Benchmarks trade flat in early deals

Indian equity benchmarks are trading flat in early deals on Thursday even as Bhartiya Janata Party’s (BJP’s) B S Yeddyurappa took oath as Chief Minister of Karnataka. Though, markets managed to keep their head above water with traders taking some support with report that the Centre has contained its fiscal deficit for FY18 at 3.42% of gross domestic product (GDP), down from 3.5% estimated (RE) when Budget FY19 was presented on February 1. An Rs 85,000 crore (3.8%) reduction in expenditure from the RE level of Rs 22.18 lakh crore and a marginal upward revision in nominal GDP in the second advance estimate (the Budget relied on the first advance estimate) allowed the government to curb the deficit. However, gains remained capped on report that total investments via participatory notes (P-notes) into Indian capital markets plunged to a 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the Securities and Exchange Board of India to check the misuse of these instruments.

On the global front, Asian markets are trading mostly in red at this point of time, however the Japanese stock market edged higher as investors shrugged off weak Japanese core machinery orders data for March. The US markets ended higher on Wednesday, as investors shrugged off geopolitical uncertainty after North Korea threatened to cancel an historic meeting between leader Kim Jong Un and President Donald Trump.

Back home, stocks related to public sector undertakings (PSU) remained in focus after the Cabinet approved a mechanism within the government for speedy resolution of commercial disputes of central public sector enterprises without cases going to courts. A new two-tier mechanism will be put in place of the existing Permanent Machinery of Arbitration mechanism to resolve such commercial disputes. In scrip specific developments, Crest Ventures surged on entering into SPA to acquire 48% stake in TPIL and Granules India gained on receiving USFDA approval for generic Methylergonovine tablets.

The BSE Sensex is currently trading at 35390.62, up by 2.74 points or 0.01% after trading in a range of 35388.65 and 35510.01. There were 15 stocks advancing against 15 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.31%, while Small cap index was up by 0.47%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.40%, Capital Goods up by 0.41%, Telecom up by 0.38%, IT up by 0.35% and Power was up by 0.32%, while Metal down by 1.01%, Oil & Gas down by 0.44%, Basic Materials down by 0.35%, Energy down by 0.34% and PSU was down by 0.05% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.61%, TCS up by 0.76%, Power Grid Corporation up by 0.68%, Larsen & Toubro up by 0.60% and Kotak Mahindra Bank up by 0.59%. On the flip side, Tata Steel down by 2.61%, Adani Ports down by 0.83%, Tata Motors - DVR down by 0.76%, Yes Bank down by 0.76% and HDFC down by 0.66% were the top losers.

Meanwhile, The share of foreign portfolio investments (FPI) through participatory notes (P-notes) in domestic capital markets has declined to nine-year low of Rs 1 lakh crore at the end of April, due to tough rules put in place by Securities and Exchange Board of India (SEBI) to check the misuse of these instruments. This is the lowest level since June 2009 when the cumulative value of such investments stood at Rs 97,885 crore. According to SEBI data, total value of P-note investments in Indian markets including equity, debt and derivatives, at April end slipped to Rs 100,245 crore from Rs 106,403 crore at the end of March and Rs 106,760 crore in February.

Of the total, P-note holdings in equities at April-end were at Rs 72,321 crore, while in debts and derivatives were at Rs 27,274 crore and Rs 3,748 crore respectively. The quantum of foreign portfolio investors’ (FPIs) investments via P-notes dropped to 3 percent during the period under review from 3.4 percent in the preceding month. P-notes are issued by registered FPIs to overseas investors who wish to be part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process.

SEBI had notified stricter norms stipulating a fee of $1,000 on each instrument to check any misuse for channelising black money. It also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. These measures were an outcome of a slew of other steps taken by the regulator in the recent past. In April 2017, SEBI had barred resident Indians, NRIs and entities owned by them from making investment through P- notes.

The CNX Nifty is currently trading at 10742.15, up by 1.05 points or 0.01% after trading in a range of 10739.20 and 10777.25. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Coal India up by 1.75%, Titan Co up by 1.37%, Bharti Infratel up by 1.33%, TCS up by 0.78% and Power Grid Corporation up by 0.73%. On the flip side, Hindalco down by 2.82%, BPCL down by 2.60%, Tata Steel down by 2.56%, Cipla down by 1.57% and HPCL down by 1.43% were the top losers.

Asian markets are trading mostly in red; Taiwan Weighted decreased 20.88 points or 0.19% to 10,876.69, Hang Seng slipped 12.24 points or 0.04% to 31,097.96, Shanghai Composite shed 7.34 points or 0.23% to 3,162.23 and KOSPI Index down by 1.1 points or 0.04% to 2,458.72.

On the flip side, FTSE Bursa Malaysia KLCI gained 4.4 points or 0.24% to 1,862.66, Jakarta Composite rose 39 points or 0.67% to 5,880.47 and Nikkei 225 up by 153.41 points or 0.68% to 22,870.64.