Markets trade lower amid weak global cues; Nifty breaches 7,700 mark

After marking a weak start, Indian equity markets have extended their losses and are now trading with cut of over half a percent in early deals amid feeble global cues, as investors are awaiting US jobs figures later in the day for more clues to the health of the US economy and the future interest rate trajectory. Sustained selling was being witnessed in most of the key heavyweights that dragged the Sensex and Nifty below their psychological 25,100 and 7,700 levels respectively.  Further, sentiments were also under pressure on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 388.51 crore on May 5, 2016, as per provisional data released by the stock exchanges. However, down side looked capped as Finance Minister Arun Jaitley has said that the Indian economy can grow even faster pace this year if predictions of good monsoon hold up. Meanwhile, there is some good news on the reforms front as the Lok Sabha on Thursday passed the Insolvency and Bankruptcy Code Bill 2016, which seeks to improve ease of doing business in the country. The new law will give the banks ‘more confidence’ to lend for long-term projects such as roads, ports and power plants. Banks and non-banking finance companies were trading mixed after the release of draft norms for on-tap licensing for universal banks by Reserve Bank of India (RBI).

In the scrip specific development, Talwalkars Better Value Fitness surged 8 per cent on the National Stock Exchange (NSE) after the company reported 13% year on year (YoY) growth in consolidated net profit at Rs 20 crore for the quarter ended March 31, 2016 (Q4FY16). Total income from operations increased 17% at Rs 90 crore on YoY basis.

On the global front, US markets ended flat on Thursday as consumer discretionary shares fell and investors showed caution ahead of the April jobs report.  Asian markets were trading lower tracking the lackluster cues overnight from Wall Street and as investors turned cautious ahead of the release of the closely watched April US non-farm payrolls report later in the day. The U.S. Labor Department report is expected to show an increase of about 200,000 jobs in April, while the unemployment rate is expected to edge down to 4.9 percent.

Back home, all the sectoral indices on the BSE were trading in red led by Metal, Realty, FMCG, IT and Auto. The market breadth on BSE was negative in the ratio of 582: 909, while 74 scrips remained unchanged.

The BSE Sensex is currently trading at 25082.53, down by 179.68 points or 0.71% after trading in a range of 25057.93 and 25228.31. There were 2 stocks advancing against 28 stocks declining on the index.

The broader indices too were trading in red; the BSE Mid cap index was down by 0.26%, while Small cap index was down by 0.30%.

The top losing sectoral indices on the BSE were Metal down by 1.07%, Realty down by 1.06%, FMCG down by 0.90%, IT down by 0.89% and Auto down by 0.79%, while there were no losses. 

The top gainers on the Sensex were Bharti Airtel up by 2.00% and SBI up by 0.36%. On the flip side, ITC down by 2.14%, BHEL down by 1.38%, ONGC down by 1.35%, Dr. Reddys Lab down by 1.33% and TCS down by 1.31% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has issued draft norms for on-tap licensing for universal banks. On tap licensing which means there will not be any cut-off date for applying for the licences, has set stiff conditions for industrial houses that aspire to become banks and top industrial groups, which once harboured ambitions of starting a universal bank in the country, will no longer be eligible to apply for a universal bank licence. Earlier, RBI was opening up the licence process periodically.

Though, the broad contours of the draft norms are in line with guidelines issued for bank licensing in 2013, the central bank has now made it clear that business houses predominantly in financing activities, for example, non-banking financial companies (NBFCs) would be preferred. Existing NBFCs that are “controlled by residents” and have a successful track record for at least 10 years are among those that can apply for on-tap licences. In addition, individuals and professionals, who are residents and have 10 years of banking experience, can also now apply for a licence.

As per the RBI notification, in a departure from the earlier guidelines on universal banks dated February 22, 2013, the present 'Draft Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector' include (i) resident individuals and professionals having 10 years of experience in banking and finance as eligible persons to promote universal banks; (ii) large industrial/business houses are excluded as eligible entities but permitted to invest in the banks to the extent of less than 10 per cent; (iii) Non-Operative Financial Holding Company (NOFHC) has now been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities; (iv) The NOFHC is now required to be owned by the promoter/promoter group to the extent of at least 51 per cent of the total paid-up equity capital of the NOFHC, instead being wholly owned by the promoter group; and (v) Existing specialised activities have been permitted to be continued from a separate entity proposed to be held under the NOFHC subject to prior approval from the Reserve Bank and subject to it being ensured that similar activities are not conducted through the bank as well.

The CNX Nifty is currently trading at 7691.75, down by 43.75 points or 0.57% after trading in a range of 7678.35 and 7717.65. There were 12 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 2.27%, Bharti Infratel up by 1.27%, Bank Of Baroda up by 1.01%, Idea Cellular up by 0.75% and SBI up by 0.61%. On the flip side, ITC down by 1.98%, Dr. Reddys Lab down by 1.49%, HCL Tech. down by 1.33%, Power Grid Corpn. down by 1.29% and TCS down by 1.25% were the top losers.

Asian markets were trading in red, Hang Seng decreased 262.46 points or 1.28% to 20,187.36, Nikkei 225 decreased 90.77 points or 0.56% to 16,056.61, Shanghai Composite decreased 55.38 points or 1.85% to 2,942.46, Taiwan Weighted decreased 38.16 points or 0.47% to 8,129.80 and FTSE Bursa Malaysia KLCI decreased 1.96 points or 0.12% to 1,643.13.