Benchmarks continue to trade in green on back of recovery in rupee

Indian equities continued to trade in fine fettle on the back of rupee recovery by 135 paise in late morning trade. Sentiments got some support from  after Prime Minister’s Economic Advisory Council Chairman C Rangarajan has pegged economic growth at 5-5.5 per cent for the current financial year and has said that the economy still had the potential to grow more than the previous year’s growth rate of five per cent.

Most of the Asian equity indices trading in the red on renewed worries over possible US military intervention in Syria. Risk appetite remained on the negative side after key congressional leaders John Boehner and Eric Cantor both pledged their support for military action to punish President Bashar al-Assad for his suspected use of chemical weapons against civilians. Though, the US markets ended higher overnight after a long weekend though major upside was restricted on lingering concerns about the situation in Syria and the outlook for the Federal Reserve’s stimulus program.

Back home, traders were buying, IT, Teck, and Oil & Gas while selling were seen in Realty and FMCG on the BSE. Meanwhile, the benchmarks NSE Nifty and BSE Sensex were trading near the psychological 5,400 and 18,500 levels respectively. Stocks of IT companies were in good demand on expectations that strengthening dollar would improve their earnings as 60 per cent of their revenues come from U.S. and European markets. However, stocks in the realty segment faced selling pressure after the RBI tightened norms for disbursal of home loans.

The market breadth on BSE was showing positive trend with advances to declines in the ratio of 1077: 468.

The BSE Sensex is currently trading at 18529.67, up by 295.01 points or 1.62% after trading in a range of 18566.88 and 18188.43. There were 27 stocks advancing against 3 declines on the index. The broader indices were trading in green; the BSE Mid cap index was up by 0.85% and Small cap index up by 0.64%.

The top gaining sectoral indices on the BSE were, IT up by 2.65%, Teck up by 2.47%, Oil & Gas up by 2.34% , Metal up by 2.15% and Health Care up by 1.96%, and while Realty down by 1.30% and FMCG down by 0.23% were the only losers on the sectoral index.

The top gainers on the Sensex were Tata Motors up by 3.67%, Hero MotoCorp up by 3.30%, Infosys up by 3.15%, TCS up by 2.96% and RIL up by 2.92%. On the flip side, ITC was down by 1.74% and Maruti Suzuki was down by 1.26% were the top losers on the Sensex.

Meanwhile, In a sharpest prick to the inflated real estate sector, the Reserve Bank of India (RBI) on Tuesday asked banks to closely link the disbursal of home loans to stages of construction and desist from upfront disbursal of sanctioned individual housing loans to builders. In the notification, the RBI has asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of 'innovative' housing financing schemes, popularly known as 80:20 and 75:25 schemes.

Providing such loans help a bank as these schemes are classified as mortgage and not construction finance, which is considered a risky business by the RBI and requires higher provisioning. Further, the builders also stand to gain from these schemes as home loans are far cheaper than construction loans.

Nevertheless, these home loan products are likely to expose banks and their borrowers to additional risks, including disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time.

However, RBI’s diktat, which will put further pressure on the real estate prices that are already on a downward spiral, in effect should be good for consumer as the decision will force developers and banks to be more transparent in explaining the benefits of the scheme to buyers. It will force developers to give a prospective buyer a discount upfront instead of spreading it across 2 to 3 years as in the 80:20 schemes. Further, RBI has emphasized that the banks, while introducing any kind of product should take into account customer suitability and appropriateness and ensure that borrowers and customers are made fully aware of the risks and liabilities.  

The CNX Nifty is currently trading at 5,431.25 up by 89.80 points or 1.68% after trading in a range of 5,443.00 and 5,318.90. There were 46 stocks advancing against 4 declines on the index.

The top gainers of the Nifty were IndusInd Bank up by 4.52%, Ranbaxy up by 4.16%, Hero MotoCorp up by 3.90%, Hindalco up by 3.50% and Infosys up by 3.44% On the flip side, DLF down by 2.79%, Maruti Suzuki India down by 2.04%, ITC down by 1.26% and Sesa Goa down by 0.46% were the major losers on the index.

Most of Asian equity indices were trading in red; Shanghai Composite slipped 0.69 points or 0.03% to 2,122.42, Hang Seng dropped 86.22 points or 0.39% to 22,308.36, Jakarta Composite declined 82.29 points or 1.98% to 4,081.38, KLSE Composite contracted 8.14 points or 0.47% to 1,716.07, Straits Times tumbled 31.85 points or 1.04% to 3,022.93 and Taiwan Weighted was down by 4.06 points or 0.05% to 8,080.69.

On the flip side, Nikkei 225 increased 37.83 points or 0.24% to 14,012.54 and Seoul Composite up by 2.93 points or 0.16% to 1,936.88.