Local markets continue to reel under pressure in the absence of any firm cues; persistent profit booking is being witnessed after the main indices saw their highest close in nearly three months in the previous session. Though the benchmark Sensex rallied by over 68 points in opening trade today on the back of strong FII inflows amid expectations of encouraging fourth quarter earnings by corporate but quickly slipped into negative territory following mixed to negative cues from regional counterparts and Brent crude surging above $121/bbl. The crude prices advanced to the highest level since 2008 crimping market gains across Asia. Brent crude was hovering around $121/bbl due to unrest in Yemen and elections in Nigeria.
On the global front, despite overnight gains in the US market, Asian shares are trading lower as Japan's inability to tame a nuclear crisis cast a shadow over investment sentiment. Japan's benchmark Nikkei 225 index dropped substantial weight, amid frantic --and unsuccessful --efforts to control a radioactive leak at a nuclear plant damaged by earthquake and tsunami that struck off the country's northeastern coast on March 11.Back home, on the BSE Sectoral front, stocks from Consumer Durable, Healthcare and power stocks are struggling hard to push the market's momentum on the positive side, however, stocks from Auto, Information Technology and TECk space are playing the culprits behind. Nevertheless, the broader indices have emerged victorious for the third consecutive session thereby contributing to the gains of over 0.50% each. Meanwhile, the benchmark 30 share index-Sensex--on BSE is trading below its 19700 mark while Nifty holding onto its slender gains is still above its 5900 physiological level respectively. In the overall market advances have thumped declines in the ratio of 1516:788, while, 65 shares remained unchanged.
The BSE Sensex is currently trading at 19,678.82, down by 22.91 points or 0.12%. The index has touched a high of 19,770.21 and a low of 19,625.90 respectively. There were 14 stocks advancing against 16 declines on the index.
The broader indices continued their winning streak for the third consecutive session; the BSE Mid cap and Small cap indices surged 0.58 % and 1.16% respectively.
The top gaining sectoral indices on the BSE were, Consumer Durable (CD) up 1.52%, Healthcare (HC) up 0.56%, Power up 0.41%, Capital Goods (CG) up 0.34% and Public Sector Undertaking (PSU) up by 0.19%. While Auto down by 0.50%, Information Technology (IT) down by 0.45% and TECk down by 0.25% were the only losers on the index.
The top gainers on the Sensex were Reliance Communication up 1.88%, Hindalco Industries up 1.76%, BHEL up by 1.57%, Sterlite Industries up 1.07%and Cipla was up by 0.85%.
On the flip side, Tata Power down 1.29%, Infosys down 0.91%, Bajaj Auto down by 0.90%, M&M down by 0.69% and Jindal Steel down by 0.58% were the top losers on the index.
Meanwhile, the Reserve Bank of India (RBI) has implemented eight hikes in its key policy rates including repo or the rate at which it lends to banks and reverse repo or the rate at which it allows banks to park their surplus liquidity with it. Further, with inflation still high, the central bank is expected to continue tightening its monetary policy stance deep into the calendar year 2011.
The rate hikes implemented by the RBI so far have already resulted in some firming up of market rates as cost of funding for banks go up. However, most bankers and analysts feel that despite further tightening in monetary policy expected from the RBI, market rates may not rise significantly further from the current levels in calendar year 2011.
This is because even as the RBI tightens its monetary policy, liquidity scenario in the system is expected to improve with government pushing up spending. Much of the liquidity crisis faced by banks through most of the second half of fiscal year 2010-11 was due to a slump in government spending amidst stand-off in Parliament and procedural delays. With Parliament running well now, bankers expect that government spending will remain strong.
Further, the first half of the fiscal is generally a leaner period for credit demand and as such bankers may not feel have the space to jack up their rates or else the demand could go further down. In fact, many bankers have been saying that right now market conditions do not permit any further increase in rates. Credit demand usually starts increasing by second half of the financial year. By then, however, inflation is expected to come down which will again have a softening impact on interest rates.
Also, the government has budgeted its market borrowing at a lower than expected level at Rs 4.17 lakh crore which is only slightly higher than last year in absolute terms. It also plans to keep the fiscal deficit within 4.6% of the gross domestic product (GDP). This will also ease pressure on rates. With nearly 60% of the government borrowings expected to be completed in first half, rates may remain stable in second half as well.
There are a couple of downside risks however. In case the inflation continues to remain at elevated levels, it will dampen the real interest rates and hence boost the nominal rates. However, economists feel that in case inflations continue to remain at elevated levels, it will impact overall economic growth and hence the investment demand will slowdown. This will directly impact the credit off-take by bankers, again taking the pressure off the market rates.
A greater risk comes from the optimistic nature of government's fiscal deficit estimate. While the government has budgeted the deficit at 4.6% of the GDP, many analysts feel that with crude prices continuing to remain above the $100 barrel, the subsidy spending is likely to surge significantly beyond the levels seen in the last fiscal. This can force the government to wither increase its market borrowings or issue bonds for partial delivery of subsidy. Both these actions can put significant upward pressure on market rates in the second half of the fiscal.
The S&P CNX Nifty is currently trading at 5,909.65, up by 1.20 points or 0.02%. The index has touched a high of 5,928.65 and a low of 5,887.55 respectively. There were 29 stocks advancing against 21 declines on the index.
The top gainers of the Nifty were Ambuja Cement up by 2.39%, Ranbaxy up by 2.22%, Sesagoa up by 2.18%, Reliance Communication up by 2.11% and Hindalco Industries up by 1.78%.
Tata Power down by 1.26%, Infosys down by 0.92%, Power Grid Corporation down 0.90%, Bajaj Auto down by 0.89% and Punjab National Bank was down by 0.82 %, were the major losers on the index.
Asian markets were trading mixed; Jakarta Composite was down by 0.51%, KLSE Composite shed 0.14% and Nikkei 225 declined 1.47%.
On the flip side, Straits Times was up by 0.49%, Seoul Composite gained 0.38%.
No comments:
Post a Comment