Markets pare all their gains after a decent start

The Indian equity markets extending their positive momentum made a green start of the new week, though the gains remained modest and the major indices facing stiff resistance at their current levels have lost most of their gains in the morning deals. There was some early cheer in the markets after the US jobs data came weaker than expected, while on the domestic front the CSO though kept its growth forecast for FY13-14 sub 5% percent but the estimates were better than the general expectations. Market participants turned cautious with the HSBC's composite emerging markets index of manufacturing and services purchasing managers’ surveys slipping for the second straight month to 51.4 in January, the slowest pace in four months. The broader indices were holding their gains though some of the sectoral indices have lost their way and slipped into red after a positive start. Power stocks were showing mixed response to the IMG’s recommended for cancelation of 19 mines, while there was some buzz in the stocks of banking aspirants ahead of the Bimal Jalan committee meeting on the licensing issue.

On the global front, there is mostly green in the Asian regional stocks, though some indices are marginally in red too. But the overall mood remains optimistic after the report of decline in US unemployment gave a sense that the Federal Reserve will be less aggressive in its stimulus tapering.

The broader indices too were trading in-line with benchmarks, while the market breadth on the BSE was positive; there were 1007 shares on the gaining side against 884 shares on the losing side while 570 shares remain unchanged.

The BSE Sensex opened at 20429.16; about 52 points higher compared to its previous closing of 20376.56, and touched a high and a low of 20434.50 and 20357.48 respectively. The index is currently trading at 20380.17, up by 3.61 points or 0.02%. There were 16 stocks advancing against 14 declines on the index.

The overall market breadth has made a strong start with 57.37% stocks advancing against 36.87% declines. The broader indices too were trading in green; the BSE Mid cap index up was by 0.31% and Small cap gained 0.47%. 

The top gaining sectoral indices on the BSE were, Realty up by 2.42%, Metal up by 0.98%, Healthcare up by 0.84%, Oil & Gas up by 0.55% and IT up by 0.27%, while FMCG down by 0.44%, Bankex down by 0.24%, Consumer Durables down by 0.16% and Power down by 0.07% were the top losers on the sectoral index.

The top gainers on the Sensex were Tata Steel up by 1.70%, SSLT up by 1.58%, Sun Pharma up by 1.46%, BHEL up by 1.32% and Dr Reddys Lab up by 1.29%. On the flip side, BHEL was down by 1.33%, Hindustan Unilever  was down by 1.10%, NTPC  was down by 1.09%, Gail India was down by 1.00% and  Bajaj Auto was down by 0.98% were the top losers on the Sensex.

Meanwhile, in order to resolve the concerns of PSU banks for acting as an insurance broker, government’s panel is considering the proposal to define the exact road map to implement the multi-company insurance sale model. The government also indicated that PSU banks must follow broker model to sell insurance instead of corporate agency model. Government wants to use banking network to deepen insurance coverage in the country. Therefore, Finance Ministry, in December, has directed public sector banks to become insurance brokers instead of remaining corporate agents.

Conversely, 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 insurance broking model is also backed by the Insurance Regulatory and Development Authority (IRDA), which noted that it is open to further relax norms to facilitate this transition. The insurance regulator has cleared that its guidelines regarding bancassurance will be the same for both state and private sector banks for selling insurance products. As per the IRDA guidelines, banks will have to cap business from their own group companies at 25% for both life and non-life business. Furthermore, according to the RBI guidelines, banks with more than 3% of non-performing loans and lower than 10% capital adequacy ratio cannot undertake insurance broking business, 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.

The CNX Nifty opened at 6,072.80; about 9 point higher as compared to its previous closing of 6,063.20, and has touched a high and a low of 6,083.05 and 6,059.45 respectively. The index is currently trading at 6,064.10, up by 0.90 points or 0.01%. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were DLF up by 4.53%, Tata Steel up by 1.74%, IDFC up by 1.66%, SSLT up by 1.55% and Dr. Reddy's Laboratories up by 1.52%. On the flip side, Bharti Airtel down by 1.39%, Hindustan Unilever down by 1.17%, GAIL down by 1.11%, ACC down by 1.00% and Bajaj-Auto down by 1.00% were the top losers on the index.

Most of the Asian equity indices were trading in green; Shanghai Composite surged by 35.99 points or 1.76% to 2,080.49, Jakarta Composite gained 17.70 points or 0.40% to 4,484.36, KLSE Composite was up by 8.80 points or 0.49% to 1,817.39, Nikkei 225 moved up by 175.68 points or 1.21% to 14,638.09, Seoul Composite was up by 1.49 points or 0.08% to 1,923.99 and Taiwan Weighted gained 27.84 points or 0.33% to 8,415.19.

On the other hand Hang Seng was marginally down by 4.90 points or 0.02% to 21,631.95 and Straits Times was lower by 3.49 points or 0.12% to 3,009.65.