Markets make a cautious start, consolidates after the big gains

Indian markets after a sharp surge in last session have made a cautious start on Friday and were trading modestly in red, tailing the sluggishness in the global markets. The US markets ended marginally in red, while the Asian markets were trading mixed with some of the indices trading in red, paring their biggest weekly gain in six weeks. Traders were taking a pause after rallying in last session and some choppiness too was being seen in early deals and traders were reacting to the recommendations of the 7th Pay Commission , which has suggested a 23.55 percent hike in salary, allowances and pension involving an additional burden of Rs 1.02 lakh crore for the government. Some cheers was being witnessed in consumer durables and auto sector stocks, as the recommendations will led to rise in disposable income of consumer which will push up demand.

While, most of the sectoral indices were managing to hold in green, some selling has appeared on the banking counter, after the Reserve Bank of India threw open the doors for mergers and acquisitions in the banking industry by signaling that it is open to persons owning more than 10 percent stake in a bank. On sectoral front oil & gas has taken the lead followed by consumer durables, realty and power, while the broader markets too were showing good performance in early deals, outperforming the benchmarks.

The BSE Sensex is currently trading at 25789.23, down by 52.69 points or 0.20% after trading in a range of 25769.81 and 25871.89. There were 15 stocks advancing against 14 stocks declining on the index, while one stock remained unchanged.

The broader indices were outperforming the benchmarks and were trading in green; the BSE Mid cap index was up by 0.40%, while Small cap index gained 0.48%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.02%, Consumer Durables up by 0.83%, Power up by 0.60%, Auto up by 0.46%, Realty up by 0.45%, while Bankex down by 0.65%, FMCG down by 0.22% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 8.55%, Mahindra & Mahindra up by 2.07%, Wipro up by 1.95%, Dr. Reddys Lab up by 1.43% and Hero MotoCorp up by 0.96%. On the flip side, Sun Pharma Inds. down by 1.37%, ITC down by 1.15%, Bharti Airtel down by 0.97%, Axis Bank down by 0.86% and ICICI Bank down by 0.73% were the top losers.

Meanwhile, the 7th Pay Commission headed by Justice A K Mathur, cheering the central government employees and pensioners has recommended a 23.55 percent hike in salary, allowances and pension involving an additional burden of Rs 1.02 lakh crore for the government, of which increase in salary would be Rs 39,100 crore, allowances Rs 29,300 crore and pension Rs 33,700 crore.The new pay scale will come into effect from January 1, 2016.

The pay panel, in its report submitted to the finance ministry has suggested an increase of 16% in basic salary, 63% in allowances and 24% in pension. The increase in basic pay is still the lowest in 70 years, as the previous 6th Pay Commission had recommended a 20 percent hike which the government doubled while implementing it in 2008. In its other recommendations, the commission has set the minimum salary at Rs18,000 per month and pegged the maximum pay at Rs 2.25 lakh per month for apex scale and Rs 2.5 lakh per month for cabinet secretary. It has maintained the rate of annual increment at 3% and doubled the gratuity to Rs 20 lakh from Rs 10 lakh.

The commission also favoured introduction of a health insurance insurance scheme for staff and pensioners and doubling the gratuity ceiling to Rs 20 lakh. The panel has suggested abolition of the pay band and the grade pay, and recommended a fitment factor of 2.57 which will be applied uniformly to all employees. The recommendations that will benefit 47 lakh central government employees and 52 lakh pensioners, will impact the Central Budget by Rs 73,650 crore and the Railway Budget by Rs 28,450 crore.

In a significant development, the commission without calling it one-rank-one-pension (OROP), recommended a revised pension formulation for the central government employees, including para-military personnel as well as for defence staff who have retired before January 1, 2016.

To hasten the implementation of the recommendation, the government has decided to set up an implementation secretariat that would be headed by the expenditure secretary. Finance Minister Arun Jaitley said that an Implementation Secretariat, under Expenditure Secretary, will look into the recommendation of the Seventh Pay Commission. He further said that there will be a separate Empowered Committee which is normally headed by the Cabinet Secretary where different departments of the government which are concerned with the recommendations their heads are members and therefore if any representations come from any segment, they take a view.

The CNX Nifty is currently trading at 7830.40, down by 12.35 points or 0.16% after trading in a range of 7817.80 and 7847.30. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 8.32%, Mahindra & Mahindra up by 2.16%, Wipro up by 2.15%, Dr. Reddys Lab up by 1.89% and Ambuja Cement up by 1.46%. On the flip side, Bosch down by 2.43%, Sun Pharma Inds. down by 1.43%, Bharti Airtel down by 1.06%, HCL Tech. down by 1.05% and PNB down by 0.93% were the top losers.

The Asian markets were trading mixed, KOSPI Index was up by 1.11 points or 0.06% to 1,990.02, FTSE Bursa Malaysia KLCI gained 1.33 points or 0.08% to 1,661.39, Shanghai Composite was higher by 2.59 points or 0.07% to 3,619.65 and Jakarta Composite increased by 17.87 points or 0.4% to 4,536.81.

On the flipside Nikkei 225 declined by 49.35 points or 0.25% to 19,810.46, Hang Seng lost 43.25 points or 0.19% to 22,456.97 and Taiwan Weighted was lower by 24.12 points or 0.28% to 8,453.08.