Markets slip into red after a positive start tailing global indices

Indian markets after making a cautious but positive start have lost their momentum and are reeling in red in the very first hour of trade. The mood turned somber tailing the weakness in the global markets, while the US indices ended mostly in red, the Asian peers were trading soft. On the domestic front too, the sentiments remained dampened on mixed set of macro data.  Announced after the market hours yesterday, the Indian industrial production growth rate remained negative for the third straight month, contracting 0.6 per cent in December 2013, as against a contraction of revised  -1.3% in November. However, on the positive side and giving some respite to the rate sensitives, the retail inflation slowed to a two-year low in January to 8.79 percent, its lowest level since January 2012.  Though, core retail inflation remained at around 8 percent, which has been deemed uncomfortably high by the Reserve Bank of India (RBI) governor Raghuram Rajan. The global pressure was mainly weighing on the sentiments and barring the defensive FMCG and to some extent Auto, non of the sectoral gauges were trading in green. Broader markets were witnessing bigger cuts then the benchmarks.

The market breadth remained in favour of decliners, as there were 625 shares on the gaining side against 834 shares on the losing side, while 78 shares remained unchanged.

The BSE Sensex opened at 20478.67; about 30 points higher compared to its previous closing of 20448.49, and touched a high and a low of 20503.86 and 20357.18 respectively.  The index is currently trading at 20366.93, down by 81.56 points or 0.40%. There were 9 stocks advancing against 21 declines on the index.

The overall market breadth has made a weak start with 40.66% stocks advancing against 54.26% declines. The broader indices were trading in red; the BSE Mid cap index was down by 0.32% and Small cap index was lower by 0.20%.

The top gaining sectoral indices on the BSE were, Auto up by 0.24% and FMCG up by 0.11%, while PSU down by 1.12%, Oil & Gas down by 1.00%, Power down by 0.73%, Bankex down by 0.71% and Metal down by 0.64% were the top losers on the sectoral index. 

The top gainers on the Sensex were Mahindra & Mahindra up by 0.98%, Sun Pharma up by 0.71%, Tata Motors up by 0.68%, ITC up by 0.48% and SSLT up by 0.37%. On the flip side, Cipla was down by 4.84%, Coal India was down by 2.30%,  HDFC was down by 1.55%, ONGC was down by 1.47% and Tata Power was down by 1.46% were the top losers on the Sensex.

Meanwhile, in a bid to create a level playing field for existing banks and new players that may soon get the banking license, the Reserve Bank of India (RBI) has imposed curbs on banks investing in their group companies. As per the norms, banks cannot lend more than 5% of their paid-up capital and reserves to a single non-financial company or unregulated financial company belonging to the same group, while their aggregate group exposure should not exceed 20%.

However, in a case where bank’s current intra-group exposure is more than the limits stipulated, it would be required to bring it down before March 31, 2016. Nevertheless, exposure through equity and other capital instruments would be exempted from this norm. 

The measures, which would ensure banks maintaining arm's length relationship in dealings with their own group entities, meeting minimum requirements with respect to group risk management and group-wide oversight, and adhering to prudential limits on intra-group exposures, would come into effect in October, 2014. Almost all existing commercial banks, including foreign banks operating in India, will have to adhere to these norms.

Further, the central bank also has mandated banks not to enter into cross-default clauses i.e. clauses that trigger automatically when a lender declares that a loan is in default. It has barred banks from selling their bad loans to group entities other than asset reconstruction companies.

The CNX Nifty opened at 6,087.55; about 3 points higher as compared to its previous closing of 6,084.00, and has touched a high and a low of 6,094.40 and 6,050.75 respectively. The index is currently trading at 6,053.70, down by 30.30 points or 0.50%. There were 10 stocks advancing against 39 declines and one stock remains unchanged on the index.

The top gainers of the Nifty were M&M up by 1.08%, Tata Motors up by 0.85%, Sun Pharmaceuticals Industries up by 0.76%, SSLT up by 0.64% and DLF up by 0.43%. On the flip side, Cipla down by 4.62%, Jindal Steel & Power down by 2.76%, Bank of Baroda down by 2.19%, Coal India down by 2.11% and BPCL down by 1.73% were the major losers on the index.

most of the Asian equity indices were trading in red; Hang Seng dropped 57.35 points or 0.26% to 22,228.44, Jakarta Composite lost 2.32 points or 0.05% to 4,493.96, KLSE Composite dropped 5.21 points or 0.29% to 1,820.43, Nikkei 225 declined by 184.77 points or 1.25% to 14,615.29, Seoul Composite shed 1.51 points or 0.08% to 1,934.33 and Taiwan Weighted was down by 18.78 points or 0.22% to 8,492.09.

On the flip side, Shanghai Composite was up marginally by 1.63 points or 0.08% to 2,111.59 and Straits Times was up by 9.45 points or 0.31% to 3,044.90.