CAUTIOUS CONFIDENCE

Some confidence seems to be building up in Indian equity markets ahead of the much awaited Union Budget for the year 2012-13, which comes in the backdrop of ballooning fiscal deficit amid cooling economic growth and a crisis of stability for the coalition government. Benchmark equity indices after getting a cautious start, have amassed additional gains to oscillate around the 17,700 (Sensex) and 5400 (Nifty) psychological level. Selective buying by funds and retail investors on expectations of a market-friendly budget, to be announced later in the day, has mainly influenced the trading sentiment. However, hefty positioning in Realty, Power and Capital counters have uplifted the spirit at Dalal Street. Meanwhile, stocks from Consumer Durable, Auto and Oil & Gas counters are the major laggards on the index. Meanwhile, broader indices too enticed additional traction.

Brushing aside gloomy regional counterparts, benchmark equity indices are sketching their own growth trajectory. Asian pacific shares are trading lower despite the positive close of Wall Street on Thursday as many investors took to the sidelines ahead of the weekend, mulling conflicting implications of stronger U.S. economic data and slowing growth signals from China.  The S&P 500 closed above 1,400 for the first time since the 2008 financial crisis on Thursday as stocks resumed the upward climb that has yielded a steady stream of gains this year.  Back on the home turf, the BSE Sensex is currently trading at 17,743.70, up by 67.85 points or 0.38%. The index has touched a high and a low of 17,764.88 and 17,656.81 respectively. There were 20 stocks advancing against 10 declines on the index.

The broader indices continued to outperform benchmarks; the BSE Mid cap and Small cap indices surged 0.82% and 0.87% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 1.62%, Power up by 1.58%, Capital Goods (CG) up by 1.12%, Bankex up by 0.83% and Health Care (HC) up by 0.82%. While Consumer Durable (CD) down by 1.25%, Auto down by 0.99%, Oil and Gas was down by 0.35% remained the only losers on the index.

The top gainers on the Sensex were BHEL up by 2.96%, DLF up by 2.25%, Wipro up by 1.52%, HDFC up by 1.40% and HDFC Bank up by 0.35%.

On the flip side, Tata Motors down by 1.94%, Maruti Suzuki down by 1.14%, Hero MotoCorp down by 1.04%, RIL down by 1.01% and Bajaj Auto down by 0.96% were the top losers on the Sensex.

Meanwhile, the Reserve Bank of India (RBI) has kept its policy rates unchanged in its mid-quarter monetary policy review. Even though the apex bank had recently slashed the CRR rate to ease liquidity, it has kept the interest rates unchanged due to the still uncomfortable levels of inflation. Going forward, the focus shall remain on growth, but the timing and magnitude of rate cuts shall be determined by the levels of inflation, as per the apex bank.

As per the RBI, on the domestic front, while most indicators suggest that the economy is slowing down, the performance in Q4 of 2011-12 is expected to be better than that in Q3. Inflation has broadly evolved along the projected trajectory so far. However, upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation. Besides, there continues to be significant suppressed inflation in fuel, fertilizer and power as administered prices do not fully reflect the costs of production. While corporate sales growth in Q3 of 2011-12 was robust, margins moderated, reflecting increasing difficulty in passing on rising input prices.

The Central Bank has given a slightly positive outlook on the global economy. It has stated that the recent macroeconomic data for the US economy has shown some positive signs, in particular for the labour market. Immediate financial market pressures in the Euro area have also eased due to the European Central Bank (ECB) injecting liquidity of more than 1 trillion euros. However since the emerging and developing economies (EDEs) are showing signs a slowdown, the global growth for 2012 and 2013 is expected to be lower than earlier anticipated. Oil prices continue to remain a concern.

The S&P CNX Nifty is currently trading at 5,404.10, higher by 23.60 points or 0.44%. The index has touched a high and a low of 5,411.00 and 5,379.50 respectively.  There were 37 stocks advancing against 12 declines on the index, while 1 stocks remained unchanged.

The top gainers of the Nifty were BHEL up by 2.86%, DLF up by 2.27%, Reliance Infra up by 2.07%, Ranbaxy up by 1.72% and Reliance Power up by 1.66%.

On the flip side, Tata Motors down by 2.12%, Hero Motocorp down by 1.29%, Maruti Suzuki down by 1.15%, RIL down by 0.85% and Bajaj Auto down by 0.58%, were the major losers on the index.

Most of the Asian equity indices were trading in the red; Hang Seng declined by 0.24%, Jakarta Composite slid by 0.05%, Nikkei 225 inched lower by 0.01%, Straits Times shed 0.04%, Seoul Composite surrendered 0.26% and Taiwan Weighted lost 0.28%.

On the flip side, Shanghai Composite gained 0.35% and KLSE Composite rose 0.06%.