Benchmarks trade flat as profit-booking creeps in at record high level

Surrendering away almost entire gains, benchmark equity indices were trading flat, though with positive bias as markets’ record high levels tempted some traders to lock in their gains. Further, with it being the last trading session of week traders too have started the process of unwinding their position, especially ahead of the most controversial RBI’s monetary policy review, wherein its chief Raghuram Rajan always manages to surprise the markets. Despite being at day’s low, both Sensex and Nifty are holding above the crucial 22,200 and 6650 levels respectively. While, broader indices showing a degree of performance are up with gains in range of 0.75%-1%.

On the global front, Asian stocks were trading mostly in green, led by gains in Hong Kong as China's major banks this week reported solid profits for 2013, easing doubts around the sector's financial health.

Closer home, in-spite of profit-booking, most of counters were trading in green on BSE, barring Fast Moving Consumer Goods and Capital Goods counters which were the only losers of the session. On the flip side, stocks from Realty, Metal and Power counters were the top gainers of the session. Meanwhile, all the state-run banks continued to witness buying after RBI on Thursday extended the deadline for banks to implement Basel III capital rules by a year. Additionally, Shares of all Information Technology (IT) firms were trading jubilant after global rival Accenture Plc raised its full-year profit forecast and the lower end of its revenue forecast. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1395:434; while 35 shares remained unchanged.

The BSE Sensex is currently trading at 22225.42, up by 11.05 points or 0.05% after trading in a range of 22363.97 and 22212.65. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.02%, while Small cap index up by 0.79%.

The gaining sectoral indices on the BSE were Realty up by 1.56%, Metal up by 1.23%, Power up by 1.08%, Oil & Gas up by 0.74% and IT up by 0.60%. While, FMCG down by 0.79% and Capital Goods down by 0.65% were the only losing indices on BSE.   

The top gainers on the Sensex were Hindalco Inds up by 3.11%, SBI up by 2.91%, SSLT up by 2.22%, Tata Power up by 1.63% and Dr Reddy’s Lab up by 1.37%. On the flip side, L&T down by 1.32%, ITC down by 1.29%, HDFC down by 1.16%, HDFC Bank down by 0.96% and HUL down by 0.93%.

Meanwhile, giving some respite to the Indian banks, the Reserve Bank of India (RBI) extended deadline for banks to implement global capital norms, Basel III, by a year to March 2019 amid concerns over the asset quality and profitability of the banks.

The RBI notified that prevailing slowdown in Indian industries has been putting pressure on the asset quality and thus impacting performance/profitability of the banks. Therefore, RBI decided to extend time for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III capital regulations. Indian banks will now align full implementation of Basel III norms closer to the internationally agreed date of 1 January 2019.

The central bank has also revised certain aspects of guidelines like Minimum Common Equity Tier 1, Capital conservation buffer (CCB) and loss absorption features of non-equity capital instruments. However, the central bank issued more strict norms for Indian banks as compared to Basel Committee on Banking Supervision (BCBS). Under Basel III, total capital (Tier 1 and Tier 2) of a bank in India must be at least 9 per cent of risk weighted assets (RWAs) while, the BCBS requirement is minimum 8 per cent of RWAs.

The RBI suggested Indian banks that capital requirements are substantially lower during the initial years as compared to later years for full implementation of Basel III Guidelines and therefore banks should consider this aspect carefully while undertaking their capital planning exercise. Referring to the dividend distribution, the RBI recommended that the dividend on common shares and perpetual non-cumulative preference shares (PNCPS) will be paid out of current year's profit only. If the coupon payment on perpetual debt instrument (PDI) would lead to result in losses in the current year, then declaration should be precluded to that extent. Coupons on perpetual debt instruments should not be paid out of retained earnings or reserves.  

The CNX Nifty is currently trading at 6,657.35, up by 15.60 points or 0.23% after trading in a range of 6,684.95 and 6,650.25. There were 36 stocks advancing against 14 declining on the index.

The top gainers of the Nifty were Ultratech Cement up by 4.79%, Grasim up by 3.67%, PNB up by 3.60%, Indusind Bank up by 3.09% and SBI up by 3.04%. On the flip side, ITC down by 1.42%, L&T down by 1.34%, Jindal Steel down by 1.21%, HDFC down by 1.12% and Mcdowell-N down by 1.05% and were the major losers on the index.

Most of the Asian equity indices were trading in green; Straits Times was up by 0.39%, Jakarta Composite up by 0.79%, Nikkei 225 up by 0.50% and Hang Seng surged 1.06%. While, Shanghai Composite down by 0.35% and Taiwan Weighted down by 0.06% were the losers on the index.