Benchmarks trade marginally higher on firm global cues

Indian equity benchmarks made a positive start following firm global cues. Traders are taking some support from report that the capital markets regulator, Securities and Exchange Board of India (SEBI) is likely to ease entry norms for FPIs willing to invest in the Indian markets. It may ease some rules, including expanding the eligible jurisdictions for registration by including countries with diplomatic tie-ups with India. However, gains remained capped as traders remained wary ahead of December F&O expiry later today. Some cautiousness also persisted in the markets with the government decision to make additional borrowing of Rs 50,000 crore this fiscal through dated securities, a move that may put burden on the fiscal deficit target of 3.2 percent of GDP.

On the global front, Asian markets rallied at this point of time with some of the indices trading near the record high. Japanese market was trading in green, as the Industrial production in the country rose in November, fueled by strong growth in exports. The US markets managed a modestly positive close in the last session.

Back home, banking stocks remained under pressure, as the global rating agency Standard & Poor's (S&P) on the basis of the economy and industry risk criteria has classified the Indian banking sector under 'Group 5' along with countries such as Italy, Spain, Ireland, the UAE and South Africa and has said that Banks’ asset quality is weak and has been deteriorating in the past four years. Auto stocks were in focus, as the Lok Sabha approved a bill to hike cess on luxury vehicles from 15 to 25 per cent with a view to enhance funds to compensate states for revenue loss following the rollout of GST.

The BSE Sensex is currently trading at 33940.04, up by 28.23 points or 0.08% after trading in a range of 33914.37 and 33975.05. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.25%, while Small cap index was up by 0.44%.

The top gaining sectoral indices on the BSE were Metal up by 1.80%, Realty up by 1.05%, Basic Materials up by 0.99%, FMCG up by 0.39% and Capital Goods was up by 0.36%, while Auto down by 0.02% was the lone losing index on the BSE.

The top gainers on the Sensex were Tata Steel up by 1.28%, Hindustan Unilever up by 1.18%, Dr. Reddys Lab up by 0.35%, Larsen & Toubro up by 0.35% and Mahindra & Mahindra up by 0.33%. On the flip side, Sun Pharma down by 1.14%, Hero MotoCorp down by 0.76%, Axis Bank down by 0.65%, Yes Bank down by 0.62% and Bajaj Auto down by 0.61% were the top losers.

Meanwhile, with an aim to ease direct registration for foreign portfolio investors (FPIs) and avoid participatory notes (P-notes), the capital markets regulator, Securities and Exchange Board of India (SEBI) is likely to ease entry norms for FPIs willing to invest in the Indian markets. It may ease some rules, including expanding the eligible jurisdictions for registration by including countries with diplomatic tie-ups with India. Besides, the markets regulator may rationalise ‘fit and proper’ criteria for FPIs as well as simplify broad-based requirements for such investors. Additionally, it may allow listing of security receipts issued by an asset reconstruction company (ARC) on the exchange platform. Security receipt, in market parlance, means a receipt or other security issued by a securitisation company or reconstruction company. This will enhance capital flows into the securitisation industry and particularly be helpful to deal with bank non-performing assets (NPAs).

As per the new proposal, more jurisdictions such as Canada would be able to access the market due to change in FPI Regulations. Category I and II FPIs, which are essentially government and regulated entities, should not need any additional documentation and procedural requirements. However, Category III FPIs should continue to be subject to such requirements. Rationale of broad-based criteria may be extended in other cases wherein the applicant funds have other institutional investors -- sovereign wealth fund, insurance/reinsurance companies, pension funds, Exchange Traded Funds (ETFs) as their underlying investors. Currently, an FPI is considered to be broad-based in case such overseas investor has a bank as an underlying investor.

Broad-based fund means a fund, established outside India, which has at least 20 investors, with no investor holding more than 49% of the shares or units of the fund. In case broad-based fund loses its status due to an exit of some offshore global investors then it may not result in immediate loss of Category II status. Three months time should be given to such funds to regain such status. The regulator may discontinue the requirements of seeking its prior approval in case of a change in local custodian or designated depository participants (DDPs). At the time of change of local custodian/DDP, the new DDP should be permitted to rely on the registration granted by previous DDP at the time of transition. The move is expected to avoid duplicate efforts and incremental documentation by the FPIs as well as the DDPs.

The CNX Nifty is currently trading at 10504.95, up by 14.20 points or 0.14% after trading in a range of 10494.55 and 10515.90. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.25%, Vedanta up by 2.05%, Hindustan Unilever up by 1.40%, UPL up by 1.24% and Tata Steel up by 1.10%. On the flip side, Hero MotoCorp down by 0.97%, Sun Pharma down by 0.92%, Wipro down by 0.80%, Axis Bank down by 0.62% and Yes Bank down by 0.60% were the top losers.

Asian markets are trading higher; Jakarta Composite rose 3.15 points or 0.05% to 6,280.32, FTSE Bursa Malaysia KLCI increased 8.67 points or 0.49% to 1,780.43, Shanghai Composite jumped 15.85 points or 0.48% to 3,291.63, Nikkei 225 gained 19.37 points or 0.08% to 22,930.58, KOSPI Index surged 22.31 points or 0.92% to 2,458.98, Taiwan Weighted added 58.03 points or 0.55% to 10,544.70 and Hang Seng was up by 167.24 points or 0.57% to 29,764.90.