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Markets shed early gains
Thu, 25 Aug 11:30 am

Indian stock market indices have been trading in the red over the past two hours of trade. All sectoral indices are trading weak except for healthcare and FMCG stocks.

The BSE-Sensex is down by 65 points and NSE-Nifty is down by 28 points. BSE Midcap and BSE Small cap indices are down by 0.9% and 0.6% respectively. The rupee is trading at 45.7 to the US dollar.

PSU Banking stocks are trading in the red led by UCO Bank and Indian Overseas Bank. RBI (Reserve Bank of India) is looking at implementing Basel III norms in India. Basel III are a set of new banking regulations designed with a view to avoid a financial crisis on the lines of the subprime crisis. As per the new norms, the capital requirement is the same as the earlier 8% but the equity component has been increased to 4.5% instead of 2%. There is another capital conservation buffer also which would comprise of equity. Thus, the total capital requirement stands at 10.5% of which 7% would be equity. This implies that effectively equity requirement has gone up from 2% to 7%.

To meet these new banking regulations, Indian PSU banks would require Rs 8 trillion over the next 8 years. An alternate way of raising funds could be bringing down the average Government holding from 58% to 51% thereby making a sum of Rs 700 bn available.

Power stocks are trading in the red. All the stocks in the sector are trading down except for Tata Power which is trading in the green. According to a leading financial daily, the world's largest coal miner Coal India could face closure of its 22 mines in Jharkhand over environmental concerns. This would lead to an output loss of nearly 40,000 tons per day which could have huge consequences. The mines which face closure mainly supply coking coal to one of India's largest steel maker Steel Authority of India (SAIL) which would also affect production in that company. Already local coal supplies are falling short of demand not only because more power plants are coming up in the country but also because of mining projects running into environment and land acquisition delays. The company will file a petition with the central environment ministry on this issue.

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