Markets slip mildly into red after a positive start

Indian markets made a mildly positive start, extending the gains of the last session on supportive regional cues, though the US markets ended modestly in red overnight but majority of the Asian peers were trading in green. In the very first hour of trade the domestic markets have slipped marginally into red. There was some cautiousness in the markets with Deputy Governor of the Reserve Bank of India’s (RBI) statement that the impact of demonetisation on the informal sector is not fully captured in the GDP data and the effects of demonetisation is expected to spill over to certain segments of the economy in this quarter. However, he also said that the impact of the notes ban would only be temporary and would help in bringing informal sector into the mainstream economy. Markets were though getting some support from continued buying in the blue-chip stocks like Reliance Industries.

On sectoral front, power utility and energy stocks were restricting any fall in the market. The oil & gas stocks were trading higher after International Energy Agency (IEA) stated that India is moving to the centre stage of global energy market and by the early 2020s it will replace Russia as the world's third largest refiner. In scrip specific action Bharat Financial Inclusion declined after it said that 4.5 percent of its loan portfolio was at a risk of turning bad in Q4 and that 60 percent of the overdue portfolio pertained to Uttar Pradesh and Maharashtra.

The BSE Sensex is currently trading at 29043.51, down by 4.68 points or 0.02% after trading in a range of 29033.83 and 29098.17. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were holding the ground and trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index up by 0.17%.

The top gaining sectoral indices on the BSE were Power up by 0.84%, Utilities up by 0.76%, Energy up by 0.52%, Oil & Gas up by 0.43% and Consumer Durables up by 0.37%, while Metal down by 0.50%, Realty down by 0.47%, IT down by 0.29%, TECK down by 0.21% and Healthcare down by 0.10% were the losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 0.98%, Reliance Industries up by 0.93%, GAIL India up by 0.89%, TCS up by 0.64% and ICICI Bank up by 0.58%. On the flip side, Infosys down by 1.40%, Tata Steel down by 0.74%, Tata Motors down by 0.66%, Axis Bank down by 0.42% and Mahindra & Mahindra down by 0.40% were the top losers.

Meanwhile, in order to retain experienced employees with the help of better incentives, Finance Ministry has agreed in-principle to allow public sector banks (PSBs) to offer employee stock option plan (ESOP) to their employees from next financial year. This step will help motivate the employees to build a strong financial status of the bank. ESOPs could be given by those banks which have not only earned substantial profit but also made remarkable improvement in managing NPAs.

Based on the suggestions of the Banks Board Bureau (BBB), the Finance Ministry has given an in-principle nod, but the finer details are being worked on, like what percentage of profits can be designated for ESOPs. One of the proposals is to issue shares equivalent to a certain percentage of banks' net profit to employees which is being examined. For large banks, the ESOPs could be as much as 5% of profit after tax, while for the smaller ones, it could be about 3%, but no decision has been taken yet. As per suggestions by the BBB, other benefits like performance-linked packages and bonuses are also under consideration.

ESOPs are common in the private sector, where companies offer stocks to reward and retain key and top-performing employees. Since the employees stand to benefit from any appreciation in stock price, ESOPs also help in aligning the interests of the employees with those of shareholders.

BBB chief Vinod Rai had said that the compensation package across the board of public sector banks needs to be improved. He said ‘maybe we are not able to do much with the fixed part of compensation package but variable part we are hopeful that in the next financial year we will be able to introduce a far more attractive package which will have bonuses, ESOPs and other performance linked incentives as part of the package’. He added it can be monetary or non-monetary benefits to make it more attractive for professionals to enter public sector banking space.

The CNX Nifty is currently trading at 8959.40, down by 4.05 points or 0.05% after trading in a range of 8952.40 and 8977.85. There were 25 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Tata Power up by 1.33%, BPCL up by 0.98%, Reliance Industries up by 0.85%, Zee Entertainment up by 0.77% and Tech Mahindra up by 0.65%. On the flip side, Hindalco down by 1.70%, Infosys down by 1.44%, Tata Motors - DVR down by 0.96%, Tata Motors down by 0.85% and Yes Bank down by 0.80% were the top losers.

The Asian markets were trading mostly higher; FTSE Bursa Malaysia KLCI was up by 1.29 points or 0.07% to 1,728.65, KOSPI Index gained 13.4 points or 0.64% to 2,094.76, Taiwan Weighted was higher by 38.3 points or 0.4% to 9,720.93 and Hang Seng increased 92.36 points or 0.39% to 23,688.64.

On the other hand, Nikkei 225 declined by 26.15 points or 0.13% to 19,352.99, Jakarta Composite was down by 6.41 points or 0.12% to 5,403.41 and Shanghai Composite was tad lower by 2.24 points or 0.07% to 3,231.63.