MARKETS CONTINUE TO BE IN RED

The Indian equity benchmarks extended its early losses amid intense selling pressure in other Asian markets. Investors were concerned about the European jitters - rising sovereign bond yields. The BSE Sensex fell more than 1.3% in late morning trade, while the NSE Nifty trading near intra-day low. On sectoral front, all sectors were trading in red. Capital goods, realty, metals, technology, auto and banks stocks were caught in bears' grip. Shares of largest-listed company Reliance Industries, and frontline banking and auto stocks led the losses, and even shares of software exporters could not register any gains despite the rupee slumping to a near-32 month low. Banking shares continued their downward trend on worries that rising slippages and provisioning due to high interest rates would impact earnings in coming quarters. ICICI Bank fell more than 2.5%, while largest lender State Bank of India lost 1.5%. On the global front, Asian stocks were bleeding badly. Back home, the market breadth favoring the negative trend; there were 537 shares on the gaining side against 1,961 shares on the losing side while 76 shares remained unchanged.
The BSE Sensex is currently trading at 16,246.09, down by 215.62 points or 1.31%. The index has touched a high and low of 16,387.70 and 16,199.09 respectively. There were 5 stocks advancing against 25 declining ones on the index.
The broader indices were reeling under intense selling pressure; the BSE Mid cap and Small cap indices plunged by 1.90% and 2.33% respectively.
Selling was witnessed across the counter, so there were no gainers on the BSE sectoral space. CG down by 2.97%, Realty down by 2.62%, Power down by 2.58%, Metal down by 2.22% and PSU down by 2.01% were the top losers on the index.
The top gainers on the Sensex were Hero MotoCorp up by 2.43%, Sun Pharma up by 1.84%, Cipla up by 1.17%, HDFC up by 0.64% and HUL up by 0.24%.
On the flip side, BHEL down by 5.16%, Jaiprakash Associate down by 4.39%, Tata Motors down by 3.34%, Tata Steel down by 3.00% and Maruti Suzuki down by 2.96% were the top losers on the index.
Meanwhile, the government has raised the foreign investment limit in corporate and government debt by $5 billion each, in a move to resolve the issue of poor investor response to government debt and the rupee depreciation. The present foreign investment limit in government debt is already exhausted, whereas the corporate debt is about to exhaust.
'The decision has been taken after a review of the macro-economic situation...it would enhance capital flows into the country,' said a finance ministry official. The rupee has declined by around 13.5% from its year high in July and currently it is hovering nearby Rs 50 per dollar mark, this is expected to increase current account deficit (CAD) to over 3% of GDP in 2011-12 from 2.6% of GDP in 2010-11.
The Foreign Institutional Investor (FII) investment in government securities has been raised to $15 billion from $10 billion and corporate debt, the FII investment limit is raised to $20 billion from $15 billion, making room for foreign investment worth Rs 50,000 crore. These limits were last revised on September 23. Market regulator SEBI will issue a circular giving effect to these changes in the next few days, the official added.

The government's decision to increase the FII limit in the government debt has come with the Reserve Bank of India's decision to buy back bonds worth $2 billion next week, which helped to cool bond yields. The most-traded 10 bond yield fell by 9 basis points at 8.79%. The yield on 10-year benchmark paper had last week increased to its 39 month high of 8.94% in hope that the government will not be able to meet its fiscal deficit target and it may have to raise more money from market to meet the deficit gap.

Experts of the industry has welcomed the step taken by the government, as the move will increase the depth of Indian sovereign and high-rated corporate debt by broadening the investor base, increasing demand for gilts and improving foreign fund flows. Because of the global risk, in 2011-12, the portfolio investments have been weak however, debt flows have been strong. Indian firms have borrowed around $21 billion in abroad. However, the FIIs have invested only $2.2 billion in Indian equities and $8.7 billion in debt in 2011-12. 
To increase the capital inflow, the government is considering more measures, which would include an increase in the $30 billion ceiling on overseas borrowing by companies. The government has also put on fast track a proposal to allow individual foreign investors to invest directly into equities as part of the qualified foreign investor framework, or QFIF. Further the finance ministry officials are in talks with the RBI to allow it. The government has already unveiled QFIF for investment in MFs as part of the opening up of financial sector.
The S&P CNX Nifty is currently trading at 4,862.55, down by 72.20 points or 1.46%. The index has touched a high and low of 4,902.25 and 4,847.50 respectively. There were 8 stocks advancing against 42 declining one's on the index.
The top gainers of the Nifty were Hero MotoCorp up by 2.63%, Sun Pharma up by 1.53%, Cipla up by 1.53%, Siemens up by 1.03% and BPCL up by 0.96%.
JP Associates down by 4.95%, BHEL down by 5.25%, JP Associate down by 4.39%, RCOM down by 4.26%, Sesa Goa down by 4.03% and Axis Bank down by 3.77%, were the major losers on the index.
All the Asian equity indices were bleeding badly; Shanghai Composite lost 1.73%, Hang Seng plummeted 1.82%, Jakarta Composite slid 0.95%, KLSE Composite declined 0.20%, Nikkei 225 plummeted 1.03%, Straits Times fell 1.16%, Seoul Composite dropped 1.77% and Taiwan Weighted dived 2.08%.