Benchmarks trade lower in a narrow range in noon deals

Indian equity benchmarks continue to trade lower in a tight band in noon deals amid weak global cues. Investors failed to draw any sense of relief with ratings agency Fitch, while maintaining a stable outlook for India, stated that the country’s economy will grow by 7.5 percent in the current fiscal that will stand out globally, but warned that its business environment would remain weak despite improvements. Depreciation in Indian rupee too weighed down sentiments. The rupee was trading lower by 6 paise at 66.83 against the dollar at this point of time on sustained foreign fund outflows amid increased demand for the US currency from importers. Moreover, e slump in metal, energy and oil & gas counters amid an international rout in crude oil prices has kept the pressure on markets.

The Asian markets dropped to a near three year low after the crude oil prices nosedived to a seven year low, thus knocking off global energy company shares and commodity currencies. Back home, on the sectoral front, software, technology and fast moving consumer goods witnessed the maximum gain in trade, while metal, realty and public sector undertaking remained the top losers on the BSE sectoral space. The broader indices too were reeling under pressure, while the market breadth on the BSE was negative; there were 1027 shares on the gaining side against 1,458 shares on the losing side while 132 shares remain unchanged.

The BSE Sensex is currently trading at 25420.30, down by 109.81 points or 0.43% after trading in a range of 25407.27 and 25542.47. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.41%, while Small cap index down by 0.38%.

The few gaining sectoral indices on the BSE were IT up by 0.67%, TECK up by 0.60%, FMCG up by 0.45% and Auto up by 0.37% while, Metal down by 2.21%, Realty down by 1.71%, PSU down by 1.41%, Oil & Gas down by 1.31% and Power down by 0.96% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.67%, Infosys up by 0.97%, Hindustan Unilever up by 0.69%, TCS up by 0.56% and ITC up by 0.53%. On the flip side, Hindalco down by 3.34%, ONGC down by 3.26%, Vedanta down by 3.18%, GAIL India down by 2.94% and Dr. Reddys Lab down by 2.55% were the top losers.

Meanwhile, in order to deepen the capital market and attract more foreign companies to raise funds from the BSE and National Stock Exchange, the government and Reserve Bank of India (RBI) are having a look at easing the norms on Indian Depository Receipts (IDR) for foreign companies, after liberalizing the external commercial borrowing (ECB) regime for companies looking to raise debt abroad.

The base for such recommendations would be a report last year on IDRs from a panel chaired by Competition Commission of India (CCI) member M S Sahoo. The report was on the back burner all this while as the finance ministry wasn’t considering the suggestions. However, it is now being looked at as a starting point for any future announcements on IDR markets.

Sahoo committee comprising of 11 members made many recommendations on overhauling the IDR market which included whole new class of securities called Bharat Depository Receipts (BhDRs) to replace IDRs. The recommendation also included widening of underlying securities to include all instruments accessible to an Indian investor, widening of end-usage rules for capital and non-capital purposes, clear taxation provisions and an easier regulatory framework, among others.

Further the panel suggested that BhDRs be allowed to have all permissible securities as the underlying product. Currently, the underlying securities of a foreign company while issuing IDRs should be the company's equity shares. It also recommends creating two ‘levels’ of BhDRs -- Level-I restricted to large institutional investors, with market knowledge, and Level-II being available for all investors, including retail (small, individual) ones. The report also stated that in order to provide equal opportunities between an Indian security and an IDR in the eyes of all Indian institutional investors to encourage them to invest in the latter, there is a need to modify regulations on the markets and Indian institutional investors.

Meanwhile, other changes suggested include allowing only companies from Financial Action Task Force and International Organization of Securities Commissions jurisdictions, compared to just any foreign company. Allowing the stated end-purpose to be for both capital raising and other purposes, allowing sponsored and unsponsored issues, no necessary approval from Sebi and allowing foreign companies to use the funds in India as well.

IDR is a security a foreign company can list on Indian exchanges. If some changes in the IDR regime could be finalised by February, these could make their way to the 2016-17 Union Budget.

The CNX Nifty is currently trading at 7739.60, down by 25.80 points or 0.33% after trading in a range of 7733.80 and 7771.25. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 2.21%, Tata Motors up by 1.65%, BPCL up by 1.22%, Infosys up by 1.03% and Zee Entertainment up by 0.84%. On the flip side, Cairn India down by 3.50%, ONGC down by 3.42%, Vedanta down by 3.29%, Hindalco down by 3.28% and GAIL India down by 2.99% were the top losers.

Asian markets were trading in red; Hang Seng declined 389.55 points or 1.75% to 21,813.67, Nikkei 225 dropped 205.55 points or 1.04% to 19,492.60, Taiwan Weighted decreased 110.41 points or 1.31% to 8,343.86, Shanghai Composite shed 54.8 points or 1.55% to 3,482.13, Jakarta Composite fell 33.02 points or 0.73% to 4,488.38, KOSPI Index lost 14.63 points or 0.75% to 1,949.04 and FTSE Bursa Malaysia KLCI was down by 2.43 points or 0.15% to 1,669.57.