MARGINAL LOSSES

The domestic indices showed a relatively resilient performance even as benchmarks failed to sustain the three session winning momentum for yet another day and snapped the initial day of F&O expiry week with moderate losses despite the freefall in heavyweights like RIL, Axis Bank, SAIL, DLF, ICICI Bank and ONGC. Markets refused to give in to the selling pressure as investors chose to deal only in stock specific activities and commended stocks purely on their merits. The session remained characterized by choppiness and indices appeared exhausted, gradually crawling in a narrow range, around the psychological 5,900 and 19,600 levels, only to consolidate the gains amassed in last three sessions. Sentiments got weighed down in the dying hours of trade as updates from the 2G case trial hit headlines prompting investors to book profits in scam linked shares like RCom, Unitech and DB Realty. However, the resurgent Sterlite, SBI, Maruti, Infosys and L&T balanced out the losses and prevented the bourses from sinking deeper into the red. Leads from across the globe remained lackluster as Asian indices settled mostly in the red terrain while the European peers remained absent from trade on account of Easter holiday. Back home, the NSE's 50-share broadly followed index Nifty, settled with marginal losses, above the crucial 5,850 support level while Bombay Stock Exchange's Sensitive Index, Sensex too ended with minor losses, around the psychological 19,600 mark. The broader markets failed to show any kind of fervor this Monday as the midcap index added 0.09% while the smallcap index rose by 0.24%. On the sectoral front, the Consumer Durables index, grabbed the top gainers position after climbing by 0.92% due to rally in stocks like Bajaj Electrical and Titian Industries which surged by 2%. While the IT counter too witnessed some buying and ended with gains of 0.83% because of 1.13% gains in bellwether Infosys and 5.73% gains in Oracle Fin Services. On the other hand, the Oil and Gas pocket languished at the bottom of the table with 1.75% losses on the back of the constant uptrend in international crude oil prices while the realty index got pounded in the session by 1.15% as majors like DLF and HDIL respectively shaved off 2.25% and 1.59%. From the result corner, individual stocks like Maruti Suzuki, Sterlite Industries and MM Forgings were commended by the investors and soared by 1.53%, 4.40% and 3.68% respectively while the one's that got punished were RIL, Axis Bank, Strides Arcolab.

On the global front, majority of Asian equity indices settled in red zone with Chinese benchmark being the leading laggard with one and half a percent of losses, on concerns that the Peoples' Bank of China may maintain tight monetary policies for longer than expected given the rising price of oil. On the other hand, the screen trading for US index futures too indicated that the Dow could open with gains of around a quarter percent point.

Earlier on Dalal Street, the benchmark got off to a quiet opening as cautious investors lacked conviction to pile up positions lacking significant leads. Below expectation figures from index heavy-weight Reliance Industries and Axis Bank during the weekend dragged the market in the red initially however; the bourses went ahead to test the 5,900 and 19,700 levels which once again proved as a stiff resistance for the indices as the market gave up some gains with a few blue-chip stocks retreating on profit taking. Thereafter the benchmarks see-sawed in a narrow range around the neutral line through session but some position squaring in the late hours eventually brought the indices marginally below Thursday's close. Markets registered volumes of over Rs 1.25 lakh crore while the turnover for NSE F&O segment remained lower compared to Thursday at over 1.12 lakh crore. Market breadth remained negative as there were 1340 shares on the gaining side against 1558 shares on the losing side while 103 shares remained unchanged.

Finally, the BSE Sensex declined by 17.92 points or 0.09% to settle at 19,584.31 while the S&P CNX Nifty lost 10.20 points or 0.17% to end at 5,857.00.

The BSE Sensex touched a high and a low of 19,697.49 and 19,531.34 respectively. The BSE Mid-cap and Small-cap indices gained 0.09% and 0.24%, respectively. 

Sterlite Industries up 4.40%, SBI up 2.06%, Maruti Suzuki up 1.53%, Infosys up 1.13% and L&T up 1.03% were the major gainers on the Sensex.

On the flip side, RIL down 2.97%, DLF down 2.25%, Reliance Communication down 1.41%, Jaiprakash Association down 0.98% and Jindal Steel down 0.76% were the only losers on the index.

Consumer Durables (CD) up 0.92%, IT up 0.83%, TECk up 0.55%, Capital Goods (CG) up 0.47% and Public Sector Undertakings (PSU) up 0.38% were the major gainers in the BSE sectoral space.Oil & Gas down 1.75%, Realty 1.18%, Bankex down 0.05% and Power down 0.04% were losers in the BSE sectoral space.

