Markets open weak after bank licences

Thu, 3 Apr 09:30 am

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Barring Taiwan (down 0.3%), the major Asian stock markets have opened the day on a firm note with stock markets in Singapore (up 0.8%) and Japan (up 1.5%) leading the gains. The Indian share markets have opened the day on a negative note. The sectoral indices have opened mixed with stocks in the capital goods and banking space leading the losses. However, stocks in the metal and consumer durables space were trading firm.

The Sensex today is down by around 20 points (0.1%), while the NSE-Nifty is down by about 10 points (0.1%). However, the mid and small cap stocks have opened in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.1% each. The rupee is currently trading at Rs 59.96 to the US dollar.

The Reserve Bank of India (RBI) has given in-principle approvals to just two entities - the infrastructure financier IDFC Ltd and Bandhan Financial Services Pvt Ltd to start new banks. As per the RBI release, the two chosen companies were suitable for "in-principle" approvals based on the clearance given by the high- level advisory committee (HLAC) under former RBI Governor Bimal Jalan. The approvals will be valid for a period of 18 months during which these two will have to fulfill the RBI's guidelines to offer banking services. Until a regular license is issued, the applicants will not be allowed to do banking business. With this, the number of banks in India will go up to 90. The RBI has promised that the entities that have not qualified in the current round will be allowed to apply in future rounds or they could apply for differentiated licences under the proposed framework.

Auto stocks have opened the day on a mixed note with Ashok Leyland Ltd and Maruti Suzuki Ltd leading the pack of gainers. However, Tube Investments Ltd and Escorts Ltd were leading the losses. Auto sales have been announced for the fiscal year FY2014. The entire auto industry registered a muted growth of around 3% YoY during the year. During the year, overall commercial vehicle segment sales declined by around 20% YoY to 6.4 lakh units. The slowdown was mainly on account of sluggish macroeconomic growth and mining activities, because of which the overall fleet utilization levels fell to a record low of 60%. In the passenger vehicle segment, Maruti Suzuki Ltd registered an increase of around 300 basis points (3%) in its market share, that now stands at 42%. However, Tata Motors Ltd's market share in commercial vehicles segment fell by around 620 basis points (49.8% vs. 56% a year earlier). In the motorcycle segment, the market share of Bajaj Auto Ltd declined by almost 400 basis points (20.3% vs. 24.43%) due to competition from rivals like Honda and Mahindra Two Wheelers.