Trade continues to be lacklustre at D-Street; Nifty gyrates sub 5600 bastion

Trade at Dalal Street continues to be subdued post previous session’s large-sell off, which besides washing off gains have also sapped risk appetite of nervy investor’s.  Market-men after previous session’s disappointing Second quarter monetary policy review 2012-13, have now approached a cautious stance ahead of the release of Shome panel’s final report on General Anti-Avoidance Rules (GAAR) to Finance Minister P. Chidambaram. The panel among other things, has suggested, that interest and penalty be waived if tax has been applied retrospectively, as reported earlier. However, the report, which is expected to have high implication, is expected to be public only by November 1.

Absence of cues from global front also has contributed to listlessness of Indian equity markets. After making a muted start, 30 share index of BSE, trading near the neutral line, is holding off the 18400 level. Similarly, widely followed index of NSE, Nifty, after surrendering its crucial 5600 level since the start of trade, is currently trading off that bastion. Meanwhile, broader indices, baring the trend, continue to showcase resilience.

On the global front, Asian pacific shares look set for a mixed close on end October, as investors look ahead to a series of important political and economic events set to unfold in early November. Further, the US financial markets looked set to resume trading with the passage of a powerful storm. However, even European stock futures indicate a mixed opening on Wednesday as disappointing earnings from Arcelor Mittal and Anheuser-Busch InBev could rekindle worries over the outlook for corporate profits.

Closer home, Health Care, Auto and Consumer Durable counters, have limited the downside chances of the bourses. On the flip side, stocks from Capital Goods, Oil & Gas and Power, emerging as the weakest spell, are mainly endorsing weakness. Pharma shares have extended gains on account of optimism spelled by the robust earnings of Glenmark Pharmaceuticals, which accelerated over 8 percent a day after its July-September quarter earnings almost tripled. The overall market breadth on BSE is in the favour of declines which have thumped advances in the ratio of 1238:1157, while 145 shares remained unchanged.

The BSE Sensex is currently trading at 18423.24, down by 7.61 points or 0.04% after trading in a range of 18485.20 and 18409.20. There were 14 stocks advancing against 16 declines on the index.

The broader indices continued to showcase strength; the BSE Mid cap and Small cap indices were trading higher by 0.22% and 0.10% respectively.

The top gaining sectoral indices on the BSE were, HC up by 1.37%, Auto up by 0.90%, CD up by 0.50%, TECk up by 0.37% and IT up by 0.15%. While, CG down by 0.96%, Oil & Gas down by 0.62%, Power down by 0.48%, FMCG down by 0.37% and Metal down by 0.35% were the top losers on the index.

The top gainers on the Sensex were Maruti Suzuki up by 2.51%, Dr Reddy up by 2.39%, Wipro up by 1.84%, Cipla up by 1.54% and Tata Motors up by 1.13%.

On the flip side, Gail India down by 1.59%, Jindal Steel down by 1.41%, L&T down by 1.38%, HUL down by 1.35% and ONGC down by 1.34% were the top losers on the Sensex.

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 is currently trading at 5,588.75, down by 9.15 points or 0.16% after trading in a range of 5,610.40 and 5,585.20. There were 21 stocks advancing against 28 declines on the index and one stock remained unchanged.

The top gainers of the Nifty were Maruti Suzuki up by 2.87%, Dr Reddy up by 2.31%, Wipro up by 1.76%, Cipla up by 1.34% and M&M up by 1.20%.

On the flip side, Reliance Infra down by 3.32%, GAIL down by 2.08%, JP Associates down by 1.97%, BHEL down by 1.81% and Jindal Steel down by 1.62%, were the major losers on the index.

Asian equity indices were trading mixed; Jakarta Composite declined 0.65%, KLSE Composite lost 0.13%, Straits Times slid 0.29% and Taiwan Weighted shed 0.23%. On the other hand, Shanghai Composite added 0.23%, Hang Seng gained 0.59%, Nikkei 225 surged 0.98% and Kospi Composite surged 0.66%.