DOWNTREND CONTINUES

Losses in 30 share barometer index- Sensex- have exacerbated as qualms on account of reports of discord at the European Union summit, continued to weigh on investor's mind. Early reports from the summit suggested that all 27 members were struggling to reach an accord and that any agreement would be likely made between euro-zone members plus any others willing to join. However, 50 share broadly imitating the style and pattern of Asian pacific markets, pruned slender losses post the release of some key economic data on Friday, with the country's consumer inflation rate easing sharply to 4.2% in November, compared to a 5.5% rise in October. Meanwhile, the US future indices continued to show sharp downtick in the screen trade.
Back home, although selling was witnessed across all the 13 index pivotal's, however, stocks belonging to the Capital Goods, Power and Realty space topped the list of worst performance. 30 share barometer index- Sensex- enticing additional losses was trading sub 16300 mark. Meanwhile, 50 share broadly followed index- Nifty-pruning slender losses was striving to reclaim its 4900 level. However, the broader indices too showcased slender recovery. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1341:779, while 72 shares remained unchanged.
The BSE Sensex is currently trading at 16,219.18, down by 296.06 points or 1.63%. The index has touched a high and low of 16,334.85 and 16,153.97 respectively.  All the 30 stocks were on declining side.
The broader indices pruned some its loss; the BSE Mid cap and Small cap indices were down by 0.79% and 0.76% respectively.
Selling was witnessed across the space, however, CG down by 2.27% Power down by 2.03%, Realty down by 2.02%, Auto down by 1.97% and Metal down by 1.75 were the top losers on the index.
Sterlite Industries down by 3.01% BHEL down by 2.92%, Tata Motors down by 2.54%, Bajaj Auto down by 2.44% and M&M down by 2.24% were the top losers on the index.
Meanwhile, the Reserve Bank of India (RBI) on December 8 said that it would take all the necessary steps to ease liquidity constraints in the money market. In order to have smooth liquidity situation, the RBI has been buying back government securities, after having raised its short term lending and borrowing rates 13 times.
'In order to ease the situation, so far, we have carried out open market operations for Rs 25,000 crore. We would take all necessary steps to see that liquidity is eased. We are aware of the advance tax payment situation. We will take that into account while assessing the liquidity situation,' RBI Governor, D Subbarao said.
As per the RBI guidance, liquidity situation should remain between plus/minus 1% of net demand and time liabilities (NDTL) in the banking system, which is around Rs 60,000 crore. However, in last few weeks it has gone up beyond this benchmark, which clearly indicates liquidity constraint in the banking system or for central bank.
The RBI in its last monetary policy review has indicated that it may pause in its hawkish policy stance.  'Further rate action, whether it would be paused, depends upon any unanticipated development. Certainly, supporting growth remains our objective, Subbarao said.  Under the liquidity adjustment facility (LAF), since November 24, at repo rate of 8.5%, the banks have been drawing an average of Rs 1 lakh crore daily from RBI. 'Whatever instruments we have, OMO and LAF are there...If anything else is required, we would do that for liquidity management,' he added.

Meanwhile, the deputy governor Subir Gokarn said that the consideration that goes into a cash reserve ratio (CRR) cut, or CRR action, has to be kept in mind. The consideration fundamentally is CRR is not just a liquidity tool, but also a monetary policy signal. And, we are, as of now, still in a situation in which inflationary pressures are high. By adding further he said, for the moment, while we want to address the liquidity situation, we don't want to do it in a way that compromises our monetary stance. So, the use of these tactical measures like OMOs is clearly the way we are going to go.

Experts are of the view that the RBI should use CRR, which is the proportion of deposits banks need to set aside with RBI as cash, as a tool to manage current liquidity crisis. Presently, the CRR is 6%. 
However, on the prospect of a cut in CRR in the upcoming policy meet, RBI governor said 'I cannot really react to what the market is expecting outside the context of the policy. Whatever we might decide, on the CRR or otherwise, you would have to wait for our mid-quarter statement.'
Since March 2010, the RBI has increased its key policy rates for 13 times. However, the RBI is expected to go for another rate hike in its next monetary policy review, which is scheduled on December 16, because of the high inflation, which has been hovering above 9% from last few months.
The S&P CNX Nifty is currently trading at 4,869.65, down by 74.00 points or 1.50%. The index has touched a high and low of 4,902.10 and 4,843.40 respectively. There were just 3 stocks advancing against 47 declining one's on the index.
The gainers of the Nifty were Dr Reddy up by 1.35% BPCL up by 0.66%, and Reliance Communication 0.13% remained the only gainers.
While, Sterlite Industries down by 3.15%, SAIL down by 2.80%, BHEL down by 2.75%, Tata Motors down by 2.55% and Bajaj Auto down by 2.43% were the major losers on the index.
All the Asian markets were trading in the red; Shanghai Composite declined 0.63%, Hang Seng plunged 2.63%, Jakarta Composite descended 1.03%, KLSE Composite shed 0.97%, Nikkei 225 lost 1.58%, Straits Times plummeted 1.26%, Seoul Composite surrendered 1.91% and Taiwan Weighted was down by 1.39%.