Benchmarks shed gains amid choppy trade

The Indian equity benchmarks pared early gains and currently trading flat in the positive territory after a fairly bright start following a positive lead from global markets. Investors were turning quite cautious and cutting down positions amid concerns about weak growth and declining earnings.  On sectoral front capital goods stocks, which were among the severely hammered in recent sessions, are trading firm in the late morning. Select realty, metal, power and auto stocks were also trading higher. Information technology, bank and consumer durables stocks were mostly subdued at present. Midcap and small cap stocks are finding good support. On the global front, markets in the Asia-Pacific region markets were fairly supportive. Back home, the market breadth favoring the positive trend; there were 1,503 shares on the gaining side against 828 shares on the losing side while 103 shares remained unchanged.

The BSE Sensex is currently trading at 15,838.68, up by 25.32 points or 0.16%. The index has touched a high and a low of 15,911.23 and 15,788.99 respectively. There were 16 stocks advancing against 14 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose 0.83% and 1.34% respectively.

The top gaining sectoral indices on the BSE were, CG up by 2.50%, Realty up by 1.16%, Metal up by 1.00%, Power up by 0.77% and Auto up by 0.52%. While, TECk down by 0.24%, CD down by 0.17%, Bankex down by 0.14% and IT down by 0.08% were the top losers on the index.

The top gainers on the Sensex were BHEL up by 3.22%, L&T up by 2.74%, Sterlite Industries up by 2.01%, Hindalco Industries up by 1.92% and Maruti Suzuki up by 1.82%.

On the flip side, Bajaj Auto down by 1.49%, NTPC down by 1.10%, Bharti Airtel down by 1.36%, ONGC down by 1.04% and Jindal Steel down by 0.93% 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 is currently trading at 4,740.35, up by 6.50 points or 0.14%. The index has touched a high and a low of 4,763.45 and 4,724.05 respectively.  There were 26 stocks advancing against 24 declines on the index.

The top gainers of the Nifty were BHEL up by 3.54%, L&T up by 3.26%, SAIL up by 2.06%, Maruti Suzuki up by1.99% and Sterlite Industries up by 1.90%.

On the flip side, BPCL down by 2.13%, Ranbaxy down by 1.78%, PNB down by 1.59%, Bharti Airtel down by 1.39% and Bajaj Auto down by 1.33% were the major losers on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite gained 0.99%, Hang Seng added 1.01%, Straits Times up by 0.34%, Seoul Composite up by 0.92% and Taiwan Weighted up by 2.07%.

On the flip side, Jakarta Composite down by 0.15% remained the lone loser amongst the Asian pack.