Equity markets pare early gains on weak GDP numbers

The Indian equity benchmarks have given up some gains from the high point of the day as investors booked profits across blue chip counters. Meanwhile, the government has come out with a FY12 GDP advance estimates in which FY12 GDP growth estimated at 6.9% versus 8.4%, farm growth seen at 2.5% versus 7%, manufacturing sector growth at 3.9% versus 7.6%, construction growth at 4.8% versus 8%, mining sector growth decline at -2.2% versus 5%, electricity and gas growth estimated at 8.3%. On the sectoral front, metal, pharmaceuticals and FMCG stocks were also off their highs. Automobile, capital goods, realty and power stocks were displaying some weakness due to profit taking. On the global front Asian bourses is quite cautious and trading mixed. Back home, the market breadth favoring the positive trend; there were 1271 shares on the gaining side against 1240 shares on the losing side while 122 shares remained unchanged.

The BSE Sensex is currently trading at 17,737.93, up by 30.62 points or 0.17%. The index has touched a high and a low of 17,832.04 and 17,700.21 respectively. There were 14 stocks advancing against 16 declining ones on the index.

The broader indices traded just in line with benchmark indices; the BSE Mid cap and Small cap indices rose 0.15% and 0.36% respectively.

The top gaining sectoral indices on the BSE were Oil and Gas up by 1.31%, CD up by 0.98%, Bankex up by 0.78%, PSU up by 0.35% and IT up by 0.24%. While, Power down by 0.69%, Realty down by 0.51%, CG down by 0.33%, TECk down by 0.33% and FMCG down by 0.11% were the top losers on the 30 share index.

The top gainers on the Sensex were RIL up by 2.07%, Hero MotoCorp up by 1.32%, Jindal Steel up by 1.24%, HDFC Bank up by 1.05% and ICICI Bank up by 1.03%.

On the flip side, Bharti Airtel down by 2.21%, HUL was down by 1.90%, Gail India down by 1.89%, Sun Pharmaceuticals down by 1.84% and M&M down by 1.52% were the top losers on the Sensex.

Meanwhile, the Reserve Bank of India (RBI) has allowed the repurchase or repo of government securities (G-secs) that have been contracted for sale to improve liquidity in the G-sec market. The move comes at a time when the banking system is facing severe liquidity crunch with banks borrowing over Rs 93,000 crore every day from the special liquidity window and also increasing government borrowing to meet their requirements.

This is despite the fact the on January 24, RBI had cut the Cash Reserve Ratio (CRR) requirement by 50 basis points (bps), thus releasing Rs 32,000 crore into the system daily. The RBI has done OMOs worth nearly Rs 90,000 crore so far since November 2011.

Earlier any transaction in G-secs was allowed only if the party or dealer actually held that security in its portfolio. But, now the dealers will be able to transact in a G-sec if he has entered into a contract for sale or repurchase without actually holding that security at the time of trading. However, the contract agreement should be confirmed prior to the transaction and be guaranteed by Clearing Corporation of India (CCIL) or the security is contracted for purchase from the RBI itself.

To ward off any concerns about RBI’s OMOs being a way to support government borrowings, the RBI Deputy Governor Subir Gokarn has recently stated that the choice of securities is driven by the need to be reasonably certain about achieving the aggregate liquidity number and are not a way of helping the government borrowing programme.

As per the data released by the RBI, government has overshot its market borrowing target by nearly Rs 93,000 crore this financial year from the budgeted Rs 4.17 lakh crore. As of end December, the government had already borrowed a little over 92% of its planned borrowing target. In another notification, RBI has modified the monthly report on short-selling to capture the changes in the regulatory changes during the month. Also, the monthly report on these transactions shall be submitted to the Financial Markets Department by 8th of every month.

The S&P CNX Nifty is currently trading at 5,368.30, higher by 6.65 points or 0.12%. The index has touched a high and a low of 5,413.35 and 5,356.35 respectively. There were 26 stocks advancing against 24 declining ones on the index.

The top gainers of the Nifty were Cairn up by 3.50%, Reliance up by 1.96%, Kotak Bank up by 1.57%, Hero MotoCorp up by 1.40% and Jindal Steel up by 1.23%.

Bharti Airtel down by 2.51%, JP Associates down by 2.19%, GAIL down by 2.19%, IDFC down by 2.04% and HUL down by 2.04% were the major losers on the index.

Asian equity indices were trading weak; Shanghai Composite was down by 1.88%, Hang Seng down by 0.15%, Jakarta Composite was down by 0.96% and Nikkei 225 was down by 0.13%.

On the flip side, Straits Times was up by 0.36%, Seoul Composite was up by 0.43% and Taiwan Weighted was up by 0.25%.