Firm trade prevails; IT, Metal lead

Indian equity markets continued their firm trade in the late afternoon session on account of buying in front line blue chip counters and taking cues from European counterparts. The sentiments were on cautious note after HSBC Services Purchasing Managers’ Index showed that Indian services growth eased dramatically during April as new orders came in at a much slower pace, prompting firms to rein in hiring plans. The HSBC Services PMI based on a survey of around 400 companies, fell to 50.7. Traders were seen piling position in IT, Metal and TECK stocks while selling was witnessed in FMCG, Bankex and PSU sector stocks. The banking counter was under pressure following online portal Cobrapost’s sting operation which alleged 23 public and private sector banks involved in money laundering. In scrip specific development, SpiceJet was trading in green as ace investor Rakesh Jhunjhunwala and his wife Rekha picked up 2.5 million shares of the budget carrier. Mahanagar Telephone Nigam (MTNL) was trading firm as the Group of Ministers (GoM) is likely to hold its first meeting on May 10 to discuss ways to revive the two loss-making public sector telecom companies. Reliance Communications was trading in green after the Anil Ambani promoted firm announced tariff hikes for the second time in six months.

On the global front, the Asian markets were trading in green barring KOSPI Composite while the European markets were trading on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,950 and 19,600 levels respectively. The market breadth on BSE was positive in the ratio of 1237:947, while 125 scrips remain unchanged.

The BSE Sensex is currently trading at 19,622.51, up by 46.87 points or 0.24% after trading in a range of 19,694.29 and 19,554.31. There were 21 stocks advancing against 9 declines on the index.

The broader indices were trading in green; the BSE Mid cap and Small cap index were up by 0.70% and 0.76% respectively.

The top gaining sectoral indices on the BSE were, IT up by 1.83%, Metal up by 1.60%, TECK up by 1.52%, Auto up by 1.15% and Consumer Durables up by 0.85% while, FMCG down by 0.87%, Bankex down by 0.80%, PSU down by 0.46%, Capital Goods down by 0.38% and Realty down by 0.25% were the top losers on the BSE.

The top gainers on the Sensex were Hindalco Industries up by 3.37%, TCS up by 3.26%, Tata Steel up by 3.13%, Reliance Industries up by 2.22% and Tata Motors up by 2.21%. On the flip side, ONGC down by 1.45%, ITC down by 1.22%, HDFC Bank down by 1.12%, NTPC down by 1.10% and Coal India down by 0.64% were the top losers on the Sensex.

Meanwhile, as per the new Reserve Bank of India (RBI) directives, banks and their employees are not allowed to receive incentives directly from insurance and mutual fund companies. Pursuant to which, the sale of these products may reportedly see some moderation, if the incentive given to employees at bank branches for selling insurance and mutual funds comes down.

Most insurance companies and mutual funds companies have distribution tie-ups with banks, whose branches play a crucial role in the sale of insurance and mutual fund products. Insurance and mutual fund companies have leveraged the reach of bank branches to sell their products. Both parties benefit. The insurers and funds save on costs, while the banks earn fees.

Recently, the central bank in its monetary policy review stated that banks did not have clear segregation of duties of marketing personnel from other branch functions, and bank employees were directly receiving incentives from third parties such as insurance, mutual fund and other entities for selling their products, which may lead to mis-selling and distortion of the staff incentive structure.

Further, to ensure customer due diligence is adhered to, RBI has asked banks to extend KYC/AML/CFT norms to wherever third party products are sold as agents as a measure of abundant precaution. Banks would also have to maintain details of third party products sold and related records for a period and in the manner prescribed in the KYC/AML/CFT guidelines.

The banking regulator has also decided to issue guidelines on wealth management services offered by banks, marketing of third party products like insurance and mutual funds and bring out a comprehensive policy on KYC/AML and CFT by June-end.

The CNX Nifty is currently trading at 5,956.15, up by 12.15 points or 0.20% after trading in a range of 5,976.50 and 5,928.45. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were Hindalco Industries up by 3.47%, Asian Paints up by 3.38%, TCS up by 3.33%, Tata Steel up by 3.08% and Reliance up by 2.19%. On the flip side, Kotak Bank down by 1.98%, Axis Bank down by 1.48%, ITC down by 1.38%, Ambuja Cement down by 1.35% and ONGC down by 1.33% were the major losers on the index.

Most of the Asian equity indices were trading in green; Shanghai Composite rose 1.16%, Hang Seng surged 0.99%, Jakarta Composite soared 1.17%, Straits Times up by 0.46%, KLSE Composite zoomed 3.52%, and Taiwan Weighted was up by 0.42%.  On the flip side, KOSPI Composite was down by 0.22%.

Japanese market is shut for the trade today on account of Children’s Day.

The European markets were trading in green; France’s CAC 40 was up 0.02%, Germany’s DAX gained 0.07% and United Kingdom’s FTSE 100 edged higher by 0.94%.