The surge in global crude oil prices can have a slowing down impact on Indian economy, said the financial services conglomerate Goldman Sachs in a recent report. Every increase in international crude prices by $10 a barrel can reduce growth in India's gross domestic product (GDP) by 20 basis points, it noted.

India imports nearly 75% of total crude consumed by it and higher global prices therefore will impact costs throughout the supply chain. Not only will it make India's exports costly but can also impact domestic consumption as at some stage the government will have to pass on the increase in crude prices, at least partially, to retail fuel prices. This will boost transportation costs and thereby push the already high domestic inflation. 

Global crude prices continue to remain at elevated levels following the political unrest in many Middle-East and African countries that threatens supply disruptions. Brent crude prices were hovering around $124 a barrel on April 23. Current prices of Brent are the highest seen in last more than two years. At these levels, Indian government's subsidy spending will be far too higher compared with it has been looking forward to. This in turn will also cause a higher fiscal deficit than budgeted levels.

Besides, higher crude prices will also boost India's trade deficit and hence current account deficit (CAD). According to estimates prepared by the Goldman Sachs, with every $10 increase in oil prices, the CAD would rise by 40 basis points. In fact CAD was a major worry for Indian policy makers till recently but the strong growth seen in India's exports over the last few months has brought down the deficit to under 3% of gross domestic product.

The S&P CNX Nifty touched a high and a low of 5,906.60 and 5,857.00 respectively.

The top gainers on the Nifty were HCL Tech up 4.15%, Sterlite Industries up 2.82%, Ambuja Cement up 1.90%, SBI up 1.89% and Kotak Bank up 1.78%.

The top losers on the index were Axis Bank down 4.83%, Reliance down 3.04%, DLF down 2.53%, SAIL down 2.52% and RCOM down 1.93%.

In what came as a major relief for banks, the Reserve Bank of India (RBI) has relaxed the norms relating to provisioning of non-performing assets (NPAs). The move will result in decline in the capital that banks would have to put in for potential bad assets and hence boost profitability.

The central bank has said in a notification that while setting aside provisions for bad loans, banks need not account for assets that got the NPA tag after September 30. Earlier, the RBI had asked banks to maintain a provisioning coverage ratio (PCR) of 70% of gross NPAs on an ongoing basis. This would have required the banks computing NPAs till the closing date in every quarter.

Now, however, the central bank has said that provisioning may not be done on regular or continuous basis and for the purpose of computing provisioning ratio, banks can refer to NPAs as on September 30. This will bring down the provisioning requirement in absolute terms as banks would have got additional NPAs after Sept 30 and they would not need to make provisioning for these bad assets on immediate basis.

According to the central bank, most of the commercial banks have already achieved the PCR of 70% as required by it and have been approaching the RBI on whether they needed to maintain the PCR on an ongoing basis. Continuously maintaining a PCR would obviously result in banks setting aside the requisite provisions as soon as an asset is identified of being sub-standard or doubtful and hence increase overall provisioning for banks.

"The matter has been examined by us and till such time RBI introduces a more comprehensive methodology of countercyclical provisioning taking into account the international standards as are being currently developed by Basel Committee on Banking Supervision (BCBS) and other provisioning norms, banks are advised that the PCR of 70% may be with reference to the gross NPA position in banks as on September 30, 2010," said the central bank in a notification.

The move will also benefit banks which had asked for an extension to meet the 70% provisioning requirement. As part of the original RBI directive, banks were required to achieve 70% provisioning ratio by Sept 30, 2010. Some of the banks had asked for an extension to meet the new provisioning norms. For such banks as well, the shortfall from 70% level will now be computed in context of NPAs existing as on Sept 30, 2010.

Finally, in cases where the provisioning exceed the sum required as per the extant policies, the RBI recommended such surplus to be kept in a separate account known as the counter-cyclical provisioning buffer till the central bank introduced a more comprehensive methodology of countercyclical provisioning taking into account the international standards as were being currently developed by Basel Committee on Banking Supervision (BCBS). The buffer will be allowed to be used by banks for making specific provisions for NPAs during periods of system wide downturn, with the prior approval of RBI.

Stock markets in Europe remained closed on account of Easter Monday holiday.

Most of the Asian equity indices finished in the negative terrain as they re-opened after the long Easter weekend. Chinese benchmark index ended with a gut of more than one and a half percent on concerns that the Peoples' Bank of China may maintain tight monetary policies for longer than expected given the rising price of oil. The Japanese traders gave up their earlier gains ahead of the reporting season this week, as they continued to worry about the corporate outlook after last month's natural disasters. However, South Korea's benchmark Seoul Composite surged more than half a percent and hit another record intraday high. Stock markets in Hong Kong remained closed for the trade on Monday on account of Easter holiday.