Euphoria prevails at D-street; banking stock continue to hog limelight

Excitement remains palpable even in early afternoon deals at Dalal Street, which outperforming global peers, are holding up with sparkling gains of over two percent. Spate of populist measures announced by the new governor in his maiden speech, to support the ailing currency and liberalizing markets, provided a shot of confidence for investors unnerved by the country's worst economic crisis in two decades. Although, the markets currently consolidating all their gains are not adding further new ground, mood remains largely upbeat on expectations of more reforms push by the RBI’s new proactive and young RBI governor. Both Sensex and Nifty, facing stiff resistance near the crucial 19,000 and 5,600, are currently hovering below these psychological levels, though with gigantic gains of over two percent. Meanwhile, continuing to show degree of underperformance, are trading with gains of close to one and half percent.

Major contributor to this rally are stocks from banking stocks, which have ascended the most since 2009 after central bank Governor Raghuram Rajan outlined slew of measures to modernise and liberalise the Indian banking system. Banking stocking flew after governor said that RBI will take steps to reduce the Statutory Liquidity Ratio (SLR) and introduce greater regulatory and supervisory control over the domestic operations of foreign banks. Gush of Euphoria ran across these stocks post the governor highlighted that the central bank would offer special concessional window to bank for swapping FCNR dollar funds, mobilized for a minimum tenor of three years and over, at a fixed rate of 3.5% per annum for the tenor of the deposit. Meanwhile, NBFC stocks, viz Bajaj Finance, JM Financial, LIC Housing Finance, L&T Finance Holdings, IDFC, India Infoline, etc also have rallied as new RBI governor Raghuram Rajan reiterated that new bank licences will most likely be announced around January 2014.

Adding to the positive milieu is the positive global set-up. Taking a positive handover from Asian shares, European shares are trading higher in early trade on Thursday as leaders from the group of 20 nations (G20) meet to discuss the economy and Syria.

Closer home, the BSE Sensex is currently trading at 18976.05, up by 408.50 points or 2.20% after trading in a range of 19,117.52 and 18,857.60. There were only 22 stocks advancing against 8 declines on the index. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1267:672; while 140 shares remained unchanged.

The broader indices continued to trade in fine fettle; the BSE Mid cap and Small cap index were trading higher by 1.32% and 1.15% respectively.

The top gaining sectoral indices on the BSE were, Bankex up by 7.98%%, Consumer Durables up by 4.48%, Realty up by 3.79%, PSU up by 3.43% and FMCG up by 3.17%. While, IT down by 2.64%, Teck down by 1.82%, HealthCare down by 0.11% were the losers on the BSE.

The top gainers on the Sensex were, ICICI Bank up by 8.84%, SBI up by 7.08%, HDFC up by 6.05%, HDFC Bank up by 5.99% and ITC up by 4.69%. On the flip side, Infosys down by 3.22%, TCS down by 2.79%, Wipro down by 2.44%, Gail India down by 1.52% and Tata Steel down by 1.16% were the top losers on the Sensex.

Meanwhile, After nearly a decade, the Pension Fund Regulatory and Development Authority Bill finally saw the light of the day with Lok Sabha clearing the decks for the bill for creating a modern pension system with a statutory regulator to serve 460 million workers. The bill, which had been hanging in fire since 2005, when it was first introduced in the Parliament, is an important economic legislation that paves the way for foreign investment in the sector. 

The bill allows 26% foreign investment in the Pension sector and gives statutory backing to the interim pension authority that had been functioning on executive authority for over a decade now. It also gives more teeth to the pension regulator, PFRDA to create a social security architecture that channels savings of households into the financial sector. Currently, PFRDA regulates the National Payment System (NPS) through a trust that has entered into agreements with fund managers, points of presence that collect money from subscribers, and record-keepers.

However, this bill empowers the PFRDA to regulate the NPS and other pension schemes that are not covered under any Act. The scheme has a corpus of Rs 35,000 crore from nearly 53 lakh subscribers, a majority of whom are government employees.

However, the bill was passed by the lower House after some tough political negotiations that included the government accepting a crucial suggestion made by the parliamentary standing committee on finance headed by BJP's Yashwant Sinha. The government agreed to stipulate that the pension regulator will ensure that fund managers offer at least one product with an assured minimum return to protect investors from market volatility. This investment option will be in addition to the schemes that are already available.

In return, however, the opposition party, BJP agreed to the proposal to allow foreign investors acquire up to 26% stake in the sector with the rider that the foreign investment limit will be hiked if the cap for insurance is raised to 49%, as has been suggested by the government.

The CNX Nifty is currently trading at 5,587.90, up by 139.0 points or 2.57% after trading in a range of 5,625.75 and 5,553.75. There were 39 stocks advancing against 11 declines on the index.

The top gainers of the Nifty were Axis bank up by 12.95%, Indusind Bank up by 9.02%, ICICI Bank up by 8.85%, Kotak Mahindra Bank up by 8.63%, and Bank of Baroda up by 7.39%. On the flip side, Infosys down by 3.43%, TCS down by 2.86%, Ranbaxy down by 2.18%, Lupin down by 2.12% and HCL Tech down by 1.52% were the major losers on the index.

The most of Asian equity indices were trading in green; Seoul Composite up by 0.96%, Straits Times up by 1.22%, Nikkei 225 was up by 0.08%, Hang Seng up by 1.26%, Jakarta Composite up by 0.11%, Taiwan Weighted up by 1.06% and KLSE Composite up by 0.32%. While, Shanghai Composite down by 0.07%.

European markets too have got off to a positive start; with CAC 40 adding 0.43%, DAX rising 0.21% and FTSE 100 gaining 0.43%.