TRADING ON A FLAT NOTE

The Indian equity markets are trading on a flat note on the back of sustained selling witnessed in some of the key heavyweights. Initially, benchmarks started the trade on a firm note tracking positive cues from global indices. The US markets extended their gains overnight supported by good earnings announcements and some big corporate deals and all the Asian counterparts were trading in the positive terrain at this point of time, indicating investors' sentiments. Back home, market pared all of its early gains and trading on a flat note on account of sustained selling witnessed in key heavyweights like NTPC, ICICI Bank and ONGC. On the sectoral front realty witnessed the maximum gain in trade followed by software and technology while, oil and gas, fast moving consumer goods and banking remained the top losers on the BSE sectoral space. The broader indices were outperforming benchmarks. Meanwhile, PSU oil marketing companies were trading lower in the trade on reports that meeting of ministerial panel on fuel prices was deferred. The market breadth has made a positive start; there were 1014 shares on the gaining side against 638 shares on the losing side while 64 shares remained unchanged.

The BSE Sensex opened at 18,572.61; about 60 points higher compared to its previous closing of 18,512.77, and has touched a high and a low of 18,575.00 and 18,495.59 respectively.

The index is currently trading at 18,509.24, down by 3.53 points or 0.02%. There were 7 stocks advancing against 13 declines on the index.

The overall market breadth has made a positive start with 59.09% stocks advancing against 37.18% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.22% and 0.38% respectively. 

The top gaining sectoral indices on the BSE were, Realty up by 0.78%, IT up by 0.67%, TECk up by 0.57%, Metal up by 0.39% and Auto was up by 0.33%. While Oil and Gas down by 0.60%, FMCG down by 0.17%, Bankex down by 0.13% and PSU down by 0.06% were the only losers on the index.

The top gainers on the Sensex were Hero Honda up by 1.87%, RCom up by 1.77%, DLF up by 1.53%, Infosys up by 0.64% and TCS was up by 0.61%.

On the flip side, NTPC down by 1.19%, ONGC down by 1.04%, ITC down by 0.59%, Bajaj Auto down by 0.47% and HDFC Bank down by 0.46% were the top losers on the index.

Meanwhile, banks in India are already showing signs of slowdown in credit off-take as they are feeling the heat of Reserve Bank of India's anti-inflationary stance. According to the data released by the Reserve Bank of India (RBI) on April 22, bank advances declined by 0.95% to Rs 3,919,000.47 crore compared with the previous fortnight. For the fortnight ended April 8, total bank credit had posted a marginal (0.45%) increase as against the fortnight before while on a year on year basis, though, bank credit was up 21.89% for the fortnight ended April 22. On the other hand, deposit growth remained flat over the fortnight ended April 22, 2011 but on a yearly basis, deposit growth improved to 18%.

Reverberations of the Reserve Bank of India's aggressive stance to rein in the inflationary pressure on the economy have already started to emerge and its recent double whammy of hiking Repo and reverse repo rates by 50 bps and savings bank rate to 4% from 3.5%, may prove even worse for banks which are already struggling with higher borrowing costs compounded by the inability to raise lending rates sharply on concerns of moderating loan demand.

Credit growth for banks is usually subdued in the initial months of a fiscal year because corporate bodies are busy with their audits. However, expectations are rife that credit growth may stay slack for a longer period as retail credit growth, in sectors like housing, automobiles and consumer durables would be largely affected. After the RBI's 50 basis points hike in key policy rates, banks at large are on a spree to hike their base rates, which are touching double digits and making funds costlier for the corporate bodies as well as retail borrowers.

In the last fiscal year, the central bank had hiked rates eight times, to which the banks did not respond with base rate hikes of the same quantum. According to RBI norms, banks have to review their base rates at least once every quarter. Credit growth is the biggest and most potent contributor to demand-side inflation and therefore banks, the largest channel of loan disbursements, are seen as the most effective tool to manage inflation. Banks expect credit growth of 18-22% in FY12, with high interest rates impacting demand for loans from customers.

The S&P CNX Nifty opened at 5,547.20; about 6 points higher compared to its previous closing of 5,541.25, and has touched a high and a low of 5,556.85 and 5,537.20 respectively.

The index is currently trading at 5,539.70, down by 1.55 points or 0.03%. There were 27 stocks advancing against 23 declines on the index.

The top gainers of the Nifty were Ranbaxy up by 4.54%, Hero Honda up by 2.11%, RCom up by 1.43%, DLF up by 1.37% and RPower up by 1.04%.

BPCL down by 1.36%, NTPC down by 1.25%, ONGC down by 1.02%, Sun Pharma by 0.84% and Bajaj Auto was down by 0.81%, were the major losers on the index.

All the Asian peers were trading in the green; Shanghai Composite was up 3.69 points or 0.13% to 2,894.33, Hang Seng was up 69.21 points or 0.30% to 23,405.21, Jakarta Composite was up 17.32 points or 0.46% to 3,817.84, KLSE Composite was up 13.68 points or 0.90% to 1,537.05, Nikkei 225 was up 54.64 points or 0.56% to 9,873.40, Straits Times was up 14.27 points or 0.45% to 3,170.53, Seoul Composite was up 17.73 points or 0.83% to 2,156.90 and Taiwan Weighted was up 12.02 points or 0.13% to 9,035.30.