Benchmarks trade cautiously ahead of Brexit referendum

Indian equity benchmarks have made a cautious start and are trading near neutral lines in early deals, as traders remained cautious ahead of the Brexit poll outcome later today, which will decide whether Britian would remain in the European Union or not. Sentiments also remained dampened with report that foreign institutional investors remained net sellers in equities worth Rs 41 crore on Wednesday, as per provisional stock exchange data. Weakness in Asian counters too weighed down sentiments, most of the Asian equities were trading in red terrain at this point of time following downslide in the US stocks, as investors remain edgy ahead of the UK vote on whether to leave the European Union (EU).

Domestic traders however took some encouragement with government’s approval of setting up of a ‘Fund of Funds for Startups’ with a corpus of Rs 10,000 crore at SIDBI (Small Industries Development Bank), in line with the Start-up India Action Plan unveiled by it in January. On the sectoral front, telecom stocks were reeling under pressure after Union Cabinet approved norms for the biggest-ever spectrum auction, which could make exchequer richer by no less than Rs 5.66 lakh crore. Stocks related to textile space too edged lower despite government announcing Rs 6,000-crore package for the textiles and apparels sector to help it wrest a bigger share of the global market.

The BSE Sensex is currently trading at 26771.94, up by 6.29 points or 0.02% after trading in a range of 26746.97 and 26813.57. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.11%, while Small cap index down by 0.09%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.65%, Auto up by 0.39%, Industrials up by 0.25%, Bankex up by 0.15% and FMCG up by 0.11%, while Power down by 1.29%, Realty down by 1.25%, Utilities down by 1.21%, PSU down by 0.41% and Capital Goods down by 0.38% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.59%, Sun Pharma up by 1.54%, Dr. Reddys Lab up by 1.48%, Mahindra & Mahindra up by 0.78% and ITC up by 0.47%. On the flip side, NTPC down by 3.09%, Power Grid down by 1.25%, ONGC down by 0.89%, Tata Steel down by 0.74% and TCS down by 0.61% were the top losers.

Meanwhile, after the major FDI reform push, the government has given its approval for the mega-spectrum auction plan recommended by the department of telecommunication. The government is expected to auction nearly 2,300MHz of spectrum across 7 bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz and it is expected to fetch about Rs 5.66 lakh crore to the exchequer.

Though the final schedules are yet to be confirmed, but the notice inviting application for auction is likely to be issued by July 1, followed by pre-bid conference on July 6. The bidding is expected from September 1. There could be a minor delay in the auctions as the Cabinet decided to seek Telecom Regulatory Authority of India (Trai) opinion on the issue of spectrum usage charge (SUC). The move could result in a delay in the issuance of the notice inviting applications for the auctions as Trai is expected to take some time in finalizing its views on the matter. The 2016 mega-auction is considered to be the biggest spectrum auction seeking Rs 64,000 crore for the government, with revenue of Rs 98,995 crore from various levies and services.

According to the rules approved by an inter-ministerial panel, the auction would include sale of most premium 700 Mhz band at a reserve price of Rs 11,485 crore per Mhz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs 4 lakh crore.  Furthermore, the panel has favoured that companies winning spectrum in higher frequency bands - above 1 Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz - should make 50 per cent upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment.

On the otherhand, for spectrum below 1 Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in ten years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.

The CNX Nifty is currently trading at 8202.55, down by 1.15 points or 0.01% after trading in a range of 8192.65 and 8212.35. There were 25 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 1.71%, Dr. Reddys Lab up by 1.48%, Sun Pharma up by 1.25%, Lupin up by 0.74% and Ambuja Cement up by 0.70%. On the flip side, Bharti Infratel down by 3.73%, NTPC down by 3.28%, Tata Power down by 1.36%, Power Grid down by 1.25% and ONGC down by 0.98% were the top losers.

Asian markets were trading mostly in red; Taiwan Weighted decreased 43.01 points or 0.49% to 8,673.24, Shanghai Composite shed 24 points or 0.83% to 2,881.55, Jakarta Composite slipped 11.47 points or 0.23% to 4,885.38, KOSPI Index declined 9.7 points or 0.49% to 1,982.88 and FTSE Bursa Malaysia KLCI was down by 1.04 points or 0.06% to 1,636.65. On the flip side, Hang Seng increased 41.33 points or 0.2% to 20,836.45 and Nikkei 225 was up by 101.68 points or 0.63% to 16,167.40.