Benchmarks lose further ground; weak European market start weighs

After re-entering the negative zone in the early noon deals, benchmark equity indices have added weakness, in the backdrop of sluggish global set-up, with Asian peers continuing to showcase heartbreaking moves and European counterparts too opening in the negative terrain. A sharp downtick in US future indices in the screen trade seems to be pressurizing the sentiment at Dalal Street. Stocks from Power, Capital Goods and Fast Moving Consumer Goods counters mainly are endorsing weakness, while stocks from Health Care, Auto and Consumer Durable space, are slogging to limit the downside of the bourses. 30 share index of Bombay Stock Exchange (BSE), Sensex, edging lower over 50 points, is trading above the 17800 level, while the Nifty, too seems to stuck near 5400 crucial level, which is proving to be stiff resistance. However, broader indices, have manage the upward trajectory.

On the global front, Asian shares slipped in negative terrain on Wednesday as slumping Japanese exports reminded investors of the risks the euro zone debt crisis poses to regional economies. Japan's exports fell an annual 8.1 percent in July, the deepest drop in six months, dragged down by collapsing shipments to Europe and a sharp plunge in sales to China. The fragile report from the world's third-biggest economy followed similarly bleak data from export-reliant South Korea and Taiwan.

Closer home, the BSE Sensex is currently trading at 17832.99, down by 52.57 points or 0.29% and touched a high and a low of 17895.79 and 17,800.29 respectively. There were 17 stocks advancing against 13 declines on the index. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1245:845, while 109 shares remained unchanged.

The broader indices continued to trade in fine fettle; the BSE Mid cap and Small cap indices up by 0.14% and 0.16% respectively.

The top gaining sectoral indices on the BSE were, Health Care up by 0.80%, Auto up by 0.40%, Consumer Durable up by 0.26%, IT up by 0.14% and PSU up by 0.07% while, Power down by 0.63%, Capital Goods down by 0.45%, Fast Moving Consumer Goods (FMCG) down by 0.43%, Technology down by 0.34% and Oil & Gas down by 0.31% remained top losers on the index.

The top gainers on the Sensex were Maruti Suzuki up by 1.54%, Hindalco Industries up by 1.47%, Dr Reddy up by 1.26%, Hero MotoCorp up by 1.10% and BHEL up by 0.86%.

On the flip side, Bharti Airtel down by 2.71%, Tata Power down by 1.30%, Sterlite Industries down by 1.06%, Wipro down by 0.75% and Jindal Steel down by 0. 67% were top losers on the Sensex.

Meanwhile, in a bid to prevent the 'unhealthy practices' and distribute risk to a wide spectrum of investors, the Reserve Bank of India (RBI) has tightened the non-banking finance company (NBFC) securitization norm, by setting a 95 per cent cap on the loans it is selling to another company. Thus with the new norm, the NBFC will have to retain a minimum 5 per cent of the loan being sold to another entity, with a further condition of not selling or securitizing a loan unless three monthly installments have been duly paid by the borrower.

In order to prevent unhealthy practices surrounding securitization viz., origination of loans for the sole purpose of securitization and in order to align the interest of the originator with that of the need that originators should retain a portion of each securitization originated. Further, these guidelines are expected to be implemented by NBFCs in two phases by October end.

As per the new guidelines, loan up to two years could be securitized only after three monthly installments have been duly paid by the borrower. The limit for loans between two and five years is pegged at six months and above five years, would be 12 months. With regard to minimum retention requirement (MRR) for securitization, RBI mandated NBFC’s selling loans to retain 5 per cent of the amount, if the loan is for less than two-year period and 10 per cent if it is of over two years.

Further according to the guidelines, NBFCs should formulate policies regarding the process of due diligence to be exercised by their own officers to satisfy the Know Your Customer (KYC) requirements and credit quality of the underlying assets.

The S&P CNX is currently trading at 5,406.70, down by 14.30 points or 0.26% and touched a high and a low of 5,422.60 and 5,394.80 respectively. There were 23 stocks advancing against 27 declines on the index and one remained unchanged.

The top gainers of the Nifty were BPCL up by 2.58%, Ranbaxy up by 1.97%, Dr Reddy up by 1.84%, Hero MotoCorp up by 1.25% and Sun Pharmaceuticals up by 1.09%.

On the flip side, Bharti Airtel down by 3.11%, Tata Power down by 1.80%, IDFC down by 1.45%, HCL Technologies down by 1.12% and Sterlite Industries down by 1.10%, were major losers on the index.

Most of the Asian markets continued to reel in red; Shanghai Composite declined by 0.68%, Hang Seng plunged 1.04%, Nikkei 225 lost 0.27%, Straits Times slid 0.66%, Kospi Composite edged lower by 0.66% and Taiwan Weighted shed 0.14%. On the other hand, KLSE Composite up by 0.05% was the only gainer amongst the Asian pack. Jakarta Composite is closed due to Idul Fitri holidays.

European markets got off to sluggish start; CAC 40 declined 0.84%, DAX lost 0.80% and FTSE 100 plunged 0.91%.