Markets pair some losses amid modest recovery in banking index

Indian equity markets pared some losses on back of modest recovery in banking index, but continued their trade in red in the late morning session on Wednesday. The sentiments were subdued amid worries that the country’s fiscal deficit may widen further after the implementation of the Food Security Bill, which will cost around Rs 1,30,000 crore annually for the government to supply around 62 million tonnes of rice, wheat and coarse cereals to 67 percent of the population. Further, the steep fall in rupee value also dampened the investors’ sentiments. Today, rupee depreciated to a record low of over 68 per dollar. On stock specific movement, ONGC, HDFC and Mahindra and Mahindra were trading over 5 percent lower. The market breadth was favoring the negative trend; there were 459 stocks on the gaining side against 1301 stocks on the losing side, while 98 stocks remained unchanged.

On the global front, Asian markets were mostly trading lower as investors’ sentiments dampened on fear over military action by the US after Secretary of State John Kerry held Syrian government accountable for using chemical weapons in an attack over civilians.

The BSE Sensex is currently trading at 17,694.66 down by 273.42 points or 1.52% after trading in a range of 17851.44 and 17448.71. There were only 8 stocks advancing against 22 declines on the index.

The broader indices were trading in green; the BSE Mid cap index was down by 2.23%, while Small cap index also down by 1.54%.

The top gaining sectoral indices on the BSE were, IT up by 1.95% and Teck up by 0.87%. While, Realty down by 3.65%, PSU down by 3.55%, Oil and Gas down by 3.48% and Bankex down by 3.07% were the top losers indices on the BSE.

The top gainers on the Sensex were, TCS up by 2.96%, Wipro up by 2.02%, Infosys up by 1.79%, Tata Motors up by 1.31% and Jindal Steel up by 0.87%. On the flip side, ONGC down by 7.81%, HDFC down by 6.17%, Mahindra and Mahindra down by 5.04%, Gail India down by 4.69% and Bharti Airtel down by 3.74% were the top losers on the Sensex.

Meanwhile, in an attempt to reduce the fiscal burden on account of recapitalisation of PSU banks, the Reserve Bank of India (RBI) has proposed a 'continuous authorization' policy for new private banks and dilution of the government's stake below the 51% in public sector banks (PSBs), in its consultation paper on Tuesday. With a view of sustaining the competitive pressure on existing banks, while not straining the banking system as 'block' licensing may do, India’s Apex Bank strongly feels the case of reviewing the current 'Stop and Go' licensing policy and considering adoption of a 'continuous authorization' policy.

In its discussion paper titled ‘Banking Structure in India - The Way Forward, RBI has underscored that, in future there would be better pay-off in enabling PSBs to improve their performance while promoting private sector banks. Keeping this in mind, it has suggested government to consider diluting its stake below 51% in conjunction with certain protective rights by amending the statues governing the PSBs. Another alternative proposed is moving to a Financial Holding Company (FHC) structure.

The long-awaited discussion paper on the RBI's thinking also advocates the need for new entrants into the banking system, in line with the government's goal to reform a sector dominated by lethargic state banks, which only reaches half the country's households. Further, the report also reiterated its preference for foreign banks to establish subsidiaries in India, in a move that is aimed at ring-fencing their local operations from the overseas parents and bring them at par with Indian banks in terms of regulations.

The CNX Nifty is currently trading at 5,188.70 down by 98.75 points or 1.87% after trading in a range of 5,236.05 and 5,118.85. There were 12 stocks advancing against 38 declines on the index.

The top gainers of the Nifty were Cairn up by 5.52%, TCS up by 3.43%, NMDC up by 2.17%, IDFC up by 1.77% and Infosys up by 1.76%. On the flip side, BPCL down by 9.22%, ONGC down by 8.14%, Asian Paints down by 7.80%, HDFC down by 6.85% and Ambuja Cement down by 5.96% were the major losers on the index.

The most of the Asian equity indices were trading mixed in red; Straits Times down by 1.25%, KLSE Composite down by 1.48%, Seoul Composite down by 0.07%, Hang Seng down by 1.44%, Nikkei 225 was down by 1.51% and Jakarta Composite down by 2.81%. While, Shanghai Composite up by 0.21% and Taiwan Weighted up by 0.05%,