Benchmarks turn red after a positive start

The Indian equity markets have turned into red after making a positive start as crude prices surged to their highest since 2008, which raised inflation and interest rate worries. The US markets made a flat closing overnight, where though Dow and S&P gained marginally, Nasdaq closed tad lower. However, most of the Asian markets were trading in the negative terrain at this point of time. Back home, benchmarks started on a positive note on the back of strong FII inflows amid expectations of encouraging fourth quarter earnings by corporate, but it took U-turn and are trading in red on inflation and interest rate worries as Brent crude oil trades around $121 a barrel. Oil and gas witnessed the maximum gain in trade followed by fast moving consumer goods and public sector undertaking while, auto, software and realty stocks remained the top losers on the BSE sectoral space. The broader indices were outperforming benchmarks. The market breadth on the BSE was positive; there were 874 shares on the gaining side against 769 shares on the losing side while 58 shares remained unchanged.

The BSE Sensex opened at 19,731.38; about 30 points higher compared to its previous closing of 19,701.73, and has touched a high and a low of 19,770.21 and 19,625.90, respectively.

The index is currently trading at 19,669.23, down by 32.50 points or 0.16%. There were 11 stocks advancing against 19 declines on the index.

The overall market breadth has made a positive start with 51.38% stocks advancing against 45.21% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices surged 0.04% and 0.23% respectively. 

The top gaining sectoral indices on the BSE were, Oil and Gas up by 0.29%, FMCG up by 0.20%, PSU up by 0.19%, Power up by 0.16% and HC was up by 0.09%. While Auto down by 0.50%, IT down by 0.44%, Realty down by 0.39%, TECk down by 0.29% and Metal down by 0.26% were the only losers on the index.

The top gainers on the Sensex were RCom up by 2.11%, BHEL up by 1.57%, HUL up by 0.64%, NTPC up by 0.61% and Cipla was up by 0.55%.

On the flip side, Bajaj Auto down by 1.12%, L&T down by 0.95%, M&M down by 0.91%, DLF down by 0.87% and Infosys down by 0.67% were the top losers on the index.

Meanwhile, the Reserve Bank of India (RBI) has directed the non banking financial companies (NBFCs) not to invest capital or be a partner in partnership firms. In cases where such partnership already exists, the NBFC concerned should seek to exit at the earliest, said the central bank in a notification.

The RBI observed that it had noticed some large scale investments by NBFCs in some partnership firms that could lead to conflict of interest and moral hazards for the industry, resulting in the latest directive being issued by the central bank. Analysts point out that undue exposure to a partnership firms can result in negative impact the balance sheet of the NBFC concerned and thus create problems for depositors to such an NBFC.

'In view of the risks involved in NBFCs associating themselves with partnership firms, it has been decided to prohibit non-banking financial companies from contributing capital to any partnership firm or to be partners in partnership firms,' said the Indian central bank in a notification released on its website. The issue here is that unlike a public or a private limited company, a partner can be closed at any time. So, if an NBFC has invested in such a firm and the latter fails, then it could have an adverse ripple effect on the former and hence its depositors.

The notification indicates the new norm will be applicable mainly to NBFCs which are allowed to accept deposits from the public. "No non-banking financial company, which is accepting public deposit shall contribute to the capital of a partnership firm or become a partner of such firm," added the central bank. NBFCs are classified into various categories by the central bank and all of them are allowed to accept deposits from the public.

The RBI has been tightening its grip over the NBFCs as the size of latter grows to ensure there are no systematic risks for the Indian financial system. It had earlier increased the capital adequacy ratio for NBFCs in line with that for commercial banks and later tightened the criteria for priority sector lending by the NBFCs. Such concerns have obviously increased following the global financial crisis, which had brought central banks across the board more pro-active.

The S&P CNX Nifty opened at 5,923.85; about 15 points higher compared to its previous closing of 5,908.45, and has touched a high and a low of 5,928.65 and 5,887.55 respectively.

The index is currently trading at 5,906.65, down by 1.80 points or 0.03%. There were 23 stocks advancing against 27 declines on the index.

The top gainers of the Nifty were Ambuja Cement up by 2.80%, RCom up by 2.48%, BHEL up by 1.58%, HCL Tech up by 1.32% and Reliance Capital up by 1.27%.

Bajaj Auto down by 1.24%, DLF down by 1.19%, Jindal Steel down by 0.77%, M&M down by 0.67% and L&T was down by 0.64%, were the major losers on the index.

Asian markets were trading mostly in the negative terrain; Jakarta Composite was down 8.65 points or 0.23% to 3,691.40, KLSE Composite was down 2.25 points or 0.14% to 1,553.23 and Nikkei 225 was down by 123.34 points or 1.27% to 9,595.55.

On the flip side, Straits Times was up 13.65 points or 0.43% to 3,154.27 and Seoul Composite was up 0.56 points or 0.03% to 2,116.43.

 

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