Euphoria on Dalal Street tempers as European markets open weak

The sanguinity in Indian markets is showing signs of easing in the Friday afternoon trades as the benchmark equity indices have drifted to fresh lows in the session in the past half an hour on the back of an uninspiring opening in European markets which opened with marginal gains but soon started receding to lower levels. Nevertheless, the indices are still trading with huge gains of around two and half a percent gains around the psychological 5,300 (Nifty) and 17,700 (Sensex) levels as sentiments remained buoyant with Europe's hard-won debt deal to save the Euro-zone and the global economy from recession. Investors’ morale was buttressed because of an impressive US economic report which showed that the GDP gathered additional steam and expanded at a better than expected pace of 2.5% annual rate in the third quarter, easing concerns that the US was on the verge of a double-dip recession. Asian peers too traded on an encouraging note with notable gains. Back home, on the BSE sectoral space, the metal counter showed sharp upmove and surged close to six percent amid global rally in commodity prices on hopes of an optimistic global economic outlook. While the rate sensitive banking pocket too appeared in resurgent mood after reports that the ministry of finance has indicated that it is likely to approve capital infusion into public sector banks, including State Bank of India by mid-November. In the current financial year, the capital requirement of PSU banks has been estimated between Rs 10,000-20,000 crore. On the flipside the only chink in the armor was Consumer Durables counter which traded on a flat note with trivial losses.

Moreover, the broader markets too traded on a positive note with gains of around a percent but were outclassed by their larger peers. The bourses surged on extremely high volumes of over Rs 0.70 lakh core, considering these are initial days of a new F&O series. The market breadth on BSE was in favor of advances in the ratio of 1623:1000 while 104 scrips remained unchanged.

The BSE Sensex is currently trading at 17,743.40 up by 454.57 points or 2.63% after trading as high as 17,908.13 and as low as 17,671.86. There were 29 stocks advancing against 1 decline on the index.

The broader indices were trading in the green terrain; the BSE Mid cap index climbed 1.26% and Small cap added 0.88%.

On the BSE sectoral space, Metal up 5.73%, Bankex up 3.34%, Realty up 3.27%, Capital Goods up 3.25% and Auto up 2.65% were the major gainers while Consumer Durables down 0.04% was the only loser in the space.

Hindalco up 9.01%, Sterlite up 8.56%, Jindal Steel up 7.11%, Tata Motors up 5.99% and ICICI Bank up 5.98% were the major gainers on the Sensex, while Maruti Suzuki down 0.43% was the only loser on the index.

Meanwhile, Reserve Bank of India has warned banks for taking customers for granted by manipulating interest rates on the floating rates loans. The Apex bank also wants banks to voluntarily waive the prepayment penalty on home loans.

However, Banks and RBI both mutually agreed to outlaw prepayment fees on floating rate home loans as one the 10-point action to improve customer services. KC Chakrabarty, deputy governor of RBI said 'Banks had agreed...now they have a problem. We are giving them some time but we are very clear that this 10-point action plan has to be implemented,'

Many banks are charging around 2% of the outstanding loans if the borrower wants to repay before the due date. However, leading commercial banks from public and private sector such as State Bank of India and Axis Bank have stopped charging prepayment fees.

The RBI governor D Subbarao also had indicated that the RBI will pursue banks to waive off the prepayment penalties as soon as possible. However, he also hinted that the banking system should get time to adjust with this, and RBI will give banks some time for adjusting.

At the same time, the RBI in its mid-year monetary policy review has expressed its discomfort about old floating rate customers getting a raw deal whereas new customers are offered a better rate; however, both have got the same rating. In a statement, the RBI said that there are instances where the spread charged to a customer has been revised upward frequently during the tenure of the floating rate loan.

The RBI find this practice as discriminating in nature as the existing customer are at disadvantage compare to the new customer with the same credit rating. Especially in case of home loans where banks kept offering attractive rates to new customers whereas old customers pay a higher rate.

To bring uniformity in differential rates RBI said that it is setting up a working group which will look into the 'principles governing proper, transparent and non-discriminatory pricing of credit.'

The S&P CNX Nifty is currently trading at 5,332.65, higher by 130.85 points or 2.52% after trading as high as 5,399.70 and as low as 5,329.00. There were 46 stocks advancing against 4 declines on the index.

The top gainers on the Nifty were Hindalco up 9.28%, Sterlite up 8.59%, Jindal Steel up 7.38%, Tata Motors up 6.33% and JP Associates up 6.11%.

BPCL down 2.64%, Maruti down 1.51%, Power Grid down 0.43% and GAIL down 0.32% were the only losers on the index.

Asian markets traded on an encouraging note, Shanghai Composite surged 1.66%, Hang Seng soared 2.02%, Jakarta Composite climbed 0.73%, KLSE Composite advanced 0.66%, Nikkei 225 jumped 1.39%, Straits Times garnered 1.42%, Seoul Composite gained 0.39% and Taiwan Weighted rose 0.67%.

The European markets traded on a positive note as France’s CAC 40 added 0.31%, Germany's DAX gained 0.49% and Britain’s FTSE 100 rose 0.10%.