Market trims initial gains

Key benchmark indices trimmed initial gains in morning trade. At 10:15 IST, the barometer index, the S&P BSE Sensex was up 122.82 points or 0.48% at 25,776.05. The Nifty 50 index was currently up 35.10 points or 0.45% at 7,895.85. The market sentiment was positive with exit polls predicting a historic win for the BJP led National Democratic Alliance (NDA) in assembly election in Assam. Gains in global stocks aided the upmove on the domestic bourses.

The Sensex jumped 176.83 points or 0.68% at the day's high of 25,830.06 at onset of the trading session, its highest level since 28 April 2016. The barometer index rose 87.96 points or 0.34% at the day's low of 25,741.19 in morning trade. The Nifty rose 53.35 points or 0.67% at the day's high of 7,914.10 at onset of the trading session, its highest level since 12 May 2016. The index rose 30.45 points or 0.38% at the day's low of 7,891.20 in morning trade.

On the political front, exit polls for the assembly election held in four states and one Union territory showed the Dravida Munnetra Kazhagam (DMK)-Congress alliance heading to victory in Tamil Nadu, West Bengal Chief Minister Mamata Banerjee set for a repeat victory in that state, a victory for Communist Party of India-Marxist (CPM)-led Left Democratic Front government in Kerala, and a historic win for the BJP led National Democratic Alliance (NDA) in Assam. The Congress-DMK alliance looks set to form government in the Union territory of Puducherry, the post-poll surveys indicated. The counting of votes for assembly elections held in these four states and the Union territory of Puducherry takes place on Thursday, 19 May 2016.

A win for the BJP led NDA in Assam will put BJP 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 NDA in the Rajya Sabha has delayed passage of a key tax reform bill viz. the Goods and Services Tax (GST) in the upper house.

In overseas stock markets, energy stocks led gains in Asian equities on further gains in oil prices. US stocks closed higher yesterday, 16 May 2016 as a surge in oil prices and a rally in tech stocks overshadowed weaker-than-expected manufacturing data from the New York region. The Empire State general business-conditions index, which measures activity in the New York area, nosedived to a reading of negative 9 in early May, from positive 9.6 in April.

Closer home, the market breadth indicating the overall health of the market was strong. On BSE, 1,095 shares rose and 651 shares fell. A total of 93 shares were unchanged. The BSE Mid-Cap index was currently up 0.38%. The BSE Small-Cap index was currently up 0.31%. Both these indices underperformed the Sensex.

Shares of public sector oil marketing companies rose after announcing increase in the price of petrol and diesel with effect from the midnight of 16/17 May 2016. Indian Oil Corporation (IOCL) (up 1.34%), BPCL (up 2.64%) and HPCL (up 2.15%) rose.

Petrol price was hiked by Rs 0.83 per litre and diesel price was raised by Rs 1.26 a litre at Delhi (including state levies) with corresponding price revision in other states. After the latest revision, petrol in Delhi costs Rs 63.02 per litre and diesel costs Rs 51.67 a litre.

Shares of oil exploration and production (E&P) companies rose as crude oil prices edged higher. ONGC (up 3.01%), Cairn India (up 2.95%), Reliance Industries (up 0.17%) and Oil India (up 1.26%) edged higher. Higher crude oil prices will result in higher realization from crude sales for oil exploration firms.

In the global commodities markets, Brent crude oil futures edged higher. Brent for July settlement was currently up 29 cents at $49.26 a barrel. The contract had risen $1.14 a barrel or 2.38% to settle at $48.97 a barrel during the previous trading session amid growing supply disruptions in Nigeria in the wake of militant threats.

Realty stocks gained. DLF (up 1.29%), Indiabulls Real Estate (up 2.36%), Housing Development and Infrastructure (up 4.03%), D B Realty (up 2.98%), Godrej Properties (up 0.54%), Oberoi Realty (up 0.47%) and Parsvnath Developers (up 1.98%) rose. Unitech fell 1.25%.

Sobha rose 1.15% after the company said that the board of directors of the company will consider a proposal for buyback of equity shares of the company at its meeting scheduled on 19 May 2016 along with Q4 March 2016 results. The announcement was made after market hours yesterday, 16 May 2016.

Meanwhile, Reserve Bank of India in consultation with the Ministry of Finance has decided to allow investment by foreign portfolio investors (FPIs) in unlisted debt securities and securitised debt instruments subject to certain restrictions. In a draft circular issued yesterday, 16 May 2016, the RBI said that FPIs can invest in the primary issues of non-convertible debentures/bonds by a public company issued in demat form, provided that the issuing company does not use the borrowing proceeds for real estate activities, purchase of land, investing in capital market or on-lending to other entities. FPIs can also invest in securitised debt instruments issued by a special purpose vehicle (SPV) set up for securitisation of assets where banks, FIs or NBFCs are originators. FPIs can also invest in securitised debt instruments issued and listed in terms of the Securities and Exchange Board of India Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008. The RBI has invited public comments on draft circular by 25 May 2016.

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