Benchmarks end flat ahead of Budget; panic in broader markets weigh sentiments

Key domestic benchmarks witnessed another day of consolidation with both the frontline indices managed to keep their head above water on Monday. However, market participants stayed away from piling positions in risky assets ahead of Railway and Union Budget. The local gauges pulled back after breaching 19,250 (Sensex) mark as investors continued taking positions in software and technology stocks led by rally in Infosys, TCS and HCL Tech. Sentiments also got some support as select non-banking finance companies (NBFC) shares like Mahindra & Mahindra Financial Services, L&T Finance Holdings, Bajaj Finserv, Bajaj Finance and Reliance Capital all edged higher in early morning deals after the Reserve Bank of India (RBI) issued guidelines for the new bank licences, which will pave the way for both corporate entities and NBFC to begin banking operations. The most important thing is that RBI has not excluded companies or entities from any specific industry from applying for a new bank licence. In other development, the government has exempted merger and takeover plans for loss-making and failing banks from the purview of fair trade regulator Competition Commission for a period of five years.

Markets, in the early noon trade, witnessed a sudden slide as shares of Core Education, Eros International, ABG Shipyard, Orbit Corporation, Welsupn Corp, Opto Circuits etc were beaten down badly as brokerages offloaded shares in these counters on the back of margin call triggers by HNIs and retail investors. Highly leveraged HNIs and investors faced the brunt as lack of market support and participation led to bigger than expected fall in frontline midcap stocks.

However, the frontline gauges made a remarkable recovery in mid-noon trade supported by firm opening in European markets ahead of the end of voting in a closely-fought election in Italy, seen as crucial to efforts to dig the euro zone out of crisis. Asian markets also ended mostly in the green on Monday. Japanese Nikkei edged higher by about two and a half percent with exporters leading gains on a weaker yen, after sources said Japan was likely to nominate Asian Development Bank President Haruhiko Kuroda, an advocate of aggressive monetary easing, as its next central bank governor.

Back home, some support also came in from buying in cement stocks which rose on expectations that the government will provide a thrust on infrastructure development in Union Budget 2013-14 to be tabled in the Parliament on February 28, 2013. However, gains remain capped as shares of companies whose fortunes are linked to orders from Indian Railways like Kernex Microsystems (India), Titagarh Wagons, Kalindee Rail Nirman (Engineers), Hind Rectifiers, Zicom Electronic Security Systems and Stone India edged lower ahead of Railway Budget to be released on February 26, 2013.

The NSE’s 50-share broadly followed index Nifty rose by only four points, managed to hold the psychological 5,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex gained by fifteen points to finish below the psychological 19,350 mark. However, broader markets were butchered badly and snapped the session with a huge cut of about one and a half percent.

The overall volumes stood above Rs 1.73 lakh crore, which remained on the higher side as compared to that on Friday. The market breadth remained in favor of declines as there were 897 shares on the gaining side against 1,279 shares on the losing side while 768 shares remain unchanged.

Finally, the BSE Sensex gained 14.68 points or 0.08% to settle at 19,331.69, while the CNX Nifty rose by 4.45 points or 0.08% to end at 5,854.75.

The BSE Sensex touched a high and a low of 19,411.18 and 19,237.98, respectively. The BSE Mid cap index down by 1.20% and Small cap index was down by 1.36%.

The top gainers on the Sensex were, Infosys up by 2.84%, Tata Motors up 2.06%, Hero MotoCorp up 1.42%, BHEL up 1.29% and TCS up 1.16%, while Cipla down by 2.60%, L&T down by 2.30%, ONGC down by 2.04%, Coal India down by 1.99% and Reliance down by 1.01% were the top losers on the index.

The top gainers on the BSE Sectoral space were, IT up 1.86%, TECK up 1.28%, Auto up 0.78% and Health Care up 0.02%, while Realty down 2.39%, Capital Goods down 1.68%, Metal down 1.08%, Oil & Gas down 1.05% and PSU down 1.04% were top losers on the sectoral space.

Meanwhile, setting the stage for corporate giants to enter the highly regulated banking space as the Reserve Bank of India (RBI) on February 22 floated the much awaited guidelines for issuing new bank licences. Accommodating the Government’s viewpoint, the central bank reversed the stand it had taken in the draft guidelines of not allowing broking and real-estate companies in the banking space.

The RBI unveiled that Entities / groups in the private sector, public sector and Non-Banking Financial Companies (NBFCs) shall be eligible to set up a bank through a wholly-owned Non-Operative Financial Holding Company (NOFHC).

As per the final guidelines, the minimum capital requirement for opening a bank was set at Rs 500 crore, while the foreign shareholding was capped at 49%.It also specified that entities applying for the new bank licences should have past records of 'sound credentials and integrity, be financially sound with a successful track record of 10 years. For this purpose, the banking regulator may seek feedback from other regulators and enforcement and investigative agencies.  Further, the new lenders would be required to open at least 25 percent of their branches in unbanked rural centres, whose population is less than 10,000.

Thus, interested firms are expected to apply for the new bank licences to the central bank till July 1, 2013. At the first stage, the applications will be screened by the Reserve Bank India. Thereafter, the applications will be referred to a High Level Advisory Committee, the constitution of which will be announced shortly.

The CNX Nifty touched a high and a low of 5,878.40 and 5,825.00 respectively. 

The top gainers on the Nifty were Ranbaxy up by 4.94%, Power Grid up 2.84%, Infosys up 2.79%, Tata Motors up 2.19% and BHEL up by 1.84%.

On the flip side, the top losers of the index were, DLF down by 3.39%, JP Associates down by 3.20%, Cipla down by 2.97%, L&T down by 2.46% and ONGC down by 2.15%.

The European markets were trading in green, France’s CAC 40 up by 1.23%, United Kingdom’s FTSE 100 up by 1.36% and Germany’s DAX up by 2.07%.

Asian markets ended mostly higher on Monday, as investors were busy picking up shares, beaten-up in the last week’s steep plunge. Japan’s Nikkei went home with green mark after a descent rally, on expectations for aggressive easy monetary policy. Yen, which traded near three-year low against the dollar, also supported Japanese stocks to hold gains. Chinese stock too closed marginally higher despite HSBC flash purchasing managers' index (PMI) for February slipped to a four-month low of 50.4 from January's final reading of 52.3, which had been the best performance since January 2011. South Korean stocks bucked the trend and ended lower, on news that an advocate of aggressive monetary easing was poised to head the Bank of Japan pressured Korean carmakers.