Benchmarks continue weak trade; Metal, Realty drag

Indian equity markets continued their weak trade in the late afternoon session on account of selling in front line blue chip counters. Investors failed to draw any solace with global ratings agency Fitch affirming India’s rating at ‘BBB-‘ -- the lowest investment grade -- with a stable outlook, saying strong medium-term growth outlook and favourable external finances balance out weak structural features, including its business environment. The agency however warned that a deviation from the fiscal consolidation path, deterioration in the banking sector’s asset quality, higher inflation and widening of current account deficit could lead to a negative rating action. Traders were seen piling position in IT, FMCG and TECK stocks while selling was witnessed in Metal, Realty and PSU sector stocks.  In the scrip specific development, Oil India, ONGC, Reliance Industries and Cairn India were trading in red as crude falls to 7-year low on international markets. On the other hand, 3i Infotech was trading firm after the board of the mid-sized IT Company approved a debt realignment scheme and restructuring of foreign currency convertible bonds (FCCBs).

On the global front, the Asian markets were trading in red, while the European markets were trading on pessimistic note. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 7,750 and 25,400 levels respectively. The market breadth on BSE was negative in the ratio of 1003:1617 while 138 scrips remained unchanged.

The BSE Sensex is currently trading at 25398.79, down by 131.32 points or 0.51% after trading in a range of 25387.13 and 25542.47. There were 6 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.51%, while Small cap index down by 0.59%.

The gaining sectoral indices on the BSE were IT up by 0.39%, FMCG up by 0.37%, TECK up by 0.35% and Auto up by 0.22%, while Metal down by 2.63%, Realty down by 2.47%, PSU down by 1.58%, Power down by 1.40% and Oil & Gas down by 1.29% were the losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.49%, ITC up by 0.64%, Bajaj Auto up by 0.63%, Hindustan Unilever up by 0.51% and TCS up by 0.49%.

On the flip side, Vedanta down by 3.72%, Hindalco down by 3.72%, ONGC down by 3.12%, Tata Steel down by 2.98% and GAIL India down by 2.74% 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 7735.30, down by 30.10 points or 0.39% after trading in a range of 7727.25 and 7771.25. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 2.72%, Tata Motors up by 1.48%, Zee Entertainment up by 0.85%, Bajaj Auto up by 0.70% and ITC up by 0.69%.

On the flip side, Cairn India down by 4.27%, Vedanta down by 3.56%, Hindalco down by 3.47%, ONGC down by 3.15% and Tata Steel down by 2.85% were the top losers.

The Asian markets were trading in red; Hang Seng decreased 298.09 points or 1.34% to 21,905.13, Nikkei 225 decreased 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 decreased 66.86 points or 1.89% to 3,470.07, Jakarta Composite decreased 43.51 points or 0.96% to 4,477.88, KOSPI Index decreased 14.63 points or 0.75% to 1,949.04 and FTSE Bursa Malaysia KLCI decreased 0.94 points or 0.06% to 1,671.06.

The European markets were trading in red; UK’s FTSE 100 decreased 19.32 points or 0.31% to 6,204.20, Germany’s DAX decreased 62.64 points or 0.58% to 10,823.45 and France’s CAC decreased 23.78 points or 0.5% to 4,732.63.