Benchmarks extend losses; Rail Budget begins

Indian equity markets extended losses and continued their weak trade on account of selling in frontline blue chip counters. Investors have started eyeing rail budget where Rail Minister Suresh Prabhu started presenting his maiden Railway Budget in parliament. The minister gave a hint that it is a long journey and everything can’t be accomplished in the first year. The Railway minister’s speech will be closely watched for clues on the tone and thrust of the Union Budget scheduled on Saturday. Traders were seen piling positions in Capital Goods and Power stocks, while selling was witnessed in Consumer Durables, IT and FMCG sector stocks.  In scrip specific development, SpiceJet was trading in green as the budget carrier has finally received the much-need funding, with the new owner Ajay Singh infusing Rs 500 crore in the airline as part of his Rs 1,500 crore investment plan to revive it.

On the global front, the Asian markets were trading mostly in green. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,750 and 29,000 levels respectively. The market breadth on BSE was negative in the ratio of 1026:1450 while 90 scrips remained unchanged.

The BSE Sensex is currently trading at 28901.40, down by 106.59 points or 0.37% after trading in a range of 28877.56 and 29069.13. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.35%, while Small cap index down by 0.27%.

The gaining sectoral indices on the BSE were Capital Goods up by 0.08%, Power up by 0.01% while, Consumer Durables down by 0.79%, IT down by 0.73%, FMCG down by 0.73%, TECK down by 0.69%, Auto down by 0.65% were the losing indices on BSE.

The top gainers on the Sensex were HDFC up by 1.45%, Sesa Sterlite up by 1.02%, GAIL India up by 0.62%, NTPC up by 0.62% and Bharti Airtel up by 0.58%. On the flip side, Hindalco down by 2.41%, BHEL down by 2.26%, Sun Pharma down by 2.01%, Bajaj Auto down by 1.78% and Infosys down by 1.17% were the top losers.

Meanwhile, global rating agency Moody's, in its report clarified that fiscal policies and structural reforms will determine India's sovereign credit profile and not recent revisions to the economic growth data. Although, it acknowledged that upward revision in India's economic growth highlight strength of economy, but at the same time clarified on the little impact this had on overall assessment of the credit profile since this did not change ratios for government finances, private external leverage and bank asset quality, all of which continued to pose sovereign credit risks. India's GDP growth in the fiscal year ended March 2014 is estimated at 6.9% under the new methodology, from 5% earlier.

In a report titled 'GDP Revisions underscore economic strength, but are credit neutral’, Moody's underscored that fiscal and structural reform policies would determine the extent to which accelerating growth could buttress the sovereign credit profile. It also noted that declining inflation called for a policy rate cut to boost investments.

It cautioned that India's wide fiscal deficits, poor infrastructure and regulatory complexity have combined creating a mismatch between domestic demand and supply, thereby contributing to inflation and current account pressures. The global rating agency, further warned that absence of government action to reduce fiscal deficits and structural supply constraints, a pick-up in domestic demand or rebound in global commodity prices could lead to renewed inflation and current account pressures over a three to five year horizon.

Notably, these comments come on heels of another rating agency Standard & Poor's warning that India’s weak fiscal and debt indicators coupled with low income levels could “constrain” the sovereign rating.

Rating agencies are keenly awaiting the 2015-16 Budgets to assess the government's commitment to fiscal consolidation and the direction of reforms. The government expects an upgrade in sovereign ratings from the near junk levels now due to reforms unleashed and economy's potential for faster growth.

The CNX Nifty is currently trading at 8740.70, down by 26.55 points or 0.30% after trading in a range of 8727.00 and 8786.05. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were HDFC up by 1.70%, Lupin up by 1.35%, Sesa Sterlite up by 1.12%, Jindal Steel & Power up by 0.87% and NTPC up by 0.72%. On the flip side, Hindalco down by 2.51%, BHEL down by 2.04%, Bank of Baroda down by 1.98%, Sun Pharma down by 1.93% and Bajaj Auto down by 1.75% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 2.15 points or 0.12% to 1,818.01, KOSPI Index increased 2.61 points or 0.13% to 1,993.08, Shanghai Composite increased 58.17 points or 1.8% to 3,287.01, Hang Seng increased 105.69 points or 0.43% to 24,883.97 and Nikkei 225 increased 200.59 points or 1.08% to 18,785.79.

On the other hand, Taiwan Weighted decreased 77.44 points or 0.8% to 9,622.10, Straits Times decreased 17.7 points or 0.51% to 3,423.13 and Jakarta Composite decreased 5.17 points or 0.09% to 5,439.94.