A bout of volatility witnessed as the key benchmark indices regained positive zone after briefly sinking into the red in morning trade. At 11:15 IST, the barometer index, the S&P BSE Sensex, was up 48.47 points or 0.19% at 25,448.19. The Nifty 50 index was currently up 10.20 points or 0.13% at 7,793.60. 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 99.23 points or 0.39% at the day's high of 25,498.95 in morning 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 27.70 points or 0.35% at the day's high of 7,811.10 in morning trade. The index fell 10 points or 0.12% at the day's low of 7,773.40 in early trade.
In overseas stock markets, 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 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 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.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,108 shares declined and 923 shares rose. A total of 128 shares were unchanged. The BSE Mid-Cap index was currently up 0.14%. The BSE Small-Cap index was currently off 0.23%. Both these indices underperformed the Sensex.
Index heavyweight and housing finance major HDFC advanced 1.3% to Rs 1,192. The stock hit high of Rs 1,192.25 and low of Rs 1,172.85 so far during the day.
Capital goods stocks declined. Thermax (down 2.94%), ABB India (down 0.48%), Punj Lloyd (down 1.16%), BEML (down 0.75%), Bharat Electronics (down 1.52%) and Crompton Greaves (down 0.16%) fell. Bharat Heavy Electricals (Bhel) (up 0.67%), L&T (up 0.47%) and Siemens (up 0.37%) rose.
Realty stocks fell. Oberoi Realty (down 2.32%), Indiabulls Real Estate (down 0.91%), Sobha (down 1.7%), Godrej Properties (down 0.63%), Parsvnath Developers (down 0.27%) declined. DLF (up 1.17%), Housing Development and Infrastructure (up 1.36%), D B Realty (up 0.51%) and Unitech (up 0.51%) rose.
WABCO India shed 0.73%. The company's net profit rose 88.45% to Rs 57.29 crore on 48.85% rise in net sales to Rs 539.36 crore in Q4 March 2016 over Q4 March 2015. The announcement was made after market hours yesterday, 19 May 2016.
Gujarat State Petronet fell 1.1%. The company's net profit rose 48.6% to Rs 99.70 crore on 2.1% decline in total income to Rs 244.98 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) yesterday, 19 May 2016, announced tightening of norms 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.
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.
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