The Indian equity markets are trading flat but in red in the late morning session with investors looking for some clear signals to emerge. There was no news flowing from the home front, so the investors were trading quite cautiously. On the sectoral front consumer durables was the biggest gainer with 1.47%, metal, capital goods and realty stocks are mostly trading higher. Bank stocks are mostly restrained. PSU, FMCG, IT and Power stocks too struggling to move higher. Oil marketing as well as airline companies' were facing selling pressure due to rise in crude oil prices. Meanwhile, on the global front the Asian markets were modestly higher. Back home, market breadth was positive; there were 1,360 shares on the gaining side against 1,110 shares on the losing side while 124 shares remained unchanged.
The BSE Sensex is currently trading at 18,730.04, down by 14.52 points or 0.08%. The index has touched a high and low of 18,823.45 and 18,688.06 respectively. There were 13 stocks advancing against 17 declines on the index.
The broader indices were trading in positive; the BSE Mid cap and Small cap indices were up by 0.11% and 0.37% respectively.
The top gaining sectoral indices on the BSE were, CD up by 1.47%, Metal up by 0.48%, CG up by 0.48%, Realty up by 0.47% and HC up by 0.14%. While, Bankex down by 0.52%, PSU down by 0.34%, FMCG down by 0.30%, IT down by 0.29% and Power down by 0.21% were the top losers on the index.
The top gainers on the Sensex were Hindalco Inds up by 1.02%, Bharti Airtel up by 0.88%, DLF up by 0.87%, L&T up by 0.86% and HDFC up by 0.68%.
On the flip side, Tata Power down by 1.42%, ONGC down by 1.05%, Reliance Communication down by 1.05%, ICICI Bank down by 1.02% and Sterlite Inds was down by 0.78% were the losers on the Sensex.
Meanwhile, the Reserve Bank of India (RBI) on June 05, 2011, issued a circular quoting that the investments in liquid scheme of debt oriented mutual funds (DoMFs) with weighted average maturity of not more than one year will be capped at 10 percent of banks' net worth. A decision that can impact adversely the assets under management (AUM) of fund houses that rely heavily on money flows from banks. The central bank said, "it has been decided that the total investment by banks in liquid/short term debt schemes (by whatever name called) of mutual funds with weighted average maturity of portfolio of not more than 1 year, will be subject to a prudential cap of 10 percent of their net worth as on March 31 of the previous year".
Banks generally invest their surplus funds in liquid schemes of mutual funds, which invest in debt securities having maturity within 90 days, which is expected to be around 1 lakh crore. The Apex Bank's decision is expected to take out around 50-60% of this, affecting the total asset under management of Mutual Fund industry. Moreover, short-term debt schemes of duration of less than a year offer banks higher returns within a short period, sequentially DoMFs is invested heavily in Certificates of Deposit (CDs) of banks.
In the Monetary Policy statement for 2011-12, RBI had said, "Such circular flow of funds between banks and DoMFs could lead to systemic risk in times of stress/liquidity crunch. Thus, banks could potentially face a large liquidity risk. It is, therefore, felt prudent to place certain limits on banks' investments in DoMFs". The DoMFs offer a regular and stable income to the investors, DoMFs schemes normally invest in fixed income securities such as bonds, corporate debentures, government securities and money market instruments.
'With a view to ensuring a smooth transition, banks which are already having investments in these (liquid) schemes of mutual funds in excess of the 10 percent limit, are allowed to comply with this requirement at the earliest but not later than six months from the date of this circular," RBI added.
The mutual fund industry is expected to witness some redemption in liquid funds on the back of RBI's decision. However, industry players feel that the central bank's decision will strengthen the money market by forcing banks to participate more in this segment, which is currently dominated by mutual funds.
The S&P CNX Nifty is currently trading at 5,628.30, lower by 3.80 points or 0.07%. The index has touched a high and low of 5,655.40 and 5,613.50 respectively. There were 19 stocks advancing against 31 declines on the index.
The top gainers of the Nifty were Sesa Goa up by 2.16%, Hindalco up by 1.26%, Dr Reddy up by 1.24%, L&T up by 0.94% and HDFC up by 0.80%. While, BPCL down by 2.28%, Ranbaxy down by 1.34%, IDFC down by 1.33%, Tata Power down by 1.25% and ONGC down by 1.21% were the major losers on the index.
Most of the Asian equity indices were trading in the green; KLSE Composite up by 0.23%, Nikkei 225 gained 1.02%, Straits Times rose 0.23%, Seoul Composite added 0.19% and Taiwan Weighted was trading higher by 0.46%.
On the flip side, Shanghai Composite declined 0.87%, Hang Seng descended 0.38% and Jakarta Composite was down by 0.11%.
Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).
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