their Rs 1.8 lakh crore capital requirement over for the next four years. RBI stated that, under the proposal of infusion of capital in PSBs, investors will have greater appetite for those banks' AT1 bonds and favoured the proposal, arguing that it could be an important source for raising the Basel-III compliant tier-1 capital. However, IRDA has strongly opposed a proposal to provide capital to state run banks backed by the banking regulator, Reserve Bank of India.

IRDA stated that there are various issues with these instruments and that is why it has not permitted insurers to invest in them as these instruments do not favour the investor. The tenor reduction from 10 years to five years and call option in favour of issuer is also a big impediment. On the other side, RBI has argued that although there is a minimum period of five years before the issuer can exercise a call option, there is no upper limit and issuers can tailor the date of call option according to the investor's preference through mutual agreement.

AT-1 capital is essentially funds raised through bonds. Under the Basel-III norms, such capital has some loss absorbency features, which means that in case of stress, banks can write off such capital or convert it into common equity, something perceived risky for insurance companies. Banks feel if insurance companies participate, the market will become deeper and they will get capital at competitive rates.

Earlier this year, the finance ministry had issued a directive to state-run banks to raise money through AT-1 bonds at lower cost and only when the market conditions are favourable.

The CNX Nifty is currently trading at 8067.45, up by 6.75 points or 0.08% after trading in a range of 8055.95 and 8116.10. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 5.95%, Hero MotoCorp up by 1.75%, Bajaj Auto up by 1.71%, SBI up by 1.36% and Mahindra & Mahindra up by 1.31%. On the flip side, Bosch down by 1.51%, ICICI Bank down by 1.49%, Tech Mahindra down by 1.45%, Asian Paints down by 1.13% and Kotak Mahindra Bank down by 1.00% were the top losers.

All the Asian markets were trading in green; KOSPI Index was up by 0.21%, FTSE Bursa Malaysia KLCI up by 0.32%, Jakarta Composite up by 1.6%, Shanghai Composite up by 4.31%, Taiwan Weighted up by 1.65%, Nikkei 225 up by 1.3% and Hang Seng was up by 2.15%.