Mid-Cap, Small-Cap indices outperform in weak market

Key benchmark indices hovered in negative zone in mid-afternoon trade as index pivotals remained gripped under selling pressure. At 14:25 IST, the barometer index, the S&P BSE Sensex, was down 121.36 points or 0.34% at 35,266.52. The Nifty 50 index was down 29.05 points or 0.27% at 10,712.05. Most IT stocks rose.

Domestic stocks kickstarted trading for the day on a positive note after BJP leader B. S. Yeddyurappa was sworn in as chief minister of Karnataka. Stocks reversed early gains to sink in negative zone in morning trade. Stocks extended fall and hit fresh intraday low in early afternoon trade. Market trimmed losses in afternoon trade.

The S&P BSE Mid-Cap index was up 0.73%. The S&P BSE Small-Cap index was up 0.41%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On the BSE, 1357 shares rose and 1167 shares fell. A total of 121 shares were unchanged.

Coal India (up 2.64%), Tata Motors (up 2.51%) and Sun Pharmaceutical Industries (up 1.53%) were the major Sensex gainers.

Most IT stocks rose. Wipro (up 1.86%), TCS (up 0.56%), Infosys (up 0.08%), Oracle Financial Services Software (up 0.03%), Tech Mahindra (up 0.2%) and Mphasis (up 2.55%) rose. HCL Technologies (down 0.04%), MindTree (down 0.39%) and Hexaware Technologies (down 1.19%) fell.

Reliance Communications surged 43.6% to Rs 15.15 on reports that the company is in talks with Swedish telecom firm Ericsson for settlement. According to media reports, Reliance Communications (RCom) and Ericsson will inform the Mumbai bench of the National Company Law Tribunal (NCLT) they are in settlement talks. This news provides some hope that RCom could avoid insolvency proceedings. Insolvency proceedings would put a hold on any asset sales by RCom.

RCom clarified after market hours on 15 May 2018, that the company and two of its subsidiaries Reliance Telecom and Reliance Infratel, await the detailed orders of the National Company Law Tribunal (NCLT), Mumbai, allowing the Ericsson application for admitting the companies to debt resolution under IBC. Ericsson has reportedly sought Rs 1154 crore from RCom and two of its arms after having signed a seven-year deal in 2014 to operate and manage RCom's nationwide network.

In December 2017, Reliance Jio agreed to buy a majority of the wireless assets of RCom for an undisclosed amount. Both companies signed agreements for sale of wireless spectrum, tower, optical fibre network and media convergence node assets.

On the political front, Bharatiya Janata Party's (BJP's) B.S. Yeddyurppa was today, 17 May 2018 sworn in as chief minister of Karnataka. The swearing-in came after a four-hour, post-midnight Supreme Court hearing on a Congress-JDS petition that sought to quash his candidature. The Supreme Court made it clear that the swearing-in and the government formation would be subject to its final order on the Congress-JDS petition before it. Yeddyurappa still has to prove the BJP's majority in the assembly.

Karnataka delivered a hung Assembly on Tuesday with no party getting a clear majority to form government in the state. While the Bharatiya Janata Party (BJP) emerged as the single-largest party, winning 104 seats, falling marginally short of the 113 seats needed to form a government. The Congress and the Janata Dal Secular (JDS) stood second and third with wins on 78 and 38 seats respectively.

Overseas, European markets were mixed as investors continued to monitor corporate earnings and political risk. Asian stocks were trading on a mixed note. US stocks rose yesterday, 16 May 2018 with major indexes advancing in a broad rally as investors appeared to shake off fears of rising bond yields, helping equities resume a recent uptrend.

On the economic front, construction on new houses dropped 3.7% in April. The annual rate of new homes being built declined to 1.29 million last month from a revised 1.34 million pace in March that was the strongest since mid-2007.

US factory output rose in April, although new estimates of manufacturing and overall industrial production showed less growth in prior months than initially believed, casting a shadow over the economic outlook. Industrial production rose 0.7% in April, the Federal Reserve said Wednesday. Output rose at a 2.3% rate in the first quarter.

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