Markets make decent recovery in early trade after pervious session's slaughter

Post previous session's massacre, key domestic bourses have made a decent recovery in the morning trade as investors remain busy in buying beaten down fundamentally strong stocks. Though, global cues remained unsupportive as US markets lost over half a percent overnight on global worries with report of Europe slipping into recession and slowing growth in China. While, most of the Asian equity indices were trading in the negative terrain at this point of time. Back home, all eyes will be set on Parliament. The reports of an alleged coal scam created a pandemonium in Parliament yesterday with the opposition forcing adjournment of both houses till noon and, subsequently, for the whole day. Moreover, sustained buying in most of the key heavyweights along with broader indices supported BSE’s -- Sensex -- and NSE’s -- Nifty -- to regain their crucial 17,300 and 5,250 mark respectively. Meanwhile, escalating crude prices with depreciating rupee continued to dampen sentiments. The broader indices too were going neck to neck with benchmarks. The market breadth on the BSE was positive; there were 1,039 shares on the gaining side against 447 shares on the losing side while 67 shares remained unchanged.

The BSE Sensex opened at 17,257.72; about 61 points higher compared to its previous closing of 17,196.47, and has touched a high of 17,356.77 while low remain its opening.

The index is currently trading at 17,341.89, up by 145.42 points or 0.85%. There were 26 stocks advancing against only 4 declines on the index.

The overall market breadth has made a strong start with 67.03% stocks advancing against 28.65% declines. The broader indices too were trading on firm note; the BSE Mid cap and Small cap indices rose 0.79% and 0.72% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 1.60%, Bankex up by 1.36%, CD up by 1.36%, CG up by 1.13% and Power up by 0.97%. While, there were no losers on the index.

The top gainers on the Sensex were L&T up by 1.71%, ICICI Bank up by 1.53%, DLF up by 1.50%, SBI up by 1.50% and RIL up by 1.43%. While, Bajaj Auto down by 1.16%, Maruti Suzuki down by 1.13%, Hero MotoCorp down by 0.60% and ONGC down by 0.26% remained the few losers on the Sensex.

Meanwhile, fearing that a rapid growth in the gold loans in the past few years could destabilize the banking system and harm retail investors on the back of fall in gold prices, the Reserve Bank of India (RBI) has tightened the norms for extending gold loans by the non banking financial companies (NBFCs). The RBI is worried that the rapid rise in these loans is exposing the banking system and retail investors to price fluctuations of the yellow metal.

NBFCs have seen almost a 50% annual growth in loans against gold. This is due to the fact that the rising price of the metal has prompted those people to borrow from NBFCs who do not have access to banks. Since business has been booming, the NBFCs have been borrowing substantially from banks and also through sale of bonds.

Since profit margins are high, investors have been increasingly purchasing bonds and stocks of gold loan companies. The apex bank is however concerned that since these companies lend 70-75% of the value of gold, a fall in prices could destabilize the system.

As per the new norms, the loan-to-value ratio should not exceed 60% for loans granted against the collateral of gold jewellery. The NBFCs which is having 50% or more of their financial assets in loans against gold shall maintain a minimum Tier l capital of 12% from by April 2014.

Moreover, the central bank has directed NBFCs to disclose the share of gold loans in their credit portfolio. It has also banned companies from lending against bullion, primary gold and gold coins, leaving just jewellery.

The regulation is expected to affect businesses of NBFCs. Borrowers may also have to revert to local moneylenders for their loan requirements. However it is still unclear whether this cap will be applicable to the existing portfolio or to new ones.

The S&P CNX Nifty opened at 5,255.65; about 27 points higher compared to its previous closing of 5,228.45, and has touched a high and a low of 5,278.45 and 5,247.10 respectively.

The index is currently trading at 5,268.70, higher by 40.25 points or 0.77%. There were 40 stocks advancing against 10 declines on the index.

The top gainers of the Nifty were Reliance Infra up by 2.30%, JP Associates up by 1.83%, L&T up by 1.60%, Cairn up by 1.56% and SAIL up by 1.55%.

On the flip side, BPCL down by 1.51%, Maruti Suzuki down by 1.28%, Hero MotoCorp down by 0.94%, Bajaj Auto down by 0.92% and Grasim down by 0.48% remained the top losers on the index.

Most of the Asian equity indices were trading in the red; Shanghai Composite declined 16.20 points or 0.68% to 2,359.57, Hang Seng dropped 210.15 points or 1.01% to 20,691.41, Nikkei 225 was down 102.60 points or 1.01% to 10,024.48, Seoul Composite slipped 4.66 points or 0.23% to 2,021.46 and Taiwan Weighted was down by 6.16 points or 0.08% to 8,053.78.

On the flip side, Jakarta Composite rose 5.33 points or 0.13% to 4,041.56, KLSE Composite was up by 1.36 points or 0.09% to 1,584.60 and Straits Times increased by 14.01 points or 0.47% to 2,993.26.