WITH the US Fed maintaining a status quo on interest rates, the Street has now shifted its focus towards a likely rate cut by RBI later this month.

While the Street cheered the US central bank’s decision to keep the Fed funds rate unchanged near zero with the Indian benchmarks rallying nearly 1%, experts believe that a slew of important developments, including the data coming out of China as well as the financial health of India Inc, will continue to drive the equity market going ahead.

According to Hitesh Agrawal, head, research, Reliance Securities, investors’ focus will now shift back to global economic growth challenges in general. “For Indian equities, all eyes will now be on the RBI monetary policy on September 29,” said Agrawal.

After Friday’s recovery that helped benchmark indices close the week more than 2% higher, market participants expect more consolidation. “Our markets might find some amount of stability with a hope that RBI might consider a cut in the repo rate during the upcoming meeting,” said Rajesh Cheruvu, CIO, Royal Bank of Scotland.

On Friday the 30-share Sensex closed at 26,218.91, clocking in weekly gains of 608.7 points while the broader Nifty added 192 points to close at 7,981.90. With this rebound, the markets are now trading close to their long-term valuations of 15 times one-year forward earnings. Bank of America Merrill Lynch expects a rate cut as the four pre-conditions — greater transmission of lending rate cuts to consumers by banks, low inflation,monsoon out-turn and status quo in the US Federal interest rates — seem to have been met.

However, it also said that with a possible Fed rate hike now postponed to December 2015, capital flows could stall till till December.

Markets experts also point out that concerns about China would have a higher bearing on the Indian markets in the near-term, even more than a interest rate hike by the US Fed.

Saurabh Mukherjea, CEO of Institutional Equities, Ambit Capital, pointed out that events like further devaluation of yuan would pose bigger threat to domestic markets.

He points out that the rise of EM equity as an asset class around 12-13 years ago was on the back of a rising China. Most emerging markets have witnessed good inflows from foreign investors over the last 10-12 years.

‘It follows, therefore, that concerns about China can impact the perception of investors about the very concept of EM equity as an asset class. Most emerging markets have started to witness outflow of foreign funds already. This trend is expected to continue in the days to come and India is unlikely to ride this out without getting affected,” added Mukherjea .

After a prolonged selling streak, the Indian stock markets found some relief on Friday in terms of Foreign Portfolio Investors(FPIs). The FPIs who sold more than $3 billion worth equities since August bought shares worth $98 million, provisional data in the stock exchanges showed. This is the best buying by FPIs in nearly one month.

Markets regulator Sebi has notified new norms that will dilute its chairman’s powers on conduct of search and seizure of defaulters’ properties, with permission for such operations being required from a special court. (PTI)

Markets regulator Sebi has notified new norms that will dilute its chairman’s powers on conduct of search and seizure of defaulters’ properties, with permission for such operations being required from a special court.

Under the new norms, Sebi will have to seek permission from special courts to conduct search and seizure operations, as against earlier regulations that had provided the capital markets regulator chief to directly authorise such actions.

These regulations would be called the Securities and Exchange Board of India (Procedure for Search and Seizure) Repeal Regulations, 2015.

The move comes following demands that the greater powers need to be balanced with necessary safeguards.

Sebi Chairman was earlier authorised to conduct search and seizure operations against suspected entities, but the new notification provides that permission for such actions would need to be obtained from a Magistrate or Judge of a designated court.

Earlier in August last year, the government had notified a new law empowering the capital market regulator to pass orders for attachment of properties, arrest of defaulters and to access call data records.

The Securities Laws Amendment Act which had come into force through a gazette notification dated August 2014, is part of the government and regulator’s efforts to tighten the noose around fraudsters in the wake of several cases of illicit money-pooling activities including ponzi operators in various parts of the country.

Domestic fund houses are of the view that the US Fed’s status quo stance on rates is a positive indication for RBI to lower its lending rates. (Express Photo)

Domestic fund houses are of the view that the US Fed’s status quo stance on rates is a positive indication for RBI to lower its lending rates.

RBI, which has already reduced its key policy rate by 75 basis points so far in the current calendar year, will be reviewing its annual monetary policy on September 29.

“The US Fed’s decision to delay raising rates is positive for interest rate here which we are expecting to come down. Our equities continue to be good long-term investments despite emerging market redemptions,” ICICI Prudential MF Managing Director and Chief Executive Nimesh Shah said today.

The central bank of the world’s largest economy kept interest rates (which are at near zero) unchanged last night citing worries about the global economy, financial market volatility and sluggish inflation at home, but left open the possibility of a modest policy tightening later this year.

