A range bound movement was witnessed as key benchmark indices hovered in green in early afternoon trade. At 12:16 IST, the barometer index, the S&P BSE Sensex, was up 63.54 points or 0.25% at 25,463.26. The Nifty 50 index was currently up 12.95 points or 0.17% at 7,796.35. 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 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.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,280 shares declined and 975 shares rose. A total of 165 shares were unchanged. The BSE Mid-Cap index was currently up 0.19%. The BSE Small-Cap index was currently off 0.29%. Both these indices underperformed the Sensex.
Auto stocks rose. Mahindra & Mahindra (M&M) (up 0.44%), Eicher Motors (up 0.28%), Bajaj Auto (up 0.36%), Hero MotoCorp (up 0.13%), Escorts (up 0.81%) and TVS Motor Company (up 0.76%) gained. Ashok Leyland fell 0.59%.
Tata Motors rose 0.52% after the company announced that it intends to raise Rs 300 crore from issue of non-convertible debentures (NCDs). In this regard, a meeting of a duly constituted Committee of the Board will be held on 25 May 2016. The announcement was made during market hours today, 20 May 2016.
Maruti Suzuki India (MSIL) fell 0.35% after the car major announced that it will undertake a service campaign to inspect fault and replace a brake part in 20,427 units of its S-Cross model. These vehicles were manufactured between 20 April 2015 and 12 February 2016. This service campaign applies to both the variants of S-Cross, MSIL said. The inspection and replacement will be done free of cost for the customers, it added. The announcement was made after market hours yesterday, 19 May 2016.
Telecom stocks declined. Reliance Communications (down 0.98%), Bharti Airtel (down 0.55%) and MTNL (down 0.28%) fell. Idea Cellular rose 1.4%. Tata Teleservices (Maharashtra) was trading unchanged at Rs 6.59.
Shares of Bharti Infratel slipped 0.47%. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
Esab India surged 5.49% after the company reported a net profit of Rs 9.37 crore in the quarter ended 31 March 2016 compared with net loss of Rs 1.38 crore in the quarter ended 31 March 2015. Esab India's net sales rose 7.7% to Rs 113.34 crore in the quarter ended 31 March 2016 over the quarter ended 31 March 2015. The result was announced after market hours yesterday, 19 May 2016.
Vaibhav Global lost 15.1% after consolidated net profit fell 50% to Rs 8.79 crore on 3.2% decline in net sales to Rs 347.49 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.
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.
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