Markets hold gains; banking stocks rally on RBI measures

Indian equity markets after opening higher and coming off from the highs, held on to their gains to continue trading in the green terrain in the late morning session on Wednesday, after three consecutive days of declines. Markets took some respite as Reserve Bank of India took measures of relaxing rules on mandatory bond holdings for banks, to protect lenders from large mark-to-market losses and further it will buy long-dated government bonds worth 80 billion rupees. The Sensex was trading up 135.55 points, while the Nifty was up by 46.75 points. In currency markets, following a negative start and a subsequent marginal recovery, Indian rupee again depreciated against greenback on sustained dollar demand. On sectoral front, heavy buying was witnessed in the banking space as central bank's decision to some rules is expected to help banks deal with the notional marked-to- market loss in their government bond portfolio. Capital goods, realty, power and automobile stocks were also trading up, while IT, FMCG and healthcare stocks were trading down.

On the global front, Asian markets were trading mixed today as investors were on the sidelines ahead of the release of FOMC's minutes of the July meeting. Back home, the market breadth was favoring the positive trend; there were 1211 shares on the gaining side against 624 shares on the losing side, while 116 shares remained unchanged.

The BSE Sensex is currently trading at 18,381.59 up by 135.55 points or 0.74% after trading in a range of 18,567.70 and 18,323.32. There were only 19 stocks advancing against 11 declines on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.09%, while Small cap index up by 1.08%.

The top gaining sectoral indices on the BSE were, Bankex up by 4.18%, Realty up by 2.47%, Capital Goods up by 2.03% and Consumer Durables up by 1.55%. While, IT down by 1.53%, Teck down by 1.30%, Metal down by 0.81% and FMCG down by 0.29% were the top losers indices on the BSE.

The top gainers on the Sensex were, BHEL up by 6.11%, HDFC Bank up by 4.49%, SBI up by 3.78%, HDFC up by 3.08% and ICICI Bank up by 2.94%. On the flip side, Infosys down by 2.05%, TCS down by 1.78%, Sterlite Inds down by 1.32%, Sun Pharma down by 1.07% and Wipro down by 0.99% were the top losers on the Sensex.

Meanwhile, as per industry body Assocham, the Reserve Bank of India's (RBI) recent measures like short-term restrictions on capital outflows to curb the volatility in the rupee along with combination of transient and targeted monetary measures are likely to boost the country's growth prospects considerably by January next year. At present, domestic currency is under pressure on account of high current account deficit (CAD) depreciating to a record low of 64 per dollar and the recent measures taken by the central bank to restrain capital outflows, along with measures from government to attract capital inflows, will eventually buffer the Rupee.

Last week, RBI announced stern measures, including curbs on Indian firms investing abroad and a reduction of outward remittances, to restrict capital outflow of foreign currency. It has reduced the limit for overseas direct investment (ODI) to 100 percent from 400 percent of net worth by domestic companies, other than oil PSUs, under the automatic route. However, Oil India and ONGC Videsh were exempt from this limitation. Further, RBI reduced the limit for remittances made by resident individuals to $75,000 from $2 lakh a year under the liberalised remittances scheme (LRS).

On the other hand, the government has been liberalizing the foreign investment policy to attract maximum FDI into the country. The government has approved 100 percent foreign direct investment (FDI) in the sector. Recently, it has also taken several policy decisions including allowing FDI in multi-brand retail and civil aviation sectors and seeking legislative approval for increasing FDI cap in insurance and pension sectors.

The CNX Nifty is currently trading at 5,448.20 down by 46.75 points or 0.87% after trading in a range of 5,504.10 and 5,432.55. There were 31 stocks advancing against 19 declines on the index.

The top gainers of the Nifty were Indusin bank up by 9.83%, BHEL up by 6.41%, PNB up by 5.92%, DLF up by 4.81% and HDFC Bank up by 4.34%. On the flip side, Ranbaxy down by 5.21%, SesaGoa down by 2.48%, Infosys down by 2.05%, TCS down by 1.77% and Ambuja Cement down by 1.66% were the major losers on the index.

The Asian equity indices were trading mixed; Nikkei 225 was up by 0.21% and Jakarta Composite up by 1.08%. While, Straits Times down by 0.50%, KLSE Composite down by 0.06%, Shanghai Composite down by 0.45% and Hang Seng down by 0.81%.