Auto, banking stocks drive benchmarks higher; Sensex re-conquers 18,500 mark

After trading lackluster for first part of the day, key Indian benchmarks rebounded in late trades to end higher on Wednesday led by auto and financial shares. After getting off to a flat to positive opening, the markets traded in close proximity with the previous closing levels for most part of morning trades as cues from the Asian space remained sluggish. But with the sharp up-move in second half, the frontline indices not only surpassed the psychological 5,600 (Nifty) and 18,500 (Sensex) levels but also regained most part of the ground lost in previous session’s brutal sell-off.

The main support came in from Auto space which surged over one and a half percent, buoyed by Maruti Suzuki which scaled 52-week high on reporting better than expected Q2 numbers. The company posted a fall of 5.41 percent in its net profit at Rs 227.45 crore for the quarter ended September 30, 2012 as compared to Rs 240.45 crore for the same quarter in the previous year. Meanwhile, stocks like Hero MotoCorp, Tata Motors and Mahindra & Mahindra too edged higher ahead of reporting October sales numbers, which are expected mostly to be higher given the start of the festive season.

Cues from global markets too remained supportive as European counters traded firmly in the early deals on Tuesday on word of a deal reached between the Greek government negotiators and its Troika of creditors - the European Commission, the European Central Bank and the International Monetary Fund. Moreover, investors looked ahead to key economic data and waited for Wall Street to re-open after a two-day closure. Meanwhile, most of the Asian equity indices ended the session in the green with Tokyo rebounding from the previous day’s losses as dealers digested the Bank of Japan's latest stimulus push.

Back home, some amount of support also came in from banking stocks which rose on account of short covering. They had witnessed huge selling yesterday on the back of Reserve Bank's new provisioning norms for restructured assets. PSU lenders - State Bank of India and Punjab National Bank - traded with over 1 percent gains. Media shares also aided the sentiments as stocks like TV18 Broadcast, BAG Films, Network 18 Media, Sun TV Network and Zee Entertainment all edged higher as the deadline for cable operators to switch to digital TV ends today, October 31, 2012, in Delhi, Mumbai, Kolkata and Chennai. However, the gains remain capped as some anxiety was witnessed after Parthasarathi Shome committee, set up to re-examine the General Anti-Avoidance Rules (GAAR) proposed by former finance minister Pranab Mukherjee in this year's budget, reportedly presented its final recommendations to current finance minister P Chidambaram today, the outcome of which would be public on November 1, 2012.

The NSE’s 50-share broadly followed index Nifty rose by over twenty points recapturing its psychological 5,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over seventy points to finish above the psychological 18,500 mark. Broader markets too traded in-line with benchmarks and ended the trade with a gain of over half a percent.

The overall volumes stood at over Rs 1.00 lakh crore, which remained on the lower side as compared to that on Tuesday. The market breadth remained in favor of declines as there were 1,483 shares on the gaining side against 1,301 shares on the losing side while 143 shares remain unchanged.

Finally, the BSE Sensex gained 74.53 points or 0.40% to settle at 18,505.38, while the S&P CNX Nifty rose by 21.80 points or 0.39% to end at 5,619.70.

The BSE Sensex touched a high and a low of 18,521.62 and 18,398.48, respectively. The BSE Mid-cap index was up by 0.88% and Small-cap index was up by 0.50%.

Hindalco up 5.00%, Maruti Suzuki up 2.99%, Tata Motors up 2.81%, Cipla up 2.52% and Jindal Steel up 2.12% were the major gainers on the Sensex. On the flip side, ONGC down 1.72%, Gail India down 1.70%, BHEL down 1.32%, L&T down 0.80% and Hindustan Unilever down 0.55% were the major losers on the index.

The top gainers on the BSE sectoral space were, Health Care (HC) up 1.72%, Auto up 1.55%, Realty up 1.43%, Metal up 1.20% and Bankex up 0.60%. While Capital Goods (CG) down 0.37%, Oil & Gas down 0.30% and FMCG down 0.17% were top losers on the BSE sectoral space.

Meanwhile, in a move that could hit the bottom lines of banks, Reserve Bank of India (RBI), during its Second Quarter Review of the Monetary Policy 2012-13’, sharply hiked the provisioning for restructured assets to 2.75 per cent as against the earlier 2 per cent. Keeping in view the larger objectives of financial stability and in line with international best practices, RBI, to ensure that banks have sufficient provisioning buffer, raised the provision for restructured standard accounts. Further, detailed guidelines on the same shall be issued shortly by the Apex Bank.

In light of the working group report on restructuring guidelines, the central bank hiked the provisioning for restructured asset.  With a view to contain risks associated with the spiraling restructured loans of Indian banks, especially Public Sector Banks, RBI in September this fiscal appointed a working committee, which recommended the provisioning requirement on standard restructured assets to be hiked to 5% in a phased manner, over a period of two-year. The committee suggested a hike of 3.5% at the end of the first year and 5% in the second year. However, the central bank partially accepting the suggestion increased the provisioning norms to 2.75%.

Meanwhile, the new norm, effective immediately, are expected to impact the banks, especially PSBs, which have witnessed an unprecedented rise in loan restructuring due to economic stress of their borrowers. In the report, its stands to be highlighted that RBI’s this move is calculated to impact profit before tax (PBT) of PSBs for the current fiscal by between 1.5% and 4.5%. Further, among the PSBs, the best positioned is estimated to be SBI, which could see a 1.5% hit in its PBT, the report showed.

Moreover, the central bank also mandated banks to improve their disclosure norms pertaining to their exposure to credit, derivatives and un-hedged foreign currency exposures among themselves and put in place an effective mechanism for information sharing by end- December 2012.

The S&P CNX Nifty touched a high and a low of 5,624.40 and 5,583.05 respectively.

The top gainers on the Nifty were Hindalco up 5.23%, Maruti Suzuki up 3.43%, Cipla up 2.89%, Tata Motors up 2.77% and Sesa Goa up 2.49%.

The top losers on the index were Reliance Infra down 2.74%, GAIL down 1.87%, BHEL down 1.77%, ONGC down 1.72% and Ultratech Cement down 0.90%.

European markets were trading mixed. France’s CAC 40 up 0.39%, Germany’s DAX up 0.65% and Britain’s FTSE 100 down by 0.11%.

Asian stock markets went home on mixed note amid better news in Europe both on the earnings and the fiscal front, which improved investors risk appetite. Meanwhile, South Korean industrial production data and earnings reports from some regional companies also helped markets to extend the gains. Japan’s Nikkei ended higher, recovering from the sharp fall in the previous session as the Bank of Japan’s (BoJ) expansion of its asset-buying program failed to ease fears over economic growth. Hong Kong markets closed with green mark with surge in regional companies, while Seoul shares advanced after industrial output data.