Local bourses capture some more ground; first quarter GDP data eyed

Local bourses have captured some more ground as active bulls running across the space have created fresh short tailing the gains of the global equities. However, there is some air of caution at Dalal Street as finicky investor's are opting to stay on the bay before initiating any large bets ahead of the release of first quarter GDP data. The general market expectation is that Indian economy probably grew at an annual 7.6 percent in the quarter through June, slowing from the previous quarter's 7.8 percent growth. On the global front, U.S. stocks extended gains on Monday with the Nasdaq rising 3 percent after a merger between two big banks in Greece and a rebound in consumer spending boosted investors' appetite for risky assets. Meanwhile, Asian stocks too are imitating the pattern of the Wallstreet is trading in jubilant mood. However, US future indices are showing a downtick in the screen trade. Back home, on the BSE Sectoral front, stocks from Realty, TECk and Bankex counters are doing the most to enhance the gains of the bourses, while stocks from PSU counter are the only spoil sport. All Oil marketing companies bucking the trend are trading in red as brent crude rose for a sixth straight session on Tuesday, buoyed by strong data from the United States that allayed fears the world's top oil consumer was sliding back into recession and a landmark bank merger deal in Greece. Meanwhile, investor's at Dalal Street have once again got some reason to rejoice as GDP data despite declining from last year's first quarter numbers, stood at 7.7%, tad above the market expectation.

The BSE Sensex is currently trading at 16,602.14, up by 185.81 points or 1.13%. The index has touched a high and low of 16,678.72 and 16,518.42 respectively. There were 25 stocks advancing against just 4 declining one's, while one stock remained unchanged on the index.

The broader indices kept trading in line with benchmarks; the BSE Mid cap and Small cap indices rose 1.10% and 0.85% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 2.36%, TECK up by 1.64%, Bankex and Metal up by 1.63% and CD up by 1.33%. While, PSU down by 0.14% remained the lone loser on the index.

The top gainers on the Sensex were Tata Steel up by 3.79%, DLF up by 3.77%, Jaiprakash Associate up by 3.15%, RIL up by 3.02% and Bharti Airtel up was up by 2.28%.

On the flip side, ONGC was down by 4.00%, BHEL down by 0.73%, Bajaj Auto down by 0.50% and L&T was down by 0.43% were the top losers on the Sensex.
Meanwhile, the Reserve Bank of India (RBI) on August 29 released the much awaited draft guideline for the New Banking Licenses. In a statement RBI said that it has sought views/comments on the draft guidelines from banks, non-banking financial institutions, industrial houses, other institutions and the public at large. The key facet of the released draft guidelines are as follows:

Private companies (promoters/promoters group) with diversified ownership, sound credential and integrity that have a successful track record for minimum of 10 years will be eligible to promote banks. On the other hand, entities that earn 10 percent or more from realty, construction or broking activities, either individually or taken together in the past three years will not be eligible for such licenses.

 On the corporate structure, new banks will be set up only through a wholly owned Non-Operative Holding Company (NOHC) to be registered with the RBI as a non-banking finance company (NBFC) which will hold the bank as well as all the other financial companies in the promoter group. However, the aggregate non-resident shareholding in the new bank shall not exceed 49 percent for the first 5 years after which it will be as per the extant policy.

 For setting up new bank, the minimum capital requirement will be Rs 500 crore. Nevertheless, the actual capital to be brought in will depend on the business plan of the promoters. The NOHC holding will be 40 percent for first 5 years, and then it will be reduced to 20 percent within next 10 years and 15 percent within 12 years from the date of licensing of the bank.

 On the corporate governance front, at least 50 percent of the directors of the NOHC should be independent directors. The corporate structure should be such that it does not impede effective supervision of the bank and the NOHC on a consolidated basis by the RBI.
 The other key highlights of guidelines are the exposure of bank to any entity in the promoter group shall not exceed 10 percent and the aggregate exposure to all the entities in the group shall not exceed 20 percent of the paid-up capital and reserves of the bank. The bank shall get its shares listed on the stock exchanges within two years of licensing.

The bank shall open at least 25 percent of its branches in unbanked rural centres (population upto 9,999 as per 2001 census). And existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks.

The draft also proposes that in respect of promoter groups having 40 percent or more assets / income from non-financial business, certain additional requirements will be stipulated.

The Finance Minister Pranab Mukherjee in his budget speech had announced that it was the government's intent to open up the banking sector further, and RBI had floated a discussion paper on the subject. Some of the big corporate houses such as Tata, the Aditya Birla Group, Anil Ambani-led Reliance Group, Bajaj Financial Services and Shriram Finance are expected to apply for the new banking license.

Final guidelines will be issued and the process of inviting applications for setting up of new banks in the private sector will be initiated after receiving feedback, comments and suggestions on the draft guidelines, and after certain vital amendments to Banking Regulation Act, 1949 are in place, the RBI said.

The S&P CNX Nifty is currently trading at 4,978.95, higher by 59.35 points or 1.21%. The index has touched a high and low of 4,998.05 and 4,948.40 respectively. There were 40 stocks advancing against 10 declines on the index.

The top gainers of the Nifty were JP Associate up by 4.20%, Reliance Communication up by 4.10%, Tata Steel up by 3.81%, DLF up by 3.71% and Reliance Capital up by 3.29%.

On the flip side, ONGC down by 4.16%, Gail India down by 0.77%, Bajaj Auto down by 0.71%, BHEL down by 0.51% and BPCL down by 0.39%, were the major losers on the index.

All the Asian equity indices were trading in the green; Shanghai Composite was up by 0.99%, Hang Seng was up by 2.22%, Nikkei 225 was up by 1.23, Seoul Composite was up by 0.82% and Taiwan Weighted was up by 1.05%.

Meanwhile, Malaysian and Singaporean bourses are closed on account of Hari Raya Puasa today while the stock markets in Indonesia too remained shut for Idul Fitri holiday. Indonesian stock exchanges will remain closed till September 2. 

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