Benchmarks trade lower on sluggish global cues

Indian equity markets have made a soft start tracking weakness in global markets as investors looked cautious ahead of European Central Bank’s meet tomorrow and preferred to stay away from taking fresh positions ahead of that event. Overnight, the US markets made a soft-to-flat closing after a long weekend, while the Nasdaq managed to close in green, Dow and S&P were down by less than half a percent. While, all the Asian counters were trading in the red at this point of time on getting report of manufacturing contraction from US and slower growth in Australian economy. Back home, the PSU oil marketing companies like BPCL, HPCL and IOC edged higher on report that the prices of petrol, diesel and LPG may be increased next week after Finance Ministry told the Petroleum Ministry that it has no funds left to subsidize fuels. The revision could result in petrol turning costlier by Rs 4 a litre, diesel by Rs 5 and LPG by Rs 50 a cylinder. On the sectoral front, fast moving consumer goods, realty and consumer durables remained the few gainers while, metal, capital goods and power remained the top losers on the BSE sectoral space. The broader indices were outperforming benchmarks while, the market breadth has made a positive start; there were 786 shares on the gaining side against 638 shares on the losing side while 86 shares remained unchanged.

The BSE Sensex opened at 17,359.96; about 81 points lower compared to its previous closing of 17,440.87, and has touched a high and a low of 17,396.02 and 17,356.03 respectively.

The index is currently trading at 17,395.59, down by 45.28 points or 0.26%. There were 7 stocks advancing against 23 declines on the index.

The overall market breadth has made a positive start with 52.05% stocks advancing against 42.25% declines. The broader indices too were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.22% and 0.11% respectively. 

The few gaining sectoral indices on the BSE were, FMCG up by 0.32%, Realty up by 0.28% and CD up by 0.21%. While, Metal down by 1.00%, CG down by 0.72%, Power down by 0.71%, IT down by 0.46% and Bankex down by 0.45% were the top losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 1.02%, HUL up by 0.74%, HDFC Bank up by 0.64%, ITC up by 0.32% and HDFC up by 0.26%.

On the flip side, BHEL down by 1.83%, Tata Steel down by 1.74%, Jindal Steel down by 1.37%, Sterlite Industries down by 1.14% and NTPC down by 1.09% were the top losers on the index.

Meanwhile, in order to meet additional capital requirements under Basel III norms, the Reserve Bank of India (RBI) Governor D. Subbarao said the government will have to infuse Rs 90,000 crore in state-run banks in the next five years, if the Centre fails to scale down their holding in these entities to 51%.

Underscoring that both public and private banks together need an additional capital of Rs 5 trillion (Rs 5 lakh crore) by 31 March 2018 to comply with the Basel III regulations, the governor stated, 'the government, in order to maintain majority shareholding under the Basel III, will have to infuse Rs 90,000 crore into the state-run banks, which in light of precarious fiscal position would be a tall task. Out of Rs 5 trillion additional capital requirements, banks would require Rs 1.75 trillion as total equity capital, and the remaining Rs 3.25 trillion as non-equity capital of Rs 3.25 trillion.

In the FICCI-IBA organized summit, the governor told bankers, that the government only has two options, i.e., either of maintaining its shareholding at the current level or bringing down its shareholding at 51 per cent in all the banks across the board.  

Scaling down of government shareholding across all public sector banks would reduce its burden to just Rs 70,000 crore. However, Subbarao added, “even if the government sacrifices its majority shareholding, it will continue to enjoy the privileges of a majority shareholder”. Furthermore, he highlighted that though the implementation of Basel III norms will hit the profitability of the banks in the near term, the higher regulatory standards will secure growth in the medium to longer term.

Basel-III guidelines, which aim to make banks more resilient against any unexpected economic crisis, envisages scheduled commercial banks (excluding LABs and RRBs) operating in India to maintain a minimum total capital (MTC) of 9 per cent of total risk weighted assets (RWAs) as against a MTC of 8 per cent of RWAs as prescribed in Basel III rules text of the BCBS (Basel Committee on Banking Supervision), which is also higher than the international norm of 8%.

The S&P CNX Nifty opened at 5,243.90; about 56 points lower compared to its previous closing of 5,299.40, and has touched a high and a low of 5,255.90 and 5,243.85 respectively.

The index is currently trading at 5,253.45, down by 20.55 points or 0.39%. There were 7 stocks advancing against 43 declines on the index.

The top gainers of the Nifty were BPCL up by 0.92%, Bharti Airtel up by 0.92%, HUL up by 0.80%, HDFC Bank up by 0.70% and Dr Reddy up by 0.25%.

Axis Bank down by 2.68%, BHEL down by 1.90%, Tata Steel down by 1.88%, Jindal Steel down by 1.43% and Reliance Infra down by 1.37%, were the major losers on the index.

All the Asian equity indices were trading in the red; Shanghai Composite was down by 2.42 points or 0.12% to 2,041.23, Hang Seng plunged by 217.49 points or 1.12% to 19,212.42, Jakarta Composite was lower by 8.28 points or 0.20% to 4,097.29, KLSE Composite was down by 5.52 points or 0.33% 1,648.59, Nikkei 225 lost 73.17 points or 0.83% to 8,702.34 Straits Times was down by 13.91 points or 0.47% to 2,997.11, Kospi Composite declined by 25.97 points or 1.34% to 1,881.42 and Taiwan Weighted lost 64.54 points or 0.87% to 7,386.68.