Markets continue to trade in red terrain

Key Indian equity benchmarks continued their weak trade in late morning session, with Realty and Bankex declining the most. Traders’ sentiments were pessimistic, as the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) have slumped to nearly eight and a half year low of Rs 1.19 lakh crore at the end of January, amid tough rules put in place by Securities and Exchange Board of India (SEBI) to check their misuse. Sentiments also got dampened, after the government has categorised around 9,500 non-banking financial companies -- about 80 per cent of the NBFCs in the country -- as 'high risk' prone as they have not complied with a stipulated provision of the anti-money laundering law. Traders took note of International Monetary Fund (IMF) Managing Director Christine Lagarde’s statement that the global economy was showing broad-based growth, but the landscape was shifting with heightened risks of trade disputes, monetary policy normalisation and technological change. However, losses remained capped with economic think-tank NCAER’s report that the Indian economy is projected to grow at 6.7 per cent in the current financial year and 7.5 per cent in 2018-19.

On the global front, Asian markets were trading mostly in green, after Wall Street extended a rally and US bond yields slipped ahead of Congressional testimony later in the day by the new Federal Reserve Chairman Jerome Powell. Markets are looking forward to Powell's testimony for further insight on inflation and interest rates. Back home, in scrip specific development, Sagar Cements was trading higher after the company received an approval for acquisition of the entire assets of the two mini hydel power plants, one with a capacity of 4.3 MW located at Guntur Branch Canal (GBC), Narasaraopet, Guntur District and the other with a capacity of 4 MW located at Lock-in-sula (LIS), Atmakur, Kurnool, in the state of Andhra Pradesh, both belonging to Sagar Power, a related party, for a sum not more than Rs 26.90 crore.

The BSE Sensex is currently trading at 34411.72, down by 34.03 points or 0.10% after trading in a range of 34328.53 and 34610.79. There were 17 stocks advancing against 13 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.18%, while Small cap index up by 0.10%.

The top gaining sectoral indices on the BSE were Telecom up by 0.93%, Consumer Durables up by 0.84%, Energy up by 0.61%, Oil & Gas up by 0.54% and FMCG up by 0.43%, while Realty down by 0.90%, Bankex down by 0.75%, PSU down by 0.68%, Power down by 0.24% and IT down by 0.08% were the top losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 1.78%, Bharti Airtel up by 1.60%, Hindustan Unilever up by 1.25%, Yes Bank up by 1.11% and Reliance Industries up by 0.95%. On the flip side, SBI down by 1.55%, Axis Bank down by 1.42%, ICICI Bank down by 1.19%, Kotak Mahindra Bank down by 1.00% and Adani Ports & SEZ down by 0.71% were the top losers.

Meanwhile, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) have slumped to nearly eight and a half year low of Rs 1.19 lakh crore at the end of January, amid tough rules put in place by Securities and Exchange Board of India (SEBI) to check their misuse. This was the lowest level since August 2009, when the cumulative value of such investments stood at Rs 1,10,355 crore. According to the SEBI data, total value of P-note investments in Indian markets including equity, debt and derivatives, at January-end, has dropped to Rs 119,556 crore, from Rs 124,810 crore at the end of December. 

Of the total investments in January, P-note holdings in equities were at Rs 84,278 crore, while in debts and derivatives were at Rs 32,194 crore and Rs 3,084 crore respectively. The quantum of FPI investments via P-Notes decreased to 3.5 percent in January, from 3.8 percent in the preceding month. Investments through P-Notes were showing declining trend since June last year and hit an over eight-year low in September, however, it slightly rose in October but fell in November and the trend continued till January this year.

In July 2017, markets regulator SEBI had notified stricter norms stipulating a fee of $1,000 that would be levied on each instrument to check any misuse for channelising black money. Also, the regulator prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. The move was a follow-through of SEBI's board approval of a relevant proposal in June. These measures were an outcome of a slew of other steps taken by the regulator in the recent past. Further, it had barred resident Indians, NRIs and entities owned by them from making the investment through P- notes.

The CNX Nifty is currently trading at 10570.20, down by 12.40 points or 0.12% after trading in a range of 10541.00 and 10631.65. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 1.70%, Bharti Airtel up by 1.36%, Hindustan Unilever up by 1.22%, Lupin up by 1.06% and Yes Bank up by 0.97%. On the flip side, Ambuja Cement down by 4.20%, SBI down by 1.48%, Axis Bank down by 1.43%, Indiabulls Housing Finance down by 1.34% and ICICI Bank down by 1.18% were the top losers.

Asian markets were trading mostly in green; KOSPI Index increased 5.99 points or 0.24% to 2,463.64, FTSE Bursa Malaysia KLCI increased 9.79 points or 0.53% to 1,869.87, Jakarta Composite increased 11.54 points or 0.18% to 6,566.21 and Nikkei 225 increased 174.49 points or 0.79% to 22,328.12.

On the flip side, Hang Seng decreased 74.9 points or 0.24% to 31,423.70, Shanghai Composite decreased 36.13 points or 1.09% to 3,293.45 and Taiwan Weighted decreased 21.23 points or 0.2% to 10,815.47.