Late hour buying help benchmarks to keep their head above water

A day after showcasing a stupendous rally of around four percent, key domestic benchmark witnessed consolidation with both the frontline indices just to keeping their head above water, in an extremely volatile session on Wednesday. Buying which emerged in late trade, largely supported by appreciation in rupee against dollar, mainly acted as saving grace for domestic equity markets and helped Nifty to re-conquer its crucial 5,900 mark, while Sensex shied away from 20,000 mark. Earlier, markets made a shaky start as investors opted to book some of their profit in early deals after recent rallies. Traders also remained on sidelines ahead of August inflation numbers, inflation likely edged up to a sixth-month high in August, driven by higher food prices and as the battered rupee made key imports such as fuel costlier.

Choppy start in European counterparts too dampened the sentiments as most of the indices traded in red in early deals after US President Barack Obama deferred a Congressional vote on military action against the Syrian government. However, Asian markets made a decent recovery and ended mostly in the positive terrain with Shanghai Composite edging higher after data on Tuesday showed that Chinese auto sales, factory output and investment, all improved in August.

Back home, benchmarks witnessed sharp recovery in last leg of trade, supported by decent pull-back in Indian rupee due to dollar sale by exporters and Foreign Institutional Investors (FIIs) investing in domestic markets. The rupee was trading at 63.24 per dollar mark at the time of equity markets closing as compared with previous close of 63.84 per dollar. Some support also came in after Prime Minister's Economic Advisor (PMEAC) C Rangarajan assertion that India’s economy is likely to grow at around 5.5 percent this fiscal. The PMEAC Chairman said special emphasis was being given on production and capacity-creation in some key infrastructure sector that lies in the public domain. Investors moral also got boosted after Securities and Exchange Board of India (SEBI) was said to be planning to come out with notifications to minimise the know your customer (KYC) requirement for FIIs that have established a strong track record of compliance with Indian rules.

Meanwhile, banking stocks remained on buyers’ radar with latest initiative of the Reserve Bank of India (RBI), where it said that banks can borrow from overseas market up to 100% of their unimpaired Tier I capital as at the close of the previous quarter, with an upper limit of $10 million. Shares of metal companies too remained in limelight on back of stronger-than-expected retail and industrial growth in China, the world’s largest user of the metal.

The NSE’s 50-share broadly followed index Nifty rose by over fifteen points to end above its psychological 5,900 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex increased marginally to hold the psychological 19,950 mark.

Moreover, broader markets outperformed benchmarks and ended the session with again of over a percentage point. The market breadth remained in favour of advances, as there were 1,419 shares on the gaining side against 940 shares on the losing side, while 152 shares remained unchanged.

Finally, the BSE Sensex rose 0.36 points to settle at 19997.45, while the CNX Nifty gained 16.40 points or 0.28% to end at 5,913.15.

The BSE Sensex touched a high and a low of 20055.53 and 19777.63, respectively. The BSE Mid cap index was up by 1.34% and Small cap index gained 1.11 %.

The top gainers on the Sensex were Tata Steel up 5.07%, Hindalco Inds up 3.81%, SBI up 3.52%, Tata Power up 2.90% and Sun Pharma up 2.46%. On the flip side, Tata Motors down 2.49%, Hindustan Unilever down 1.76%, ITC down 1.70%, BHEL down 1.54%, and  Cipla down 1.28%.were the top losers on the index. 

On the BSE Sectoral front, Metal up by 3.33%, Realty up by 2.74%, Bankex up by 1.80%, PSU up by 1.43% and Capital Goods up by 1.37%, were the top gainers, while FMCG down by 1.11%, Consumer Durables down by 0.65%, IT down by 0.24%, Oil & Gas down by 0.22%, and TECK down by 0.18%, were the top losers on the Sectoral space.

Meanwhile, in a move to enhance the inflow of foreign capital into the country, the Reserve Bank of India (RBI) further relaxed norms that would encourage banks to raise funds in overseas market. Under new norms, the RBI allowed bank for swap facility for term deposits in dollar denomination at a concessional rate of 1 percent below the market rate for the period of 1 to 3 years. Banks can now borrow such funds from their head office, overseas branches and correspondents and overdrafts in nostro accounts up to a limit of 100 percent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher as against the existing limit of 50 percent.

