CONSOLIDATION

Indian frontline equity indices commenced the week on a sluggish note as the indices showcased an unenthusiastic performance on Monday and settled with moderate cuts of around a quarter percent. Marketmen looked to consolidate their position in the session after the benchmarks' swashbuckling over seven percent surge in the week gone by, the best weekly gain in the last two and half years. The key indices failed to extend the uptrend for the fourth straight session but managed to snap the session above the psychological 5,000 (Nifty) and 16,800 (Sensex) levels. Sentiments remained subdued, lacking any significant upside triggers to take the key gauges to higher levels. Cautiousness prevailed largely across the Asian region since marketmen looked ahead to a slew of important meetings in Europe, which are expected to spell out concrete measures to avert the onerous sovereign debt debacle in the European region. The downside for the markets was limited by encouraging developments from the European front where Italy's cabinet unveiled austerity measures in the weekend. Furthermore, reports indicated that the European service sector contracted for the third consecutive month in November however, the decline was slower than in October and faster than the earlier flash estimates. Back home, after two straight months of contraction, India's service sector recovered in November on the back of surge in new business received by Indian private sector companies despite persistent inflationary pressures. However, concerns over the ruling government's ability to implement important reform measures came to the fore, keeping investors' mood under check. Retail stocks continued to reel under the selling pressure despite government's stand that they will try to evolve a consensus on the issue. Meanwhile, reports hinted that government is likely to hike the foreign direct investment (FDI) limit in the cable industry from 49% to 74%.
Earlier on Dalal Street, the benchmark got off to a sedate start as marketmen took a breather after the previous week's sharp rally and remained on the sidelines ahead of a slew of developments from the European front. The indices even drifted to the lowest point in the session in late morning trades. However, the psychological 5,000 and 16,700 levels proved as strong support levels for the key gauges as the benchmarks soon recovered from the lows and even managed to claw back into the green in early noon trades on the back of optimistic European leads. But the indices' stint in the positive terrain was brief as investors lacked conviction and took profit off the table. Eventually the NSE's 50-share broadly followed index-Nifty, suffered a moderate cut of around a quarter percent to settle above the crucial 5,000 support level while Bombay Stock Exchange's Sensitive Index or Sensex slipped around forty points and closed above the psychological 16,800 mark. Moreover, the broader markets managed to escape without heavy losses and settled on a flat note, yet outperformed their larger peers. On the BSE sectoral space, the Metal pocket was the top laggard in the space, languishing at the bottom of the table with around a percent loss while the Consumer Durable counter shed three fourth of a percentage point. On the flipside, buying was evident in the Power and Capital Goods counters, which climbed by close to a percent each. The markets eased on weaker volumes of over Rs 1 lakh crore while the turnover for NSE F&O segment too remained on the lower side as Friday at over 0.88 lakh crore. The market breadth remained optimistic as there were 1,353 shares on the gaining side against 1,337 shares on the losing side while 123 shares remained unchanged.
Finally, the BSE Sensex lost 41.50 points or 0.25% to settle at 16,805.33, while the S&P CNX Nifty declined by 11.00 points or 0.22% to close at 5,039.15.
The BSE Sensex touched a high and a low of 16,863.10 and 16,691.21 respectively. The BSE Mid cap index was down by 0.05% and Small cap index was up by 0.09% respectively.
The top gainers on the Sensex were NTPC up 2.50%, JP Associates up 2.45%, BHEL up 1.96%, SBI up 1.17% and Hindalco Industries up 0.70%. While, Tata Steel down 1.73%, Sun Pharma down 1.53%, Sterlite Industries down 1.46%, Hero MotoCorp down 0.99% and ITC down 0.99% were the top losers on the index.
The top gainers on the BSE sectoral space were, Power up 0.86%, Capital Goods (CG) up 0.77%, PSU up 0.24%, TECk up 0.06% and Auto up 0.04%, while Metal down 0.90%, Consumer Durables (CD) down 0.75%, FMCG down 0.67%, Realty down 0.50% and Health Care (HC) down 0.40% were top losers on the BSE sectoral space. 
Meanwhile, the Reserve Bank of India (RBI) has indicated that it may intervene the currency market to stop the decline of Indian rupee. The RBI deputy governor Subir Gokarn said, India's central bank will use all available tools to stem a fall in the rupee if the currency's downward spiral escalates and will take steps to keep liquidity in the country's markets at comfortable levels.
Since July 2011, the partially-convertible rupee has decline around 16.5% as risk-averse investors flee emerging markets, increasing concerns for the government hit by high inflation, slowdown growth and increasing trade deficit.
Subir Gokarn said, 'we do have the instruments and the capacity to enhance the supply of foreign exchange into the markets, and as demonstrated by the recent actions, will use them as appropriate. If we do see the short-term risk of a downward spiral escalating, we will not hesitate to use all available instruments.'
Rupee fell snapped a four week falling trend on December 02 after weakening by 6.7% in November, which is its biggest fall since January 1995.
Gokarn further indicated that the RBI will also continue to inject liquidity into Indian markets to make sure smooth functioning of the financial markets given the bank's forecast for tight conditions in the near future.
'Currently, the Indian banking system holds government securities to the tune of 29% of net demand and time liability (NDTL), which is above the statutory requirement of 24%. Gokarn said, 'this reflects a relatively large capacity for liquidity infusion as and when the need arises'. By adding further he said, 'we have been injecting liquidity into the market through the liquidity adjustment facility and open-market operations, and we will continue to do so as conditions warrant.'
Last week, the RBI bought Rs 57.83 billion worth of bonds via open market operations (OMO), just after a week, buying Rs 94.35 billion through the same process. The OMO is a tool by which central bank control the short term interest rate and the supply of base money in economy, thus indirectly controlling the total money supply.
The S&P CNX Nifty touched a high and low of 5,055.40 and 5,002.55 respectively.
The top gainers on the Nifty were JP Associates up 2.60%, Axis Bank up 2.52%, NTPC up 2.00%, BHEL up 1.95% and PNB up 1.70%. On the flip side, HCL Tech down 2.46%, SAIL down 2.41%, Reliance Power down 2.38%, Tata Steel down 2.18% and Sterlite Industries down 1.55% were the top losers on the index.
The European markets were trading in green. France's CAC 40 surged 1.25%, Britain's FTSE 100 up by 0.50% and Germany's DAX soared by 0.83%.

Most of the Asian equity indices snapped the day's trade on higher note on Monday as investors hoped for progress in what could be a crucial week for curbing Europe's debt crisis. Some encouraging signs for Europe emerged over the weekend, as Italy outlined a euro 30 billion ($40.2 billion) three-year austerity plan ahead of a key meeting of French and German leaders planned for later Monday. Moreover, investor confidence remained high after last week's rally that was spurred by the decision of six major central banks to provide cheap dollars to under-pressure lenders in a bid to boost financial markets.

Nikkei average rose over half a percent as banking shares edged higher, with Sumitomo Mitsui Financial Group up 2.2 percent Mizuho Financial Group up 2.9 percent and Nomura Holdings 2.8 percent higher. While, Hong Kong shares up by 0.73 percent in thin Monday trade, boosted by strength in the Chinese financial and energy sectors with some investors betting on more easing measures by Beijing after fresh data pointed to a cooling economy in need of policy support.