Post Session: Quick Review

Indian equity benchmarks ended the volatile day of trade marginally in red on Wednesday, with frontline gauges swinging between red and green terrain throughout the session. In the morning trade, key indices traded on optimistic note, boosted by lower crude oil prices and firm rupee. Traders also took some support with the Securities and Exchange Board of India (SEBI) tightening disclosure and review norms for credit rating agencies (CRAs). SEBI ordered CRAs to analyse deterioration in the liquidity conditions of an issuer, while monitoring its repayment schedules and taking into account any asset-liability mismatches. These measures will enable investors to understand underlying rating drivers better and make more informed investment decisions. But traders soon turned cautious despite RBI’s report stating that based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct purchase of the following government securities under Open Market Operations for an aggregate amount of Rs 120 billion on November 15, 2018.

In early afternoon trade, markets shrugged off their losses and resumed their upward trajectory, as sentiments turned optimistic with Prime Minister Narendra Modi stating that financial inclusion has become a reality for 1.3 billion Indians as he pitched India as a favourite investment destination at the Fintech Festival. However, markets were unable to hold on to the gains for long as some anxiety remained among the investors with data indicating that Inflation based on wholesale prices rose to over 4-month high of 5.28 percent in October on rising prices of crude, natural gas, fuel and power although food prices have softened. Some concern also came in with a private report stating that the overall hiring sentiment for the second half of this financial year has declined by 3% to 92% with persisting currency and oil pricing concerns in the country.

On the global front, Asian markets ended mixed on Wednesday, while European markets were trading in red, as investors fretted about slowing global growth with crude oil prices sinking on worries about weakening world demand and oversupply. Back home, Oil marketing companies (OMCs) surged as crude prices receded, while IT and pharmaceutical stocks weakened due to the stronger rupee. Besides, agriculture sector stocks were in focus as Agri input companies posted decent growth in revenue and net profit for the quarter ended September 2018, due to an increase in sales volume on normal monsoon rainfall and price hikes.

The BSE Sensex ended at 35110.49, down by 34.00 points or 0.10% after trading in a range of 34986.86 and 35351.88. There were 14 stocks advancing against 17 stocks declining on the index. (Provisional)

The broader indices ended mixed; the BSE Mid cap index rose by 0.12%, while Small cap index was down by 0.26%. (Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.08%, PSU up by 0.94%, FMCG up by 0.82%, Telecom up by 0.59% and Bankex up by 0.42%, while IT down by 2.33%, TECK down by 1.96%, Healthcare down by 1.67%, Realty down by 1.46% and Metal down by 1.06% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Maruti Suzuki up by 2.82%, ONGC up by 2.52%, Asian Paints up by 2.50%, Hindustan Unilever up by 2.27% and Indusind Bank up by 1.86%. (Provisional)

On the flip side, Sun Pharma down by 7.31%, Kotak Mahindra Bank down by 3.35%, TCS down by 2.92%, Mahindra & Mahindra down by 2.42% and Tata Motors down by 1.89% were the top losers. (Provisional)

Meanwhile, instead of present stricter guidelines which restrict the lending capacity of lenders, the government is of the view that the Reserve Bank of India (RBI) should resort to Basel III norms for capital adequacy in banks. Currently, the RBI applies stricter norms and not those specified under Basel III for capital adequacy, leading banks to set aside higher capital for loans. Besides, the RBI has fixed March 2019 as the deadline to meet capital requirements under the Basel III norms for banks.

The government has been in favour of alignment of the capital adequacy norms with Basel III norms. This assumes significance amidst growing tensions between the RBI and the government, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

According to the Basel Committee on Banking Supervision (BCBS) report, core capital requirement for banks as prescribed by the RBI is 1% higher than what Basel III norms recommend. Indian banks as per RBI direction are required to maintain 5.5% Common Equity Tier 1 (CET 1) as against 4.5% required under the Basel III framework. The BCBS report said these higher capital norms translate into additional capital requirement, restricting lending potential and income generation.

As per the report, while the Basel framework requires the application of capital standards to all internationally active banks, these have been made applicable in India to all scheduled commercial banks, including banks which are not internationally active. Meanwhile, India has only four internationally active banks, which have more than 10 per cent of their assets in their overseas book.

The CNX Nifty ended at 10567.80, down by 14.70 points or 0.14% after trading in a range of 10532.70 and 10651.60. There were 22 stocks advancing against 27 stocks declining on the index, while 1 stock remained unchanged. (Provisional)

The top gainers on Nifty were HPCL up by 4.83%, BPCL up by 3.99%, UPL up by 3.31%, Indian Oil up by 2.97% and Maruti Suzuki up by 2.78%. (Provisional)

On the flip side, Sun Pharma down by 7.29%, Tech Mahindra down by 3.84%, HCL Tech down by 3.52%, GAIL India down by 3.38% and Kotak Mahindra Bank down by 3.35% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 43.22 points or 0.62% to 7,010.54, France’s CAC shed 55.52 points or 1.1% to 5,046.33 and Germany’s DAX fell 100.46 points or 0.88% to 11,371.76.

Asian markets ended mixed on Wednesday as global growth worries persisted and Italy's populist government escalated a row with the European Commission over the country's spending plans. The Italian government told the European Union Tuesday it would maintain its deficit and economic growth forecasts for 2019 despite calls from the bloc's authorities to revise its draft budget. Chinese shares ended lower after the release of mixed economic data. Industrial production in China rose an annual 5.9 percent in October, the National Bureau of Statistics said today - exceeding expectations for 5.8 percent, which would have been unchanged from the September reading. Retail sales climbed 8.6 percent year-on-year - missing forecasts for a gain of 9.2 percent, while fixed asset investment advanced an annual 5.7 percent, surpassing forecasts for 5.5 percent. Meanwhile, Japanese shares ended higher as technology companies and electronic component makers surged on short covering.