Markets move forward as investors indulge in some hectic buying

Local equity markets continue to move forward as the investors have been shrugged off the fears of rising inflation and possible rate hike for the time being. The sentiments seem to have turned a bit bullish after billionaire investor Warren Buffett said he is likely to use the enormous cash pile of flagship firm Berkshire Hathaway to acquire companies in India. On the global front, the other key Asian markets are trading mixed, while US index futures are down in screen trade today at this point of time. Back home, the benchmark indices are now trading at the high point of the day, up by more than a percent. Amongst the sectoral indices, all the indices with an exception of Auto, which was down by 0.02%, were trading in the green. The banking sector has taken the lead today with all the banking stocks showing significant traction after the Union Finance Minister Pranab Mukherjee on Tuesday tabled the Banking Laws (Amendment) Bill - 2011 in the lower house of the Parliament. The main aim of the Bill is to improve the regulatory powers of the central bank and reform the norms governing voting rights in both the public sector and private sector banks. Meanwhile, metal, capital goods, healthcare and realty stocks too are trading firm since morning. Shares of healthcare companies have witnessed significant bounce back after the government decided to roll back 5% service tax imposed on private hospitals with 25-bed or more capacity. The broader markets continued to trade on a firm note; the mid-cap and small-cap indices gained 0.73% and 0.63%, respectively. The market breadth on the BSE was positive; the gainers thrashed the losers in a ratio of 1607:1025 while 123 shares remained unchanged.

The BSE Sensex jumped 182.10 points or 1.01% at 18,170.40. The index touched a high and a low of 18,188.16 and 17,950.17, respectively.

The BSE Mid-cap and Small-cap indices rose 0.73% and 0.63%, respectively.

All the sectoral indices on the BSE, with an exception of Auto, which was down by 0.02% were trading in the green. Bankex up 1.54%, Metal up 1.08%, Capital Goods (CG) up 1.06%, Healthcare (HC) up 0.99% and Realty up 0.97% were the major gainers.

Meanwhile, Union Finance Minister Pranab Mukherjee on Tuesday tabled the Banking Laws (Amendment) Bill - 2011 in the lower house of the Parliament. The main aim of the Bill is to improve the regulatory powers of the central bank and reform the norms governing voting rights in both the public sector and private sector banks.

In case of the nationalized banks, the Bill proposes to raise the ceiling on voting rights of shareholders from 1% prevailing currently to 10%. It also proposes to enable the nationalized banks to increase or decrease their authorized capital with approval from central government and RBI. Presently, the nationalized banks are subjected to a ceiling of Rs 3,000 crore authorized capital.

In case of private banks it proposes to remove the voting right restriction of 10% for private sector banks in the total voting rights of all the shareholders of the banking company. It is proposed to "remove the existing restriction on voting rights limited to 10% of the total voting rights of all the shareholders of the banking company," said the statement of objects and reasons of the bill.

The Bill also includes provisions to further empower the central bank. Such a step was felt necessary before new banking licenses were issued so that the central bank is in a better position to regulate the industry. Once the bill is passed, it will be mandatory for anyone to obtain prior approval from RBI to acquire 5% or more of the share capital of a bank and the central bank will have the right to impose whatever conditions it deems fit for such acquisitions.

The bill will also exempt bank mergers and acquisitions from provisions of competition act. This is being done to ensure that bank mergers and acquisitions are exempted from scrutiny of competition commission of India (CCI) and continue to be overseen by the RBI only. This point was request by the central bank itself as bank mergers also often have to be evaluated from point of view of stability of overall banking industry. Many times a bank merger might become necessary to rescue an ailing bank even if it leads to significant increase in market share of acquiring bank. 

The top gainers on the Sensex were ICICI Bank up 3.02%, Jaiprakash Associates up 2.72%, Cipla up 2.64%, Sterlite Inds up 2.10% and BHEL up 2.05%.

On the flip side, Jindal Steel down 0.65%, M&M down 0.60%, TCS down 0.42% and Maruti Suzuki down 0.32% were the only losers on the index.

The Securities and Exchange Board of India (SEBI) has given a final approval to Indiabulls Financial Services, India Infoline (IIFL) and Union Bank of India-KBC Asset Management to start their mutual fund business. Indiabulls and India Infoline had applied for a mutual fund license in 2007 and 2008, respectively. Union Bank had applied in 2009.

India Infoline will be launching the products in two months time. The company is looking to launch Index and ETF products. With a GDP of 9%, India Infoline feels that the mutual fund is a long-term business in India and it has a huge growth proposition.

SEBI is not comfortable in granting licenses to financial services companies and has expressed concerns over granting mutual fund licenses to non-serious players. Currently it has around 23 pending mutual fund applications.

The MF industry is witnessing a phenomenal 9% growth with close to asset under management of Rs 6.2 lakh crore. The new entrants in the mutual fund industry feel that India's asset management industry is underpenetrated and doesn't even constitute even 10% of the GDP. At the same time the industry is also witnessing exits by HNIs from mutual funds to other short-term investment opportunities.

The financial crisis in 2008 has seen many new entrants in the mutual fund business burning their fingers.  Also the market regulator has removed the entry load barrier which many fund houses see as a boon to the MF industry.

The S&P CNX Nifty surged 62.45 points or 1.15% at 5476.30. The index touched high of 5477.25 and a low of 5401.95, respectively.

The top gainers on the Nifty were Sesa Goa up 3.67%, ICICI Bank up 3.22%, Cipla up 3.03%, Gail up 2.84% and Jaiprakash Associates up 2.65%.

On the other hand, Reliance Capital down 0.92%, M&M down 0.75%, Jindal Steel down 0.65%, TCS down 0.43% and Maruti Suzuki down 0.33% were the major losers on the index.

Most of the Asian markets are trading in the green. Shanghai Composite added 1.03%, Jakarta Composite soared 0.53%, KLSE Composite advanced 0.15%, Straits Times gained 0.68% and Taiwan Weighted advanced 0.44%; while Hang Seng dipped 0.24%, Nikkei 225 declined 1.65% and Seoul Composite dropped 0.07%.

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