“The ultimate beneficiary of US Fed decision to not hike rates – risk assets – don’t seem to have embraced the Fed’s decision and we are noting mixed signals across emerging markets. The Fed confusion is probably too much for the market to take and this has only induced more future uncertainty,” Tata AMC chief Investment Officer Ritesh Jain said.

“We would want to wait and see how gold and the dollar index behave in the next 2-3 days to get more clarity on the future course,” he said.

“The language of the Fed has moved to a more accommodative stance given global uncertainty. The long-term expectation of unemployment rate in the US is around 5.1 per cent, at which level the US economy is deemed to have achieved full employment,” Quantum AMC Head-Fixed Income Murthy Nagarajan said.

Share price of SKS Microfinance plunged over 15 per cent on Friday after the company failed to get the small bank licence from the Reserve Bank of India. (Photo: PTI)

Share price of SKS Microfinance plunged over 15 per cent on Friday after the company failed to get the small bank licence from the Reserve Bank of India (RBI). The central bank on Wednesday awarded in-principle small-bank licences to 10 players, eight of them were microfinance lenders (MFIs).

At 11.32 am, SKS Microfinance was trading 12.62 per cent down at Rs 393.45. The scrip opened at Rs 405.30 and had touched a high and low of Rs 406 and 376.65, in trade so far.

Brokerage houses downgraded SKS Microfinance stocks after the RBI announcement on small-bank licences. Morgan Stanley downgraded stocks to “equal-weight” from “overweight” and said, “MFI with a licence will be more competitive while SKS, without a bank licence, will likely struggle.”

SKS, the second largest MFI after Bandhan (which recently converted to a bank) is the only large MFI among the top 10 players, conspicuously out of the list, according to Kotak Institutional Equities.

According to Religare Institutional Research, SKS Microfinance was not given a small bank licence, which was due to the company’s track record, particularly the 2010 Andhra Pradesh crisis, could have worked against it coupled with preference may have been given to promoters with non-profit motives (Janalakshmi, ESAF and RGVN) and Other MFIs may have scored higher in terms of ownership structure, as well as on RBI’s external and internal parameters. The brokerage house is suggesting invetsors to avoid SKS Microfinance even if the stock corrects 5-20 per cent from current levels.

“We pare our FY16/FY17 earnings by 5-8 per cent to build in lower growth and margin pressure, and cut our September 2016 target price to Rs 320 (from Rs 400) as the stock could lose some of its valuation premium which was due to high growth and capital raising expectations,” Religare Institutional Research said in a report.

Around 13.25 lakh shares exchanged hands on BSE so far, compared with an average volume of 2.44 lakh shares in the past two weeks.

In the past one year, the share price of SKS microfinance jumped 47.93 per cent to Rs 450.30 on September 16. On the other hand, Sensex declined around 2 per cent during the same period.

For the quarter ended June 2015, the company posted net profit of Rs 61.16 crore, up 24 per cent, against Rs 49.32 crore in the corresponding quarter a year ago.

(With inputs from Reuters)

Banking stocks surged on Friday after the US Fed on Thursday decided to keep the interest rates unchanged. (Express Photo)

Banking stocks surged on Friday after the US Fed on Thursday decided to keep the interest rates unchanged. The BSE Bankex index jumped over 3 per cent in the morning trade.

Shares of public sector banks, Bank of Baroda, Punjab National Bank and State Bank of India were trading 3.83 per cent, 3.63 per cent and 3.13 per cent up at Rs 189.60, 141.30 and Rs 244.05, repectively.

Similary, private sector banks such as Axis Bank, ICICI Bank, HDFC Bank, Federal Bank and YES Bank were trading 4.53 per cent, 3.70 per cent, 3.24 per cent, 3.39 per cent and 1.48 per cent higher at Rs 516.50, Rs 283.25, Rs 1057.30, Rs 62.55 and Rs 1.48 per cent.

The BSE Bankex was up 3.19 per cent at 20,056 in the morning trade. Sensex was up 1.69 per cent at 26,404.

G Chokkalingam, founder and managing director, Equinomics Research said, “Banking stocks are trading higher in the morning trade as status quo by US Fed on interest rates strengthen the changes of rate cut in the upcoming RBI monetary policy on September 29. ”

Vaibhav Agrawal, VP and head of research, Angel Broking said, “We expect the Fed to continue to maintain an accommodative stance and raise rates in a very orderly fashion. We continue to remain positive on select banking stocks.”

According to reports the government is also considering increasing the foreign direct investment (FDI) limit in private banks to 100 per cent, from the existing 74 per cent.