Banking, Cap Goods shares help Sensex come out of consolidation mode

After squandering for most part of the session around the previous closing levels, the domestic benchmark equity indices showed some fervor in the last leg of trade and snapped Thursday’s session with about half a percent gains. The frontline indices not only came out of its four straight session consolidation mode but also climbed to the highest levels in more than 13 weeks after sailing beyond the psychological 5,300 (Nifty) and 17,500 (Sensex) levels.

The benchmarks exhibited sideways kind of movement for most part of the day as market participants chose to consolidate their positions around previous closing levels, lacking any significant triggers to take the markets either ways. A day after being outclassed by the global markets, the domestic markets gained some ground and outperformed most Asian as well as European counterparts as investors globally awaited European Central Bank's policy decision later in the day.

Investors remained concerned over reports that monsoon rains will remain well below normal this year, earlier despite predictions of normal rainfall. Moreover, amid widespread demand for some monetary easing measures to revive Asia’s third largest economy, RBI opined that its policy action in the forthcoming quarterly review this month-end will depend upon the progress of monsoon.

On the domestic front, cues from the money market remained pessimistic as Indian rupee extended its depreciating run for the second straight session and inched above the 55 per dollar levels against the US dollar. On the BSE sectoral space, the rate sensitive Banking sector surged over a percent and remained the top gainer led by sharp moves in stocks like ICICI Bank and HDFC Bank.

The Capital Goods index also climbed close to a percent in the session and capped the downside for the markets. On the other hand, some profit booking was evident in the Metal counter, which had rallied over two percent in the previous session on reports that 8 Karnataka iron ore mines will resume operations soon. Shares from the IT sector too remained dull amid fears that after the US proposed two deals with a mandatory 'no-offshore' clause, many similar deals could be on the anvil which could adversely impact Indian 100 billion dollar IT industry that thrives on offshore revenues.

On the global front, cues from the Asian markets remained subdued with the benchmark in China plunging over a percent and leading the losers in the region. The European markets after starting on a tepid note recovered to some extend as investors globally awaited European Central Bank's policy decision later in the day.

Moreover, market participants also awaited a 3 billion euro Spanish bond auction, including new 10-year bonds, which will gauge the market's response to recent measures agreed by European leaders to ease the country's funding problems.

Back home, the NSE’s 50-share broadly followed index Nifty, rose about half a percent to settle well above the psychological 5,300 support level while Bombay Stock Exchange’s Sensitive Index - Sensex gained sixty five points to finish above the crucial 17,500 mark. Moreover, the broader markets too settled on a positive note with notable gains of around a percent and outclassed their larger peers by a fat margin.

The markets rose on weak overall volumes of over Rs 1.08 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Wednesday at over Rs 0.72 lakh crore. The market breadth remained in favor of advances as there were 1,946 shares on the gaining side against 957 shares on the losing side while 109 shares remained unchanged.

The BSE Sensex gained 75.86 points or 0.43% to settle at 17,538.67, while the S&P CNX Nifty rose by 24.75 points or 0.47% to close at 5,327.30.

The BSE Sensex touched a high and a low of 17,562.89 and 17,423.45 respectively. The BSE Mid cap index was up by 0.90% and Small cap index up by 1.64%.

Cipla up 2.67%, ICICI Bank up 2.04%, Tata Motors up 1.61%, ITC up 1.58% and Maruti Suzuki up 1.55% were the major gainers on the Sensex, while ONGC down 2.02%, Bajaj Auto down 1.78%, Coal India down 1.37%, Sterlite Industries down 1.04% and Bharti Airtel down 0.78% were top losers on the index.

The top gainers on the BSE sectoral space were FMCG up 1.03%, Bankex up 1.01%, Capital goods (CG) up 0.87%, Power up 0.86% and Auto up 0.61%, while Realty down 0.43%, Metal down 0.39%, Oil & Gas down 0.14% and TECk down 0.04% were top losers on the BSE sectoral space. 

Meanwhile, India’s central bank - the Reserve Bank of India (RBI) is contemplating the proposal of easing some of the rules relating to the country’s microfinance institutions’ (MFIs) net worth, capital adequacy and provisioning needs. At a time when the MFIs are facing difficult times, the relaxation of norms by RBI would provide a huge sigh of relief to the institutions dealing in micro-finance and also help them emerge out of the crisis.

Acknowledging that the setting up of new regulatory regime has run into some bottlenecks, RBI governor D Subbarao opined that the central bank is taking efforts to resolve various challenges faced by the MFIs and would soon bring MFI operations back on track. He cited that small MFIs were unable to meet the Rs 5 crore entry point capital to be eligible to register as non banking finance company (NBFC)-MFI, underlining the difficulties faced by them in complying with the qualifying asset criterion for registering as NBFC-MFI.

Subbarao highlighted that the loss making MFIs based in Andhra Pradesh, who are suffering from large non-performing assets (NPAs) and eroded capital, are reeling under acute problems in complying with the capital and provisioning norms. Therefore banks were reluctant to make fresh loans to them as such loans do not qualify for priority sector lending.

Though micro finance institutions have RBI as their regulator but there are apprehensions over whether the central bank has the means and ability to do so. RBI Governor revealed that the central government is bringing out a law to govern the MFI and has proposed RBI as the regulator however, concerns remain whether it have the set up to oversee small MFIs without affecting the quality of supervision.

The S&P CNX Nifty touched a high and low 5,333.65 and 5,288.85 respectively.

The top gainers on the Nifty were IDFC up 2.96%, Cipla up 2.20%, ICICI Bank up 2.15%, Maruti up 1.87% and HCL Tech up 1.85%. On the flipside, Asian Paints down 2.39%, ONGC down 1.79%, Bajaj Auto down 1.72%, Sterlite Industries down 1.58% and Coal India down 1.55% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 up 0.02 points, Germany's DAX up 0.57% and United Kingdom’s FTSE 100 up 0.29%.

Asian markets on Thursday made a mixed closing as investors remained on sideline and booked some profits ahead of the European Central Bank’s meet expecting an interest rate cut. There was no cue from the US markets as it remained closed due to Independence Day holiday. Investors were keeping their finger crossed looking down upon the European Central Bank meeting today for a possible announcement $78 billion of fresh fund from the Bank of England. The Euro was at par with dollar in a cautious trade.

Nikkei slid on Thursday as traders perceived that the market which has rallied for month has touched resistance at the 75 day moving average and was weakening now. Reconstruction stocks performed better today with construction machine maker Komatsu Ltd rising 3.5 percent and Daiki Ataka Engineering Co Ltd soaring 2.3 percent. Shanghai Composite ended lower as investors were risk averse. Hang Seng Index fell due to low trade on Thursday from seven week high on fear of weakness in Chinese Domestic benchmark.