Benchmarks trade flat after a decent start

The Indian equity markets have made a positive start extending gains registered in the past two sessions on continued buying influenced by a firming trend in Asian markets. But, the benchmarks pared most of initial gains and are trading flat in absence of any major trigger. The US markets climbed overnight, with the S&P 500 extending gains into a third day, after American jobless claims and consumer confidence were reported better than expected while, most of the Asian equity indices were trading in the positive terrain at this point of time indicating strong investors’ sentiments. Back Home, markets touched their crucial 15,800 mark (Sensex) and 4,750 mark (Nifty) in initial trade but, some profit booking in software and banking space pressed the key domestic indices to pare their gains. Meanwhile, telecom stocks like, Idea Cellular and Bharti Airtel edged lower in the trade as the telecom ministry is likely to tell carriers they won't be allowed to offer 3G services outside their licensed zones through roaming agreements with each other. However, the broader indices were outperforming benchmarks. The market breadth on the BSE was positive; there were 911 shares on the gaining side against 581 shares on the losing side while 61 shares remained unchanged.

The BSE Sensex opened at 15,863.43; about 50 points higher compared to its previous closing of 15,813.36, and has touched a high and a low of 15,911.23 and 15,801.13 respectively.

The index is currently trading at 15,826.28, up by 12.92 points or 0.08%. There were 18 stocks advancing against 12 declines on the index.

The overall market breadth has made a positive start with 58.66% stocks advancing against 37.41% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose 0.44% and 0.77% respectively.

The top gaining sectoral indices on the BSE were, CG up by 1.78%, Power up by 0.66%, Oil and Gas up by 0.47%, Metal up by 0.43% and Realty was up by 0.42%. While, TECk down by 0.54%, IT down by 0.46%, Bankex down by 0.36% and PSU down by 0.05% were the only losers on the index.

The top gainers on the Sensex were BHEL up by 2.34%, L&T up by 1.87%, RIL up by 1.34%, Sterlite Industries up by 1.31% and Maruti Suzuki up by 1.12%.

On the flip side, ICICI Bank was down by 1.27%, Hero MotoCorp was down by 1.24%, Bharti Airtel was down by 1.09%, Bajaj Auto was down by 0.86% and TCS was down by 0.52% were the top losers on the Sensex.

Meanwhile, to help banks tide over the existing tight liquidity conditions in the call money market, the Reserve bank of India (RBI) has allowed banks greater flexibility to borrow more funds from the marginal standing facility (MSF), which will help them reduce costs. Banks are now allowed to borrow funds up to 1% below the statutory liquidity ratio (SLR) limits twice under the MSF. It is mandatory for the public sector lenders to invest up to 24% of their net deposits in government bonds.

Earlier in May 2011, banks were allowed to borrow overnight from its MSF (currently at an interest rate of 9.50%) against their excess government securities holdings as an additional liquidity enhancement measure. The apex bank has now allowed banks to borrow from this facility in the second half of the day too to ease liquidity pressures. Banks which have SLR holdings in excess of the mandatory 24% can also avail this facility.

The latest RBI measure on MSF comes at a time when call money rates shot up to trade in 9.45-9.75% range on Wednesday. The tightness in the money markets comes in the wake of outflows from banks due to advance tax payments by India companies on December 15. Further, this move will help to remove volatility in the Collaterised Borrowing and Lending Obligation (CBLO), counter after the closure of the Liquidity Adjustment Facility (LAF) window.  Now, after the closure of the LAF counter, banks can choose the CBLO market or the MSF counter, depending on whichever rate is lower, thus placing a limit on the CBLO market at the MSF rate of 9.5%.

This is the third time banks have been using this facility after it was introduced in November 2010. Banks now can take advantage of the arbitrage between MSF and call money. They can borrow from the MSF at 9.50% and deploy the funds in call money at 9.65-9.75%.

The S&P CNX Nifty opened at 4,763.20; about 30 points higher compared to its previous closing of 4,733.85, and has touched a high and a low of 4,763.45 and 4,730.35 respectively.

The index is currently trading at 4,732.25, down by 1.60 points or 0.03%. There were 23 stocks advancing against 27 declines on the index.

The top gainers of the Nifty were BHEL up by 2.55%, L&T up by 2.13%, RIL up by 1.31%, Maruti Suzuki up by 1.28% and Sterlite Industries up by 1.25%.

On the flip side, ICICI Bank down by 1.74%, Ranbaxy down by 1.50%, Bharti Airtel down by 1.33%, BPCL down by 1.27% and Hero MotoCorp down by 1.18%, were the major losers on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite was up 31.71 points or 1.45% to 2,218.01, Hang Seng was up 197.83 points or 1.08% to 18,576.06, Straits Times was up 9.54 points or 0.36% to 2,674.34, Seoul Composite was up 22.42 points or 1.21% to 1,869.91 and Taiwan Weighted was up by 146.07 points or 2.10% to 7,112.42.

On the flip side, Jakarta Composite was down by 5.60 points or 0.15% to 3,789.85, remained the lone loser.