GAINS TRIMMED

Indian markets failed to hold on to the optimism in the Monday afternoon trades and pared some part of their gains to trade with just over half a percent gains. Profit booking in metal and rate sensitive Real Estate counters pulled down the frontline indices closer to the psychological 5,200 (Nifty) and 17,300 (Sensex) levels. The optimism also eased after official October WPI figures showed that India's inflation rate edged closer to double digits in October, defying financial market forecasts and aggressive monetary tightening measures by RBI. The headline inflation was largely unchanged but was above the 9% mark for the eleventh straight month despite thirteen lending rate hikes by Indian central bank since March 2010. However, global sentiments remained upbeat and most markets in Asia rallied by around two percentage points underpinned by renewed hopes decisive actions to save the Euro-zone nations from bankruptcy are underway and the damage emanating from the Euro zone debt crisis will be limited. Back home on the BSE sectoral space, the software and technology counters kept the bourses afloat in the green zone as they surged by over a percent. The defensive Healthcare and rate sensitive Bankex pockets too did their bit in preventing the markets from drifting to lower levels. But some selling pressure was evident in the PSU and Metal counters which lost around a quarter percent.
Moreover, the broader markets traded on a pessimistic note with moderate cuts of around half a percent, underperforming their larger peers. The bourses slipped on higher volumes of over Rs 0.50 lakh core while the market breadth on BSE was in favor of declines in the ratio of 1516:1062 while 102 scrips remained unchanged.
The BSE Sensex is currently trading at 17,309.00 up by 116.81 points or 0.68% after trading as high as 17,391.99 and as low as 17,281.72. There were 22 stocks advancing against 8 declines on the index.
The broader indices were trading in the negative zone; the BSE Mid cap index lost 0.45% and Small cap shed 0.51%.
On the BSE sectoral space IT up 1.26%, TECk up 1.2%, Healthcare up 1.15%, Bankex up 0.88% and Oil & Gas up 0.34% were the major gainers while PSU down 0.26%, Metal down 0.24%, Capital Goods down 0.11%, Consumer Durables down 0.10% and Realty down 0.08% were the major losers in the space.
Sun Pharma up 3.14%, HDFC Bank up 2.96%, Hindaclo up 2.49%, Hero Moto up 2.01% and Bharti Airtel up 1.85% were the major gainers on the Sensex, while Coal India down 1.32%, Tata Steel down 1.30%, SBI down 1.09%, M&M down 0.96% and Maruti down 0.91% were the major losers on the index.
Meanwhile, non-performing assets (NPAs) of the listed banks in India surged by 33.46% to Rs 1 lakh crore in the second quarter of current financial year, which reflects the impact of increasing interest rates and slowing economic growth. In June-September 2011, the gross NPAs of State Bank of India (SBI), India's largest bank increased by 46% to Rs 33,946 crore. Along with SBI, Punjab National Bank (PNB) also saw increase in NPA by 29% to Rs 5,150 crore in June-September 2011.
However, ICICI bank registered modest increase of 0.39% to Rs 10,021 crore in gross NPAs. As per the analysis of 37 listed banks in India, the gross NPA have increased by Rs 1.06 lakh crore in the second quarter of 2011-12 from Rs 79,078 crore in the same period of last financial year. In the last 18 months, to control high inflation, the Reserve Bank of India (RBI) has increased its interest rates by 13 times or 375 basis points, as a result, banks passed these rate hikes to consumers, which led to sharp increase in bad loans.  
The banks are also under pressure from loans outgoes to the sectors, which are facing delays in execution of projects because of the uncertainty on many regulatory issues, hence increasing concern over the companies' ability to pay loan on time. The loan given to mining and power firms may become NPAs for banking sector because of the delay in the completion of projects on the back of regulatory issues, which is affecting the corporate profits. The increase in bad loans of banks has affected the investors' sentiments also, as the share of SBI declined by 7% on the day of result. SBI's NPA increased mainly from loans to export-oriented sector iron-steel, agro-based businesses and the government-sponsored schemes.
Earlier, the credit rating agency Moody's downgraded its outlook for banking sector from stable to negative, and stated that slowing economic growth could increase bad loans and impact profitability of companies. However, other global credit rating agency Standard and Poor's (S&P) has upgraded Indian banking sector by saying domestic regulations are in line with international standards.
The Reserve Bank also stated that the Indian banking sector is not facing any stress and there is no indication of a systemic threat. Non-stop hike in RBI's key policy rates has increased the borrowing cost for corporate and slowed the project investments. The slowdown is reflected in the Index of Industrial Production (IIP) which declined to 5% in the first half of 2011-12 compared to 8.2% in the April-September 2010. The RBI has also estimated that Indian economy will grow by 7.6% in 2011-12 compared to 8.5% in the last financial year.
The S&P CNX Nifty is currently trading at 5,205.95, higher by 37.10 points or 0.72% after trading as high as 5,205.95 and as low as 5,197.10. There were 33 stocks advancing against 17 declines on the index.

The top gainers on the Nifty were Sun Pharma up 3.19%, HDFC Bank up 3.15%, Ranbaxy up 2.84%, Hindalco up 2.76% and Bharti Airtel up 2.10%.

R Infra down 1.52%, R Power down 1.48%, M&M down 1.30%, SAIL down 1.28% and Tata Steel down 1.23% were the major losers on the index.
Asian markets traded on an optimistic note, Shanghai Composite surged 1.77%, Hang Seng spurted 2.16%, Jakarta Composite soared 1.11%, KLSE Composite gained 0.67%, Nikkei 225 was up by 1.10%, Straits Times ascended 1.61%, Seoul Composite expanded by 2.13% and Taiwan Weighted gained 2.15%.