Markets pare initial gains to enter into red

Witnessing a bout of selling pressure, Indian equity markets have now pared all of its initial gains nearing to the day’s low level, with 50 share index trading into the red zone albeit with slender loss. Sentiments turned choppy amid absence of any fresh triggers as traders maintained a cautious stance ahead of the expiry of December F&O contracts. Depreciation in Indian rupee too dampened sentiments. The rupee was trading lower by 17 paise at 66.36 against the dollar in noon deals at the Interbank Foreign Exchange on month-end demand for the US currency from importers amid capital outflows.

On the global front, Asian equity markets were trading mostly in positive territory, shrugging off early losses, as Chinese shares rose a day after marking their biggest loss in a month and crude prices took back some lost ground. Back home, liquor stocks like United Breweries, United Spirits, Tilaknagar Industries came under pressure after the Supreme Court of India upheld the Kerala liquor ban policy. However, State-owned oil marketing companies:  Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) were trading higher on reports that they might jointly set up a mega refinery at Ratnagiri in coastal Maharashtra. The broader indices too were exhibiting mixed trend, while the market breadth on the BSE was negative; there were 1,109 shares on the gaining side against 1,312 shares on the losing side while 223 shares remain unchanged.

The BSE Sensex is currently trading at 26007.56, down by 26.57 points or 0.10% after trading in a range of 26005.75 and 26133.78. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.30%, while Small cap index down by 0.20%.

The top gaining sectoral indices on the BSE were Auto up by 0.45%, Oil & Gas up by 0.35%, Utilities up by 0.35%, Consumer Discretionary Goods & Services up by 0.25% and Basic Materials up by 0.08%, while Consumer Durables down by 0.85%, Realty down by 0.61%, Capital Goods down by 0.41%, FMCG down by 0.35% and Metal down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.46%, NTPC up by 1.39%, GAIL India up by 1.31%, Bajaj Auto up by 1.27% and Hero MotoCorp up by 0.73%. On the flip side, Coal India down by 1.29%, BHEL down by 1.19%, Hindustan Unilever down by 1.05%, Sun Pharma down by 0.55% and ONGC down by 0.40% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) committee on medium-term path on financial inclusion, headed by RBI executive director Deepak Mohanty, has recommended that the government should transfer cash directly to persons instead of giving subsidies, and should replace interest subvention on agriculture loans with affordable universal crop insurance scheme. The group opined that the most efficient way for an effective financial inclusion is direct cash transfer which can be tried to address problems in the irrigation sector and instead of charging “abnormally low electricity tariffs” for agricultural use, equivalent cash can be transferred into beneficiaries’ accounts.

The committee which was set up in mid-July also recommended that linking credit accounts with unique identification number, or Aadhaar number, and share information with credit information companies to enhance stability of the credit system and improve access.  Currently, the government gives interest rate subvention of two per cent for short-term crop loans of up to Rs 3 lakh. Another three per cent subvention for prompt repayment lowers the effective cost further. Payments towards such subvention have increased rapidly over time. From less than Rs 2,500 crore in subvention in 2006, government’s subvention in 2016 is projected to be above Rs 12,500 crore.  Further, the committee recommended that a mandatory crop insurance scheme covering all crops should be introduced starting with small and marginal farmers with a monetary ceiling of Rs 2 lakh. Farmers will have to pay a nominal premium to get this insurance and the balance could come from government subsidy. Heavy use of technology, like satellite images for crop mapping and assess damage, could make the insurance scheme more efficient.

Among other major recommendations, the panel suggested stepping up efforts to include more women in the financial inclusion fold. The All-India Debt and Investment Survey (AIDIS) suggested that interest rates paid by female household head are, on average, higher than those paid by male household heads. In order to include more women, and with the government’s emphasis on the welfare of girl child, the panel recommended that a new welfare scheme, called Sukanya Shiksha that can be jointly funded by the central and state governments, be formed.  As per the Mohanty report, the mobile phones are the way forward for inclusion. Public sector banks account for only 14 per cent of the total mobile banking transactions worth Rs 270 billion, suggesting there is significant room for market players to grow. Besides, an eco-system should be developed where full-service banks, regional banks, non-banking finance companies, semi-formal financial institutions, as well as the newly-licensed payments banks and small finance banks, could work together for effective inclusion.

The CNX Nifty is currently trading at 7909.40, down by 15.75 points or 0.20% after trading in a range of 7909.20 and 7942.15. There were 21 stocks advancing against 28 stocks declining on the index while 1 stock remained unchanged.

The top gainers on Nifty were GAIL India up by 1.42%, NTPC up by 1.29%, Mahindra & Mahindra up by 1.26%, Ambuja Cement up by 1.13% and Bajaj Auto up by 1.11%. On the flip side, Coal India down by 1.38%, HCL Tech down by 1.20%, BHEL down by 1.11%, Power Grid down by 0.98% and Hindustan Unilever down by 0.96% were the top losers.

Asian markets were trading mostly in green; KOSPI Index rose 2.25 points or 0.11% to 1,966.31, Jakarta Composite gained 7.46 points or 0.16% to 4,564.82, FTSE Bursa Malaysia KLCI increased 8.91 points or 0.53% to 1,679.64, Shanghai Composite strengthened 14.87 points or 0.42% to 3,548.65, Hang Seng added 75.5 points or 0.34% to 21,995.12 and Nikkei 225 was up by 108.88 points or 0.58% to 18,982.23. On the flip side, Taiwan Weighted was down by 64.58 points or 0.77% to 8,293.91.