Volatility continued as key benchmark indices trimmed gains after a sudden slide in mid-afternoon trade. At 14:15 IST, the barometer index, the S&P BSE Sensex, was up 17.04 points or 0.07% at 25,416.76. The Nifty 50 index was currently up 1.60 points or 0.02% at 7,785. Meanwhile, stock market regulator Securities and Exchange Board of India (Sebi) has tightened norms for issuers and subscribers of offshore derivative instruments (ODIs) or participatory notes (P-notes) for the purpose of enhancing the transparency and control over the issuance of ODIs.
The Sensex rose 106.34 points or 0.41% at the day's high of 25,506.06 in afternoon trade. The barometer index fell 19.97 points or 0.07% at the day's low of 25,379.75 in early trade. The Nifty rose 29 points or 0.37% at the day's high of 7,812.40 in afternoon trade. The index fell 10 points or 0.12% at the day's low of 7,773.40 in early trade.
The market breadth indicating the overall health of the market was negative. On BSE, 1,446 shares declined and 988 shares rose. A total of 200 shares were unchanged. The BSE Mid-Cap index was currently up 0.05%. The BSE Small-Cap index was currently off 0.45%. Both these indices underperformed the Sensex.
Stocks of private sector banks rose. HDFC Bank (up 0.48%), Axis Bank (up 0.11%), IndusInd Bank (up 0.12%) and Yes Bank (up 0.82%) rose. ICICI Bank (down 1.84%) and Kotak Mahindra Bank (down 0.16%) fell.
PSU bank stocks fell. Andhra Bank (down 2.25%), Indian Overseas Bank (down 1.54%), State Bank of India (SBI) (down 0.23%), Punjab National Bank (down 1.01%), Bank of Baroda (down 0.62%), IDBI Bank (down 0.16%), Bank of India (down 1.33%) and Union Bank of India (down 1.03%) dropped. Canara Bank rose 2.21%.
Aviation stocks declined. Jet Airways (India) (down 3.05%) and InterGlobe Aviation (down 4.49%) fell.
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SpiceJet lost 8.99% after the company's Q4 results announced after trading hours yesterday, 19 May 2016, failed to cheer investors. SpiceJet's net profit surged 225% to Rs 73.19 crore on 85.12% rise in net sales to Rs 1448.66 crore in Q4 March 2016 over Q4 March 2015. Earnings before interest, taxation, depreciation, amortization and aircraft and engine rentals jumped 100.51% to Rs 393 crore in Q4 March 2016 over Q4 March 2015. SpiceJet reported one-time expense of Rs 173 crore in Q4 March 2016 towards stabilising and improving the reliability of its fleet.
Logistics stocks rose on hopes that the outcome of the assembly elections will boost chances for the BJP-led National Democratic Alliance to pass goods and services tax bill in the Rajya Sabha. Gati (up 5.32%), Patel Integrated Logistics (up 3.48%), Allcargo Logistics (up 2.81%), Sical Logistics (up 1.04%), Snowman Logistics (up 1.55%), Transport Corporation of India (up 0.65%) and Kesar Terminals & Infrastructure (up 1.02%) edged higher.
A Bharatiya Janata Party (BJP) led coalition emerged victorious in assembly election in Assam. It was a maiden win for the party in Assam. The Congress party ruled the state for three consecutive terms. Meanwhile, the Communist Party of India-Marxist (CPM)-led Left Democratic Front (LDF) emerged victorious in assembly election in Kerala, dislodging Congress led United Democratic Front government.
The BJP's historic win in Assam will put the party in the right shape for the 2017 assembly election in Uttar Pradesh (UP). The UP assembly has 403 seats. The number of seats in Rajya Sabha, or the upper house of parliament, depends on representation in states. A lack of a majority for the BJP led National Democratic Alliance (NDA) in the Rajya Sabha has delayed passage of the key tax reform bill viz. the Goods and Services Tax (GST) bill in the upper house. The NDA rules the central government after an emphatic victory in the 2014 Lok Sabha election.
Finance Minister Arun Jaitley said in an interview to All India Radio recently that the GST Bill will be put to vote in the monsoon session of Parliament if Congress continues to oppose the Legislation. The GST bill, which has been approved by the Lok Sabha, is pending in the Rajya Sabha because of stiff resistance by the Congress. For the GST bill to become a law, the GST bill also needs to be approved by half the state assemblies.
Man Infraconstruction slumped 5.74% after consolidated net profit fell 66.2% to Rs 1.04 crore on 16% growth in net sales to Rs 61.76 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 19 May 2016.
