Benchmarks pare gains; trade continues in red

Indian equities pared gains to continue its trade below neutral line in the late afternoon session on account of selling in front line counters. The mood got pessimistic despite Chairperson of Commission for Agricultural Costs and Prices (CACP) Ashok Gulati stated that, he expects retail inflation in the country is likely to ease on back of projected drop in food prices in coming months. Traders were seen piling positions in Capital Goods, Health Care and Consumer Durables stocks while selling was witnessed in Metal, Bankex and Realty sector stocks.  In scrip specific development, Sesa Sterlite was trading in red after CBI registered a preliminary enquiry against Vedanta Group Chairman Anil Agarwal and unknown officials in connection with alleged irregularities in the disinvestment of Hindustan Zinc. Apollo Tyres was trading in green as investors bet the Indian company will drop its $2.5 billion deal to buy US-based Cooper Tire & Rubber Company. The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. December 2013 series to next month i.e. January 2014 series. The near month December 2013 derivatives contract expire on Thursday, December 26, 2013. The stock market remains closed tomorrow i.e. December 25, 2013, on account of Christmas.

On the global front, the Asian markets were trading in green barring Taiwan Weighted, while the European markets were too trading on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 6,300 and 21,100 levels respectively. The market breadth on BSE was positive in the ratio of 1282:1008 while 148 scrips remained unchanged.

The BSE Sensex is currently trading at 21057.46, down by 43.57 points or 0.21% after trading in a range of 21156.92 and 21020.12. There were 10 stocks advancing against 19 stocks declining while 1 stock remained unchanged on the index.

The broader indices continued to trade with fervor; with BSE Mid Cap and Small Cap indices were trading higher by 0.44% and 0.82% respectively.

The gaining sectoral indices on the BSE were Capital Goods up by 0.57%, Health Care up by 0.42%, Consumer Durables up by 0.32% and IT up by 0.01%. While Metal down by 1.23%, Bankex down by 0.31%, Realty down by 0.23%, Power down 0.08% and Auto down by 0.08% were the top losing indices on BSE.

The top gainers on the Sensex were BHEL up by 1.57%, Bajaj Auto up by 1.53%, NTPC up by 0.80%, Dr. Reddy’s Lab up 0.79% and L&T up by 0.70%. On the flip side, SSLT down by 2.55%, Tata Power down by 2.47%, Wipro down by 1.58%, HDFC down by 1.47% and Tata Steel down by 1.41%.

Meanwhile, in order to increase the insurance distribution network and to avoid mis-selling of insurance products in the country, Finance Ministry has directed public sector banks to act as insurance brokers by floating a subsidiary from January 15. 

Meanwhile, as per the RBI guidelines, banks with large bad loans, low capital and losses may not qualify to start insurance broking firms. The RBI has noted that banks with more than 3% of non-performing loans cannot get into selling multiple products, eliminating PSU banks such as Central Bank of India, Allahabad Bank and United Bank of India. Currently, banks are allowed to sell products of one life, one nonlife and one health insurance company. Furthermore, earlier in August, the insurance regulator had also released the final guidelines on bancassurance under which banks must not have more than a 50% exposure to any one client. It may also not be acceptable for foreign joint venture partners of life insurance companies such as PNB Metlife Insurance and SBI-IAG General Insurance, which have paid hefty premium for exclusive bank distribution network.

On the other hand, banks are not keen to acts as an insurance broker as the banking industry is of the view that under this model, banks are likely to see a substantial decrease in their premium collections. As corporate agents, banks can earn up to 35 percent of the first-year premium but as brokers they would be entitled to a maximum of 30 percent. Further, banks also fear that floating a subsidiary to sell insurance products and ending the exclusive arrangements with insurance companies will be difficult.

The CNX Nifty is currently trading at 6,270.50, down by 14.00 points or 0.22% after trading in a range of 6,301.50 and 6,262.50. There were 20 stocks advancing against 30 declining ones on the index.

The top gainers of the Nifty were Ranbaxy up by 2.22%, Ambuja Cement up by 1.75%, BHEL up by 1.74%, Ultra Cement up by 1.53% and Bajaj Auto up by 1.32%. On the flip side, SSLT down by 2.65%, Tata Powers down by 2.53%, IndusInd Bank down by 1.72%, Wipro down by 1.67% and Bank of Baroda down by 1.53% were the major losers on the index.

The Asian equity indices were trading in green barring Taiwan Weighted which edged lower by 0.07% and was the sole loser. On the winning side Shanghai Composite up by 0.15%, Hang Seng up by 1.13%, Seoul Composite up by 0.24%, KLSE Composite up by 0.29%, Nikkei 225 up by 0.12%, Straits Times up by 0.36% and Jakarta Composite up by 0.08%.

The European markets were trading in green; France’s CAC 40 was up 0.18%, Germany’s DAX added 0.94% and UK’s FTSE 100 gained 0.31%.