CONSOLIDATION

Indian equity markets have pruned most of their losses and recovered from their intraday low levels in Monday afternoon trades. The frontline indices are showing signs of consolidation after the recent sharp upmove since the start of 2012. Though, the reports that Greek Parliament passed an austerity bill to cut government spending prevented the markets from drifting deeper into the red, but lack of significant upside triggers is also making it difficult for the frontline indices to move higher. Hefty profit booking in high beta - Realty, Capital Goods and IT stocks dragged the bourses to lower levels but the benchmarks found support around the psychological 5,350 (Nifty) and 17,650 (Sensex) levels and trended upwards from thereon. Index heavyweight Reliance Industries, on the other hand, climbed around a percent and gave the much needed support to the markets. On the earnings front, real estate major DLF, Tata Power along with Suzlon Energy got pounded heavily after announcing third quarter results which were below street's expectations. Banking heavyweight SBI is trading with around two percent cut and Coal India is trading with similar amount of gains ahead of announcing their third quarter earnings later in the session. On the global front, Asian markets are trading on a positive note while European stock futures are indicating a higher opening for the markets there as some worries over Euro-zone's debt crisis waned after Greek parliament voted to approve a package of harsh austerity measures to secure a second EU/IMF bailout and avoid bankruptcy.

Moreover, the broader markets, which showed some resilience in morning trades, have retreated and are trading on a flat note but outperforming their larger peers. The bourses fell on good volumes of over Rs 0.50 lakh crore while market breadth on BSE was in favor of declines in the ratio of 1390:1212 while 107 scrips remained unchanged.

The BSE Sensex is currently trading at 17,704.47 down by 44.22 points or 0.25% after trading as high as 17,807.61 and as low as 17,665.89. There were 16 stocks advancing against 14 declines on the index.

The broader indices were trading on a mixed note; the BSE Mid cap index eased 0.01% and Small cap rose 0.03%.

On the BSE sectoral space, Consumer Durables up 0.59%, Oil & Gas up 0.51%, Healthcare up 0.24% and Auto up 0.20% were the only gainers while Realty down 1.24%, Capital Goods down 1.23%, IT down 0.76%, Metal down 0.76% and TECk down 0.75% were the major losers in the space.

Coal India up 1.60%, Hero Moto up 1.59%, Sun Pharma up 1.49%, M&M up 1.45% and HDFC Bank up 1.19% were the major gainers on the Sensex, while Tata Power down 3.38%, DLF down 2.95%, Wipro down 2.34%, Cipla down 2.29% and SBI down 2.14% were the only losers in the index.

Meanwhile, in an effort to boost demand in the housing sector and align tax deductions to rising interest rates, the Parliamentary Standing Committee on Finance has suggested that the government should consider raising the tax exemption on interest paid on housing loans to up to Rs 3 lakh annually from the existing limit of Rs 1.5 lakh in the coming budget. If the proposal is implemented, individual borrowers can hope to have extra disposable income of anything between Rs 15,000 and Rs 45,000 a year which in turn could boost consumption spending as well as savings.

Currently, a deduction of up to Rs 1.5 lakh is allowed from taxable income towards interest on loans taken to purchase a house. Besides, borrowers also enjoy tax exemption on the payment of the principal amount. The government is considering a proposal to double the tax deduction limit on interest on home loans to Rs 3 lakh per annum. CII Director General Chandrajit Banerjee has recommended that the existing tax deduction limit on income tax of an individual be increased from the current level of Rs 2.5 lakh to at least Rs 5 lakh. Of this, Rs 3 lakh should be towards interest payments to offset the impact of high interest rates, and the remaining Rs 2 lakh be exclusively towards principal loan repayment as the present limit of Rs 1 lakh is already overcrowded with several other items.

As per other media reports, the Standing Committee has also favoured a higher limit for deduction of house rent. It is believed that the Committee feels that since the cost of renting out accommodation is rising for a common man, the proposed monetary limit of Rs 2,000 a month for deduction in respect of rent paid should be enhanced to Rs 5,000 a month. It has also advised to revise the limit periodically to keep it in sync with the prevailing market conditions.

The draft report is being discussed by the Committee and is expected to approve the report by March 2, 2012 post which it will be submitted to the Lok Sabha Speaker.

The S&P CNX Nifty is currently trading at 5,363.50, lower by 18.10 points or 0.34% after trading as high as 5,392.95 and as low as 5,351.40. There were 18 stocks advancing against 32 declines on the index.

The top gainers on the Nifty were Power Grid up 2.44%, Hero Moto up 1.96%, Kotak Bank up 1.87%, R Infra up 1.83% and Sun Pharma up 1.63%.

Tata Power down 3.34%, DLF down 3.03%, Wipro down 2.59%, Cipla down 2.57% and Ambuja Cement down 2.15% were the major losers on the index.

In the Asian space, Hang Seng rose 0.42%, Jakarta Composite climbed 0.52%, Nikkei 225 advanced 0.58%, Straits Times added 0.12%, Seoul Composite gained 0.60% and Taiwan Weighted amassed 0.64%.

On the flipside only Shanghai Composite eased 0.21%.