Benchmark front line indices stage tender optimism; broader indices continue to underperform

After swirling in and out of major technical levels in early deals, benchmark front line indices have finally managed to gain some traction albeit slender. The undertone right from the start of the trade was cautious as criticism by ratings agencies sparked skepticism about a historic European Union plan to fix a massive debt crisis by binding member economies closer together. However, covering up of pending shorts in TECk, Auto and Healthcare counters, on BSE Sectoral front, triggered a bounce back of the 30 share barometer index. Meanwhile, broadly followed 50 share index- Nifty-on NSE-emerging from the negative territory, is currently oscillating around its neutral line. Unlike with the barometer gauges, broader indices enticed weakness and were currently trading with a cut of over 0.50%. The overall market breadth on BSE was in the favour of declines which outpaced advances in the ratio of 1246:739, while 106 shares remained unchanged.

 The BSE Sensex is currently trading at 15,923.32, up by 52.97 points or 0.33%. The index has touched a high and low of 15,944.50 and 15,771.59 respectively. There were 20 stocks advancing against 10 declines on the index.

The broader indices continued to stage somber mood; the BSE Mid cap and Small cap indices declined by 0.61% and 0.51% respectively.

TECk up by 0.49%, Auto up by 0.39%, Health Care (HC) up by 0.36%, Oil & Gas up by 0.33% and Information Technology (IT) up by 0.30% were the top gaining sectoral indices on BSE’s 30 share index-Sensex.

The few losing sectoral indices on the BSE were, CG down by 0.83%, CD down by 0.70%, Bankex down by 0.62%, PSU down by 0.50% and Power down by 0.06%.

The top gainers on the Sensex were Bharti Airtel up by 2.24%, Sun Pharmaceuticals up by 1.55%, Hindalco Industries up by 1.54%, HDFC up by 1.25% and Cipla up by 1.17%

On the flip side, L&T was down by 1.43%, Tata Steel down by 1.39%, ONGC down by 0.99%, ICICI Bank was down by 0.64% and Jaiprakash Associates down by 0.58% were the top losers on the Sensex.

Meanwhile, in new guidelines for banks' Investments in subsidiaries and other companies, the Reserve Bank of India (RBI) has imposed the limit on their direct or indirect equity investments in non-financial service companies. The apex bank in its latest notification has said that the “Equity investment by a bank in companies engaged in non financial services activities would be subject to a limit of 10 %of the investee company’s paid up share capital or 10 % of the bank’s paid up share capital and reserves, whichever is less”. For the purpose of this limit, equity investments held under ‘Held for Trading’ category would also be reckoned. Investments within the above mentioned limits, irrespective of whether they are in the ‘Held for Trading’ category or otherwise, would not require prior approval of the Reserve Bank.

By imposing this limit, the RBI is seeking to ring fence to Scheduled Commercial Banks core operation from activities directly or indirectly not permitted to lenders. Till now, the investment in non financial services firms did not required prior approval from RBI, and banks where free to acquire substantial equity holding non financial services companies.

The RBI’s notification further said, banks could through their direct and indirect holdings in other entities exercise control or have significant influence over such companies and thus, engage directly or indirectly in activities not permitted to banks. 'It is, therefore, necessary to limit such investments,' it added.

According to the RBI’s notification, equity investments in any non-financial services company held by a bank or entities which are bank’s subsidiaries or mutual funds controlled by the bank should in the aggregate not exceed 20% of the investee company’s paid up share capital.

A bank’s equity investments in subsidiaries and other entities that are engaged in financial services activities together with equity investments in entities engaged in non financial services activities should not exceed 20 % of the bank’s paid-up share capital and reserves. The cap of 20 % would not apply for investments classified under ‘Held for Trading’ category and which are not held beyond 90 days and banks will have to submit to RBI a time bound action plan for disposal of such shares within a specified period.

The S&P CNX Nifty is currently trading at 4,767.30, up by 2.70 points or 0.06%. The index has touched a high and low of 4,782.40 and 4,728.50 respectively. There were 31 stocks advancing against 19 declining one’s on the index.

The top gainers of the Nifty were Dr Reddy up by 1.83%, Bharti Airtel up by 1.83%, HCL Technologies up by 1.80%, Tata Power up by 1.70% and Sun Pharmaceuticals up by 1.39%.On the flip side, PNB down by 1.98%, Axis Bank down by 1.86%, L&T down by 1.77%, Tata Steel down by 1.75% and Siemens down by 1.37% were the major losers on the index.

Asian equity indices continued trading on dismal note; Shanghai Composite declined 1.47%, Hang Seng dropped 0.87%, Jakarta Composite shrugged off 1.28%, Nikkei 225 lost 0.87%, Straits Times slipped 0.56%, Seoul Composite plunged 1.42% and Taiwan Weighted skid 0.65%.