MARKETS FIRM

Indian benchmarks have resumed their northward journey on Friday's trade, after a day of halt in previous session, with Sensex recapturing 17,700 mark tracking sanguine global cues. The US markets surged once again overnight, taking S&P to a four-month closing high. There were some good corporate earnings and comments from German Chancellor Angela Merkel, supporting European Central Bank's efforts to fight the euro zone crisis. Moreover, most of the Asian markets have made a green start with positive news from the US. Japanese market was up by over half a percent on report that US housing permits reached a four-year high, the most since August 2008. Back home, some strength also came in from the PSU oil marketing companies as stocks like BPCL, HPCL and IOC all edged higher on the buzz that government is likely to increase diesel prices by Rs 5 per litre shortly after the Parliament session ends. Also, retail stocks like Provogue India, Pantaloon Retail and Trent provided positive sentiments to the markets after the Commerce and Industry Minister Anand Sharma indicated that the government may announce some decisions on FDI in multi-brand retail and civil aviation, saying all consultations are over and an announcement is likely soon. On sectoral front, fast moving consumer goods witnessed the maximum gain in trade followed by auto and software while, realty and capital goods remained the few losers on the BSE sectoral space. The broader indices were trading in-line with benchmarks. The market breadth on the BSE was positive; there were 1,079 shares on the gaining side against 548 shares on the losing side while 76 shares remained unchanged.

The BSE Sensex opened at 17,777.82; about 120.61 points higher compared to its previous closing of 17,696.98, and has touched a high and a low of 17,786.00 and 17,696.98 respectively.

The index is currently trading at 17,777.82, up by 120.61 points or 0.68%. There were 23 stocks advancing against 7 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose 0.66% and 0.78% respectively.

The top gaining sectoral indices on the BSE were, FMCG up by 1.27%, Auto up by 0.86%, IT up by 0.84%, Bankex up by 0.63% and Oil & Gas up by 0.62%. While, Realty down by 0.17% and Capital Goods down by 0.05% were the only losers on the index.

The top gainers on the Sensex were Tata Motors up by 2.36%, HUL up by 1.71%, ICICI Bank up by 1.16%, ITC up by 1.10% and Infosys up by 0.97%.

On the flip side, Sterlite Industries was down by 0.87%, L&T was down by 0.43%, Bajaj Auto was down by 0.16%, BHEL was down by 0.15% and Hindalco Industries was down by 0.13% were the top losers on the Sensex.

As a prudential measure aimed at avoiding concentration of credit risk, the Reserve Bank of India (RBI) has decided to cap banks' intra-group exposure to own group entities at 20% of the paid-up capital and reserves. As per the RBI's draft guidelines on 'Management of Intra-Group Transactions and Exposures' (ITEs), the banks can invest a maximum of 5% of their paid-up capital and reserves in the case of non-financial or unregulated financial services companies. While the exposure could go up to 10% of net worth for a single regulated financial services entity of a group. The central bank has prescribed an aggregate group exposure limit where total investment in all group companies put together cannot exceed 10% of paid-up capital and reserves in case of non-financial services companies and also 10% for regulated financial service companies.

These measures are aimed at ensuring that banks, at all times, maintain arms length relationship in their dealings with the Group entities, meet minimum requirements with respect to Group risk management and group-wide oversight, and adhere to prudential limits on intra-group exposures. However, the Apex Bank has mandated banks to operate within these limits, as above, on an ongoing basis and report their exposure, on a quarterly basis. However, if the exposures exceed the stipulated limits, the same should be reported without delay, with an acceptable rationale of the cause of the breach to Department of Banking Supervision, Central Office (DBS, CO) of the RBI.

Further, on being satisfied, RBI may permit the bank an appropriate timeline within which the bank should comply with the stipulated limits. Any excess over the limits would be deducted from the Common Equity Tier 1 capital of the banks until the limits are restored, as mentioned in the draft guidelines. However, failure to comply within the given timeline by these banks, would result in imposition of penalties or prohibition on the bank to undertake further intra-group transaction and exposure with other Group entities.

Additionally, as per the guidelines, banks should avoid entering into cross-default clauses where a default by a group entity becomes ground to trigger an obligation for the bank. Also, banks should not purchase low-quality assets from Group entities or for that matter accept that as collateral for a loan or extension of credit to, or guarantee, acceptance, or letter of credit issued on behalf of the Group entity.

The S&P CNX Nifty opened at 5,368.60; about 29.65 points higher compared to its previous closing of 5392.60, and has touched a high and a low of 5,393.55 and 5,367.55 respectively.

The index is currently trading at 5,392.60, up by 29.65 points or 0.55%. There were 30 stocks advancing against 18 declines while 2 stocks remained unchanged on the index.

The top gainers of the Nifty were Tata Motors up by 2.48%, HUL up by 1.72%, Cairn India up by 1.45%, ICICI Bank up by 1.19% and Reliance Infrastructure up by 1.18%.

On the flip side, DLF down by 0.86%, Ambuja Cement down by 0.81%, ACC down by 0.71%, Sterlite Industries down by 0.55% and SAIL down by 0.53%, were the major losers on the index.

The Asian markets were trading on a mixed note; Hang Seng was up by 102.63 points or 0.51% to 20,065.58, Jakarta Composite gained 18.52 points or 0.45% to 4,160.51, Nikkei surged by 83.97 points or 0.92% to 9,176.73, Straits Times was up by 1.78 points or 0.06% to 3,064.67. On the other hand, Shanghai Composite was down by 2.78 points or 0.13% to 2,109.42, KLSE Composite was down by 1.38 points or 0.08% to 1,648.71, Kospi Composite has declined by 7.96 points or 0.41% to 1,949.95 and Taiwan Weighted lost 10.35 points or 0.14% to 7,479.86.