Indian equities add gains; TECk, IT and Metal leads

Recovering from yesterday’s fall, the market continued its lackadaisical trade from the morning however added gains on back of buying in front line counters. Traders were seen piling position in TECk, IT and Metal sectors while selling was witnessed in Auto, Bankex and Consumer Durables sectors. The banking stocks were under pressure after Central bank governor Duvvuri Subbarao, voiced out his concern that India's inflation rate of 7.5 percent is still high thereby dousing the rate cut hopes anytime soon. Telecom stocks such as Bharti Airtel, Idea Cellular, Reliance Communications and TTML were seen trading in green extending previous session’s gains after the failed 2G auction which points out that there is limited demand for spectrum at high prices forcing government to make a reference to TRAI for fresh recommendation on pricing.

On the global front, Asian markets were mostly trading in red while the European markets were trading on a mixed note. In Europe, Italian Finance Minister Vittorio Grilli is confident that euro-region finance chiefs will reach an agreement on aiding Greece when they meet next week. Greece was granted an additional two years to reach budget-deficit goals in its bailout program. European finance ministers will be discussing ways of plugging the funding gap resulting from that extension at a November 20 meeting in Brussels. Besides, inflation in the euro area fell in October, final data released by statistics office Eurostat showed.  Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,600 and 18,500 levels respectively. The market breadth on BSE was positive in the ratio of 1432:1259 while 113 scrips remain unchanged.

The BSE Sensex is currently trading at 18,539.88 up by 68.51 points or 0.37% after trading in a range of 18,563.32 and 18,468.27. There were 14 stocks advancing against 16 declines on the index.

The broader indices continued to trade in fine contour; the BSE Mid Cap index was up by 0.49% and Small Cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were, TECk up by 1.89%, IT up by 1.81%, Metal up by 0.73%, Health Care up by 0.70% and PSU up by 0.56%. While, Auto down by 0.48%, Bankex down by 0.30% and Consumer Durables down 0.24% were the top losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 4.02%, Infosys up by 3.88%, Jindal Steel up by 3.24%, Dr. Reddy’s Lab up by 2.91% and ONGC up by 1.89%. On the flip side, Cipla was down by 1.32%, HDFC was down by 1.10%, Tata Motors was down by 0.99%, Hindalco Industries down by 0.94% and Gail India was down by 0.93% were the top losers on the Sensex.

Meanwhile, market regulator Securities and Exchanges Board of India (SEBI) has allowed mutual funds to participate in Credit Default Swap (CDS) transactions, which allow business entities to hedge risks associated with the bonds market. This follows the RBI notification issued in May 2011 stating the guidelines on CDS for corporate bonds.

Importantly, SEBI has allowed mutual funds to participate in CDS transactions only as users (protection buyer). Thus, mutual funds are permitted to buy credit protection only to hedge their credit risk on corporate bonds they hold. The funds shall not be allowed to sell protection and hence are not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit an existing ‘bought position’. This too can be done only if the fund house’s total exposure through CDS in corporate bonds along with equity, debt and derivative positions exceeds 100 per cent of the scheme’s net assets.

Further, the total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20 per cent of the net assets of the scheme. In addition to this, the SEBI has prescribed that MFs can buy CDS for the eligible securities as reference obligations (underlying) only for fixed maturity plans exceeding one-year tenor.

Furthermore, before undertaking CDS transactions, mutual funds shall frame a written policy on participation in CDS approved by the Board of the Asset Management Company and the Trustees as per the guidelines specified by RBI and SEBI. This policy shall be reviewed by mutual funds, at least once a year.

Meanwhile, SEBI, in order to encourage growth of the corporate bond market, has also decided that the base of eligible securities may be expanded for mutual funds to participate in repo in corporate debt securities, from ‘AAA’ rated to ‘AA ‘and above rated corporate debt securities.

The S&P CNX Nifty is currently trading at 5,644.60, up by 13.70 points or 0.24% after trading in a range of 5,650.15 and 5,621.95. There were 20 stocks advancing against 29 declines while 1 stock remains unchanged on the index.

The top gainers of the Nifty were Bharti Airtel up by 4.37%, Infosys up by 3.87%, Jindal Steel up by 3.50%, Dr. Reddy’s Lab up by 3.12% and JP Associates up by 2.24%. On the flip side, HDFC down by 1.61%, HCL Tech down by 1.53%, Cipla down by 1.34%, Gail India down by 1.14% and Asian Paints down by 1.13%, were the major losers on the index.

Most of the Asian equity indices were trading in the red; Kospi Composite down by 0.53%, KLSE Composite declined 0.20%, Taiwan Weighted slid 0.19% and Shanghai Composite dropped 0.77%. While Nikkei 225 up by 2.20%, Straits Times up by 0.18% and Hang Seng up by 0.24% were the gainers. Jakarta Composite is closed today on account of Public Holiday.

The European markets were trading on a mixed note with, France’s CAC 40 gain 0.13%, Germany’s DAX dropped 0.01% and the United Kingdom’s FTSE 100 descended 0.10%.