Markets lose grip in final hours to end lower for yet another session

Indian markets showed a very volatile trade on Thursday, the benchmarks turned the sluggish start into a bullish rally which again fizzled out in final hours of trade. The major indices that looked consolidating in early session, picked up pace towards the noon and kept their momentum intact. Pre Diwali celebrations seemed resuming their course after two sessions of lull as traders even ignored the lingering weakness in the domestic currency, which continued declining for the fourth straight day, trading near its two months low. But there was sudden selling pressure that dragged the markets into red on some weak result announcements and the benchmarks ended at the day’s low.

The global cues were not very jubilant and gave a cautious start to the local markets. After the mixed closing in US markets the Asian markets made a closing mostly in red with some of the indices suffering cut of over half a percent ahead of US growth and jobs data that may provide clues, as to when the Federal Reserve will start cutting stimulus. Though, the European markets made a slightly weak start after the indices rose to their highest level in more than five years, as investors awaited the European Central Bank’s interest rate decision.

Back home, the local markets after a cautious start, tailing the weakness in regional counterparts got a sudden spurt in late morning session that took the benchmarks to their day’s high. FII’s that have been on selling spree for last few session’s seemed returning to the markets on report that  output growth across emerging markets picked up in October, posting the fastest rise in seven months, while business expectations also rose from the previous month's near-record lows. The composite HSBC Emerging Markets index for services and manufacturing rose to 51.7 from 50.7 in September. Though, some cautiousness returned to the markets after global rating agency Standard & Poor's affirmed their sovereign credit rating on India, adding that the outlook on Asia's third-largest economy remains negative and said that they may lower the rating to speculative grade next year if the government that takes office after the general election does not appear capable of reversing India’s low economic growth. There were some weak earnings number that too dampened the market sentiment, Tata Coffee slumped by around 8% on reporting numbers that missed the estimates, while India Cements too slumped on reporting poor numbers. However, the IT pack remained in jubilant mood for yet another day and gained over a percent on BSE, as the fall in the Indian rupee against the US dollar boosted sentiment. Apart from IT, tech and metal no other sectoral gauge showed any resistance. In early trade there was some buzz in smaller private sector banks after the Reserve Bank of India (RBI) come out with its detailed guidelines on how foreign banks will operate in the country, but they too lost traction and ended mostly in red.

Finally, the BSE Sensex lost 72.17 points or 0.35%, to settle at 20822.77, while the CNX Nifty declined by 27.90 points or 0.45% to settle at 6,187.25.

The BSE Sensex touched a high and a low of 21142.85 and 20797.06, respectively. The BSE Mid cap index was down by 1.07% and Small cap index plunged by 1.14 %.

The top gainers on the Sensex were Tata Steel up 3.64%, Infosys up 1.61%, TCS up 1.41%, Bajaj Auto up 1.12% and Hindalco Inds up 1.04%, on the flip side BHEL down 4.27%, SBI down 3.17%, Tata Motors down 2.76%, ICICI Bank down 2.70%, and Tata Power down 2.44%, were the top losers on the index. 

On the BSE Sectoral front, IT up by 1.25%, Metal up by 0.64%, and Teck up by 0.61%, were the only gainers, while Realty down by 2.62%, Consumer Durables down by 2.26%, Bankex down by 2.11%, Power down by 1.97%, and PSU down by 1.46%, were the top losers on the sectoral front.

Meanwhile, with a view to bolster its regulatory powers in the wake of global financial crisis, the Reserve Bank of India (RBI) has finally come out with framework on how foreign banks will operate in the country. As per the guidelines, foreign banks operating in the country will enjoy nearly equal terms with local lenders if they move to a wholly owned subsidiary structure.

Thus, with this Reserve Bank of India has permitted wholly owned subsidiary (WOS) of foreign banks to acquire domestic private sector banks as well as set up branches anywhere in the country. Further, it has also permitted foreign bank’s subsidiary to list on local stock exchanges.

However, foreign bank subsidiary will not be allowed to hold more than 74% of the stake in the private banks they may acquire. Besides, the framework stipulates an initial minimum paid-up voting equity capital for a WOS to be at atleast of Rs 500 crore for the new entrants. It also mandates foreign-owned banks operating as subsidiaries to earmark 40% of their lending to the priority sector, which includes underserved parts of the economy and agriculture, the same obligation as for domestic banks.

Additionally, to prevent foreign domination of the banking sector, the framework has underscored that certain measures are already planned to contain their expansion of foreign banks, if the share exceeds a critical size.

In yet another precautionary measure, it has highlighted that no further entry of new WOSs of foreign banks or capital infusion will be allowed if capital and reserves of all foreign banks in India exceed 20% of the capital and reserves of the entire banking system.

The CNX Nifty touched a high and low of 6,288.95 and 6,180.80 respectively.

The top gainers on the Nifty were Tata Steel up by 4.28%, HCL Technologies up by 2.03%, Hindalco Industries up by 1.43%, Infosys up by 1.29% and TCS up by 1.19%. On the other hand, Bank of Baroda down by 6.19%, DLF down by 4.71%, BHEL down by 4.10%, Axis Bank down by 3.78%, and BPCL down by 3.69%, were the top losers.

Most of the European markets were trading in red, France's CAC 40 was down by 0.16%, and United Kingdom's FTSE 100 was down by 0.24%, while Germany's DAX was up by 0.05%.

The Asian markets concluded Thursday’s trade mostly in red as investors remained cautious ahead of the major risk events that are scheduled to occur at the end of the week. Over the weekend, China will start a major political meeting - the so-called Third Plenum - where the country’s new leadership is expected to unveil a blueprint for economic policy for the next decade. Bank Indonesia’s consumer confidence index, based on more than 4,600 households, rose 2.4 points to 109.5 in October. In September, the index stood at 107.1. Readings above 100 means consumers are generally optimistic about economic conditions. Indonesia’s Finance Minister Chatib Basri stated that the country’s top priority is to halt a widening current account deficit even if does mean deliberately slowing Southeast Asia’s largest economy.

Foreign currency reserve assets of Hong Kong reached $309.6 billion at end October, the Hong Kong Monetary Authority stated. This represented an increase of 2 percent from $303.5 billion at end September. The total foreign currency reserve assets represent more than seven times the currency in circulation.