The Indian stock markets started the day on a strong positive note. However they could not sustain the momentum. In the final few hours of trade the markets slumped downwards. Finally the indices closed on a flat note. The market breadth was more negative with 1.1 declines to every advance. The BSE-Sensex closed flat, higher by around 3 points (up 0.02%), the NSE-Nifty also closed higher by around 2.5 points (up 0.05%). The smaller indices had a weak day on the bourses. The BSE Mid Cap index and the BSE Small Cap closed 0.1% lower in trade today. The Oil and gas and auto indices both saw losses today. IT and FMCG stocks led the gains.
As regards global markets, Asian indices had a positive outing today. European indices also opened the day on a positive note. The rupee was trading at Rs 55.21 to the dollar at the time of writing.
The government recently allowed housing financing companies (HFCs) to raise funds through the external commercial borrowings (ECBs) route to in order to finance low-cost housing projects. HDFC's subsidiary Gruh Finance as well as Dewan Housing Finance are present in this affordable housing finance segment. Foreign Institutional Investors (FIIs) have to invest up to US$ 5 bn in rupee bonds within the overall corporate bond limit of US$ 45 bn. The decision to allow the National Housing Bank (NHB) and HFCs to raise money through ECBs comes on account of a housing shortage for low income groups in major cities and towns. ECBs are attractive, especially on account of the prevailing high interest rates in the country. This is because the cost of raising the loan is lower than that of domestic borrowings. They also provide an additional avenue to access large amounts of funds from global financial markets.
Anil Agarwal controlled Vedanta Resources Plc plans to raise its offer to increase its stakes in Hindustan Zinc Ltd and Bharat Aluminium Co. This is in an attempt to seek control of bauxite mines and India's biggest zinc maker. Vedanta plans to ask for shareholders to approve its offer to pay as much as 15% more for Hindustan Zinc. The offer price for Bharat Aluminium will be raised as much as 63% to US$ 550 m. Vedanta had offered a combined US$ 3.28 bn for the government's 29.5% stake in Hindustan Zinc and 49% in Bharat Aluminium. Vedanta currently holds 65% in Hindustan Zinc and 51% in Bharat Aluminium through its Indian subsidiary and copper maker Sterlite Industries India Ltd. This is a win-win for both parties. Higher ownership in these companies will give Vedanta greater autonomy in the operations and control of an almost US$ 3.3 bn cash reserve at Hindustan Zinc. On the other side, the transactions will help the Indian government raise funds to pay for subsidies on food, fuel and fertilizer etc. Should Vedanta manage to acquire all of the government's remaining 29.5% stake, it will have to sell 19.4% of its shareholding to the public to meet a regulatory requirement of at least 25% public holding in listed companies. Or it may even chose to delist its subsidiary.