Weak trade persist in late morning session

Indian equity benchmarks continued their weak trade in the late morning session on account of selling in front line blue chip counters. The sentiments were under pressure amid a shock decision made by Chairman Cyrus Mistry to step down from his post. Tata group companies stocks reacted with promoters Tata Sons in a surprise decision made Chairman Cyrus Mistry to step down from his post. Tata’s announced that Mistry was stepping down as Chairman and Ratan Tata had returned to take over the role in the interim. Some selling crept in after Indian rupee weakened marginally against the US dollar, tracking losses in its Asian peers, and in the wake of increased demand for the American unit amid foreign capital outflows. Investors will be eyeing the quarterly results whereby in all 92 companies will announce their September quarter earnings scheduled for the day. The list includes many banks, including IDBI Bank, IDFC Bank, Federal Bank, Kotak Mahindra Bank and HDFC Bank. Companies such as MCX, Rane Brake, Symphony, Shakti Pumps, ICICI Prudential and L&T Finance will also announce earnings during the day. Markets participants failed to draw solace from NITI Aayog Vice-Chairman Arvind Panagariya’s statement where he has defended the Centre’s proposal for four-tier rate structure and a cess under the Goods and Services Tax and said that these would ensure less inflationary implications and lower tax rates for consumers as well as revenue predictability for the exchequer. Traders were seen selling Metal, Oil & Gas and Consumer Durables sector stocks. In scrip specific development, Adani group firms - Adani Power and Adani Enterprises were trading in red after quarterly numbers for the two Gautam Adani-led companies failed to meet market expectations. The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. October 2016 series to next month i.e. November 2016 series. The near month October 2016 derivatives contracts will expire on Thursday i.e. October 27, 2016.

On the global front, Asian markets were trading mostly in red, with the Kospi market down and the Korean won slipped despite data from the Bank of Korea that showed third quarter GDP rose a seasonally adjusted 0.7% on-quarter, beating the 0.6% gain seen. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,700 and 28,100 levels respectively. The market breadth on BSE was negative in the ratio of 995:1290, while 164 scrips remained unchanged.

The BSE Sensex is currently trading at 28050.85, down by 128.23 points or 0.46% after trading in a range of 28013.69 and 28211.41. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.42%, while Small cap index was down by 0.13%.

The losing sectoral indices on the BSE were Metal down by 1.10%, Oil & Gas down by 0.81%, Consumer Durables down by 0.81%, Realty down by 0.66% and FMCG down by 0.53%, while there were no gaining indices on BSE sectoral front.

The top gainers on the Sensex were Sun Pharma up by 0.91%, Cipla up by 0.85%, Axis Bank up by 0.78%, Maruti Suzuki up by 0.72% and Hero MotoCorp up by 0.49%.

On the flip side, Tata Steel down by 2.77%, GAIL India down by 1.40%, Hindustan Unilever down by 1.27%, Tata Motors down by 1.05% and HDFC Bank down by 1.04% were the top losers.

Meanwhile, the Finance Ministry is likely to propose to the Cabinet at least five different methods for valuation of over a dozen Public Sector Undertakings (PSUs) across sectors identified for strategic stake sale. The ministry has proposed different valuation methodologies, including balance sheet method, transaction multiple, and asset valuation procedure, for these PSUs which will be up for outright sale or involves lowering of government equity below 50 per cent. The use of a particular method of valuation will depend on health of the company, the sector in which it operates and the company's intrinsic strength. The Cabinet in its next meeting is likely to consider the strategic stake sale proposal.

With the privatization of PSUs being considered after a gap of over 12 years, the ministry feels that valuation of equity becomes important in the case of strategic sale of companies that are not listed or in cases where capital markets may not fully reflect the intrinsic worth of a share disinvested earlier. Further, NITI Aayog has prepared a list of PSUs where the government can sell its majority stake to private companies in order to bring in greater efficiency and professionalism in functioning. Based on its suggestions, the Department of Investment and Public Asset Management (DIPAM) has finalized a model of strategic disinvestment.

PSUs identified for strategic sale include profit-making Bharat Earth Movers and Certification Engineers International as well as loss-making Scooters India. While valuing a company, the officials will analyze its historical performance, its competitive positioning in the industry, inherent strengths/weaknesses of the business and the opportunities/threats presented by the environment, forecasting operating performance and the global industry outlook, among others.

The CNX Nifty is currently trading at 8673.75, down by 35.20 points or 0.40% after trading in a range of 8663.45 and 8722.65. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 1.43%, Tech Mahindra up by 1.39%, Aurobindo Pharma up by 1.13%, Sun Pharma up by 0.92% and Cipla up by 0.75%.

On the flip side, Tata Steel down by 2.80%, Tata Power down by 1.61%, Hindalco down by 1.56%, Idea Cellular down by 1.50% and GAIL India down by 1.48% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 46.29 points or 0.2% to 23,557.79, KOSPI Index decreased 10.88 points or 0.53% to 2,036.86, Jakarta Composite decreased 8.89 points or 0.16% to 5,412.11, Shanghai Composite decreased 2.53 points or 0.08% to 3,125.72 and FTSE Bursa Malaysia KLCI decreased 1.71 points or 0.1% to 1,676.05.

On the other hand, Taiwan Weighted increased 58.9 points or 0.63% to 9,381.40 and Nikkei 225 increased 122.15 points or 0.71% to 17,356.57.