Meanwhile, stock market regulator Securities and Exchange Board of India (Sebi) after trading hours yesterday, 19 May 2016, announced tightening the regulations for issuers and subscribers of offshore derivative instruments (ODIs) or participatory notes (P-notes) with a view to enhance the transparency and control over the issuance of ODIs. In order to bring about uniformity in the know-your client (KYC) and anti-money laundering (AML) norms, it has been decided that Indian KYC/AML norms will now be applicable to all ODI issuers. The KYC/AML norms applicable to ODI issuers will be the same as that for all other domestic investors.
Sebi also said that ODI issuers would have to identify and verify the beneficial owners in the subscriber entities, who hold in excess of the threshold that is 25% in case of a company and 15% in case of partnership firms/trusts/unincorporated bodies. The ODI issuers will have to identify and verify the persons who control the operations of these entities, Sebi said in a press release issued yesterday, 19 May 2016, after the conclusion of a meeting of the Sebi board in Mumbai. P-notes are derivative instruments issued by registered foreign portfolio investors (FPIs) to overseas investors to enable them to trade in Indian stocks without having to register with Sebi.
Henceforth, the ODI subscribers will have to seek prior permission of the original ODI issuer for transfer of ODIs. As per prevailing regulations, ODI subscribers are not required to take prior permission of the ODI issuer for transfer of ODIs to another investor offshore. The ODI issuers will have to capture the details of all intermediate transfers during the month and report the same to Sebi in the prescribed monthly report. Presently, ODIs issuers submit the details of the holder of ODIs in a monthly report to Sebi. The regulator also said that ODI issuers would have to file suspicious transaction reports with the Indian Financial Intelligence Unit on the ODIs issued by them. Besides, the ODI issuers will have to carry out reconfirmation of the ODI positions on a semi-annual basis.
According to Sebi data, the notional value of ODIs to the AUC (assets under custody) of FPIs has declined over the years from a high of 55.7% in June 2007 to 10% in March 2016.
Separately, Sebi has made it mandatory for the top 500 listed companies in terms of market capitalization to formulate and disclose a dividend distribution policy in annual reports and on their websites. The dividend distribution policy will include the circumstances under which shareholders can or cannot expect dividend, the financial parameters that will be considered while declaring dividends, internal and external factors that would be considered for declaration of dividend, policy as to how the retained earnings will be utilized and provisions in regard to various classes of shares. When a company proposes to declare dividend on the basis of parameters other than what is mentioned in the dividend distribution policy or proposes to change its dividend distribution policy, it will have to make appropriate disclosures. According to Sebi, a formal dividend distribution policy will help investors in taking an informed investment decision.
Meanwhile, with an aim of smoothening the process of registration of Infrastructure Investment Trusts (InvITs) with the Securities and Exchange Board of India (Sebi) and launching of the offer, the stock market regulator has proposed amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Sebi intends to allow InvITs to invest in two-level SPV structure. The stock market regulator has also proposed bringing down the mandatory sponsor holding in InvIT to 10% from current 25%, subject to certain conditions. The stock marker regulator has proposed increase in the number of sponsors in InvITs to 5 from 3. Sebi said that it would bring out a consultation paper in due course proposing the above-mentioned changes in the InvIT regulations.
In overseas stock markets, resources stocks led gains in European equities as metal and crude oil prices rose. Most Asian stocks edged higher, with increase in crude oil prices boosting investors' risk appetite. US stocks edged lower yesterday, 19 May 2016, on mounting fears that the US Federal Reserve's next interest-rate hike could come as early as June and after global credit rating agency Moody's Investors Service cut its 2016 forecast for US economic growth to 2% from 2.3%. Hawkish comments from two Fed officials yesterday, 19 May 2016, amplified the market's rate-hike worries. New York Fed President William Dudley said an interest-rate increase in June or July is possible if fresh data confirm his optimistic forecast of economic growth. Richmond Fed President Jeffrey Lacker defended the Fed's hawkish stance in an interview with a news agency, saying the case is pretty strong for a June hike.
Expectations of further increase in US interest rates had already gained more traction after recent data showed improvement in the US economy and after minutes from the US Federal Reserve's April policy meeting showed that Fed policy setters discussed the possibility of a June rate increase if the economy continued to strengthen. The Fed released the minutes of its April policy meeting on 18 May 2016. The Federal Open Market Committee next undertakes monetary policy review on 14-15 June 2016. The US central bank had lifted rates in December 2015 for the first time in nearly a decade.
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