The central bank said in its notification that during swap period a bank can sell dollars in multiples of a million to RBI and would have to buy the same amount of dollars at the end of the swap period. Central bank said that though the swaps would be for the entire tenor of the borrowing, the rate would be reset after every one year from the date of the swap at hundred basis points lower than the market rate prevailing on the date of reset. The concessional swap window shall be open till November 30, 2013. By adding further, RBI said that while the banks are allowed to borrow in any freely convertible currency, the swap will be available only for conversion of US dollar equivalent into rupees, which would be computed at the relevant cross rate prevailing on the date of the swap.

Further, in other amendment to overseas direct investment norms, the RBI has decided that issue of corporate guarantee on behalf of second generation will be considered under the approval route and on basis of current market conditions relating to excessive volatility in yields of government securities, the central bank has decided to increase the quantum of Held to Maturity (HTM) securities from 100 percent to 200 percent of the audited net owned fund of the bank as at end March.

The CNX Nifty touched a high and low of 5,924.35 and 5,832.70 respectively. 

The top gainers on the Nifty were Bank of Baroda up by 8.19%, PNB up by 7.17%, DLF up by 5.84%, JP Associate up by 5.26% and Grasim up by 4.67%. On the other hand, Power Grid down by 3.08%, Cairn down by 2.83%, Tata Motors down 2.40%, ITC down 2.04% and Hindustan Unilever down by 1.92% were the top losers.

The European markets were trading in mixed, France’s CAC 40 was up by 0.06%, and Germany’s DAX was up by 0.54%. While the United Kingdom’s FTSE 100 down by 0.02%.

Most of the Asian markets concluded Wednesday’s trade in green as the threat of US military intervention in Syria appeared to diminish. An address to the nation by President Barack Obama, broadcast early today in Asia, also gave some markets a push. Obama has asked Congress to postpone a vote on action and told Secretary of State John Kerry to meet with his Russian counterpart. The growth of new home purchases in China continued to slow down in the first eight months of this year, the National Bureau of Statistics stated. Between January and August, 3.85 trillion yuan ($628 billion) of new homes were sold across the country, up 35.7 percent year on year, compared with a 39.9 percent rise in the first seven months and a 46 percent jump in the first half of this year.

Optimism among big Japanese manufacturers in the third quarter reached the highest level in four years due to improving earnings, adding to recent evidence suggesting the economy is strong enough to withstand the blow from an expected sales tax hike. The confidence boost comes on the heels of a series of data pointing to the world’s third-largest economy steadily picking up momentum. Japanese Prime Minister Shinzo Abe ordered his government to craft measures to bolster the economy to cushion the impact of an increase in the national sales tax. Buoyed by data showing that the world’s third-biggest economy recovering briskly and a successful trip to secure the rights to host the 2020 Olympic Games, Abe wasted no time in preparing the groundwork for the April tax increase.

Indonesia sold $1.5 billion of dollar-denominated Islamic bonds at the highest yield since 2009 as it seeks to bolster its foreign-exchange reserves to support the plunging rupiah. Indonesia faces pressure to add to its most aggressive monetary-tightening cycle since 2008, underscoring a widening divergence in its growth outlook with the Philippines in a reversal of fortunes for the two economies. According to a survey, Bank Indonesia will probably raise its deposit facility rate tomorrow a fourth time this year while the Philippines will hold its benchmark at 3.5 percent the rest of the year. Indonesia’s central bank stated monthly inflation in September would ease significantly, helped by subdued domestic demand and following a spike after an average 33 per cent increase in fuel prices at the end of June.

Malaysia’s industrial production in July rose 7.6 percent from a year earlier, beating expectations to mark its fastest growth since May 2012, data from the Statistics Department showed.  A poll of 13 economists had forecast factory output grew at its fastest pace since November as export demand rose and domestic consumption remained resilient. June’s factory output was revised to 3.7 percent year-on-year from 3.3 percent previously.