If Nifty goes below today’s low, a short term decline would be on the cards
In Monday’s closing report, we had mentioned that NSE’s CNX Nifty will become weak only below 8,450. The Indian indices opened Tuesday in the red and continued to move lower gradually. Nifty went below 8,450 level and traded below it for almost an hour during the afternoon session. It then attempted to regain some ground. Today’s loss on the S&P BSE Sensex and Nifty has been the highest since 16 October 2014.
S&P BSE Sensex opened at 28,521 and went up 20 points to 28,541 while Nifty opened at 8,531 and hit a high at 8,535. This was followed by the indices moving lower steadily through the day to hit a low at 28,218 and 8,429. Sensex closed at 28,338 (down 161 points or 0.57%) while Nifty closed at 8,463 (down 67 points or 0.79%). Today’s loss on the NSE has been on a much higher volume of 125.89 crore shares. India VIX rose 3.90% to close at 13.5250.
Market regulator Securities and Exchange Board of India (SEBI), has imposed restrictions on issue of offshore derivative instruments or P-notes by foreign portfolio investors. This was the main reason for the knee-jerk reaction on the bourses today.
The Telecom Regulatory Authority of India (TRAI), in its response to the telecom department's request for clarification over pricing of various bands of spectrum said that auctions are not the only way to allot spectrum.
Coming back to stock markets, Finolex Cables (3.86%) was among the top three gainers in ‘A’ group on the BSE. The stock hit its 52-week high today. AIA Engineering (3.58%) also hit its 52-week high and was among the top four gainers in the group. AIA Engineering was recently in the news for its entering into a manufacturing agreement with Steelcast Ltd, Bhavnagar. According to the agreement, Steelcast will manufacture certain products for the company, which will improve market share of the company.
India Cements (8.67%) was among the top loser in ‘A’ group on the BSE. The stock was in news as there is uncertainty over the future of Chennai Super Kings - team owned by India Cements of which, suspended BCCI president N Srinivasan is the managing director. He is among 13 persons who were probed by a court-appointed inquiry committee investigating allegations of corruption in IPL 2013. Srinivasan has also been slammed by the Supreme Court for his conflict of interest.
State-run BHEL (2.95%) was the top gainer in the Sensex 30 pack. Citigroup upgraded the stock to "buy" from "sell" and raised the price target to Rs335.
ITC (4.99%) was the top loser in the Sensex 30 stock. The Ministry of Health & Family Welfare, has accepted the recommendation of an expert panel to ban the sale of loose cigarettes. The expert panel, set up by the Health Ministry has recommended, prohibition on sale of loose or single stick of cigarette, increasing the minimum legal age for sale of tobacco products, increasing the fine or penalty amounts for violation of certain provisions of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA), as well as making such offences cognizable. These recommendations will now be put before the Cabinet and will also require a Parliament nod before they are implemented.
On Monday, US indices closed in the green. Asian indices showed mixed performance. Shanghai Composite (1.37%) was the top gainer while NZSE 50 (0.53%) the top loser.
Minutes of the Bank of Japan's (BOJ) October 31 monetary policy meeting released showed BOJ Governor Haruhiko Kuroda proposed the additional stimulus for the Japanese economy.
China's central bank reportedly cut the yield for a key short-term money rate today for the fourth time this year. Latest data showed Germany's gross domestic product rose 0.1% in Q3 September 2014. European indices were trading higher while US Futures were trading marginally higher.
The market regulator has asked foreign investors to ensure compliance with all necessary norms before issuing offshore derivative instruments-ODIs or P-Notes
Amid concerns about possible misuse of offshore derivative instruments (ODIs), or P-Notes, for money laundering and other such purposes, market regulator Securities and Exchange Board of India (SEBI) directed foreign investors to ensure compliance with all necessary norms before issuing such notes with immediate effect.
While existing ODI positions will be allowed to continue till expiry if they are not in compliance with the relevant provisions of Foreign Portfolio Investment (FPI) Regulations, any additional issuance, renewal or rollover of such non-compliant positions would not be permitted, SEBI said.
However, there are no changes in the existing regulations that FPIs need to comply with while issuing ODIs.
P-Notes are mostly used by overseas HNIs, hedge funds and other foreign institutions to invest in Indian markets through registered foreign institutional investors, while saving on time and costs associated with direct registrations. However, there have been often concerns about misuse of this route.
The investments through P-Notes rose to a seven-year high of over Rs2.65 lakh crore at the end of October 2014.
As per the norms put in place by SEBI to check any misuse, only those foreign entities, whose country have signed bilateral MoUs with its counterpart, are eligible for issuance of such instruments.
The issuer of such instruments should not be resident of a country identified by Financial Action Task Force (FATF) as "a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply", a SEBI circular said.
Such restrictions also apply to entities from "a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies".
Sebi said that foreign funds with 'opaque' structures would not be allowed to come in under the new FPI regime.
The regulator said that two or more ODI subscribers having common Beneficial Owner (BO) will be considered together as a single ODI subscriber, in the same manner as is being done in the case of FPIs.
Further, where an investor has investments as FPI and also holds positions as an ODI subscriber, these investment restrictions shall apply on the aggregate of FPI investments and ODI positions held in the underlying Indian company.
"In other words, the investment as FPI and positions held as ODI subscriber will be clubbed together with reference to the said investment restrictions," SEBI said.
"This circular shall come into effect immediately," it added.
The new regime provides for existing overseas investor classes such as FIIs (foreign institutional investors), their sub-accounts and QFIs (qualified foreign investors) to become FPIs.