Benchmarks continue to trade in red in late morning session

Local barometer gauges, despite recovering from early lows were trading in red, with loss of over two tenth of a percent on persistent profit-booking by funds and retail investors in cyclical stocks after sharp gains recently. Besides, a weakening trend on Asian bourses following overnight losses on the US market also influenced the sentiment. In scrip specific development, Sun Pharmaceutical Industries fell after US drug regulator warned that the response to an import ban on one of the company's plants lacked sufficient corrective actions. While Essar Oil has rallied 14% after reporting a five-fold jump in net profit at Rs 1,008 crore for the fourth quarter ended March 31 2014. Meanwhile, the trade is expected to turn choppy as the session progresses as foreign institutional investors may book profits. Foreign investors sold Indian cash shares worth a net Rs 1.04 billion on Tuesday, their first sales since April 16, 2014.

On the global front, the Asian markets were trading mostly lower after the Bank of Japan left its monetary policy unchanged and raised its assessment of capital expenditures. US stocks fell as retailers from Staples Inc to Urban Outfitters Inc posted worse-than-estimated results and smaller companies declined. Back home, traders were seen piling positions in Consumer Durables, Auto and IT stocks while selling was witnessed in Capital Goods, Realty and Bankex sector stocks. The market breadth on BSE was positive, out of 1452 stocks traded, 1127 stocks advanced, while 285 stocks declined on the BSE.The BSE Sensex is currently trading at 24326.84 down by 50.04 points or 0.21% after trading in a range of 24419.54 and 24278.39. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.06%, while Small cap index up by 0.95%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.12%, Auto up by 0.98%, IT up by 0.38%, Power up by 0.37% and Teck up by 0.21%, while Capital Goods down by 0.99%, Realty down by 0.56%, Bankex down by 0.44% and Metal down by 0.36% were the top losers on the sectoral index.

The top gainers on the Sensex were Bajaj Auto up by 3.04%, NTPC up by 1.72%, RIL up by 1.29%, Mahindra & Mahindra up by 0.69% and TCS up by 0.58%. On the flip side, BHEL was down by 1.85%, L&T was down by 1.49%,  Sun Pharma was down by 1.37%, Bharti Airtel was down by 1.22% and Hero MotoCorp was down by 1.19% were the top losers on the Sensex.

Meanwhile, expressing need for containing fiscal deficit to achieve sustainable economic growth, the Reserve Bank of India (RBI) Governor Raghuram Rajan has asserted that the budget to be presented by the new government must focus to convince investors that India can realistically contain its fiscal deficit to avert a ratings downgrade from credit agencies.

High fiscal deficit has adverse impact on country’s economy as it leads to three macro economic problems such as a balance of payments crisis, high interest rates because of crowding out and high inflation owing to the currency depreciation. India’s fiscal deficit is likely to be at 4.5% of GDP in the financial year 2014, as compared to 4.89% of GDP in the FY13.

Raghuram Rajan has emphasized the need for developing a ‘good system’ to deal with bad loans in banking sector. Non-performing assets (NPAs) in the banking sector have been increasing mainly due to prevailing economic slowdown. If growth picks up, the problem of bad loans will ease. Gross NPAs during January-March quarter in 2013-14 improved to 4.44 percent from 5.07 percent in the previous quarter.

Further, Governor added that deposit financing will not continue to be cheap as banks will have to compete with financial markets and real assets for the household's savings as households will be unwilling to leave a lot of money in low interest bearing accounts. Rajan also added that public sectors banks must reduce dependence on government for financing and can raise the funds needed by issuing bonds. The RBI panel, in its latest report had suggested the government to cut its holding in public sector banks to below 50 percent in order to create a condition for its banks to compete more successfully. 

The CNX Nifty is currently trading at 7,260.95 down by 14.55 points or 0.20% after trading in a range of 7,287.15 and 7,246.00. There were 18 stocks advancing against 32 declining on the index.

The top gainers of the Nifty were Bajaj-Auto up by 3.37%, NMDC up by 3.05%, United Spirits up by 2.88%, NTPC up by 1.86% and HCL Tech up by 1.56%. On the flip side, UltraTech Cement down by 2.89%, BHEL down by 2.02%, L&T down by 1.70%, Sun Pharma down by 1.39% and Cairn down by 1.30% were the top losers on the index.

Most of Asian markets were trading in red; Hang Seng slipped by 0.01%, Jakarta Composite declined by 0.27%, KLSE Composite decreased by 0.21%, Nikkei 225 tumbled by 0.24%, Straits Times crumbled 0.21%, Seoul Composite dipped by 0.27% and Taiwan Weighted was down by 0.40%. On the flip side, Shanghai Composite was up by 0.22%.