Indian equities off day’s highs in early noon trades on Tuesday

Indian equity markets have pruned some of their gains after hitting intraday highs in late morning session and are trading on a flat note in Tuesday afternoon trades. The frontline indices gyrated in a tight range since the start but mostly remained in the positive territory, holding on to the psychological 5,400 (Nifty) and 17,800 (Sensex) levels. Local markets largely outperformed their Asian counterparts which traded on a pessimistic note after global rating agency Moody's announced a slew of credit rating downgrades of European nations. Investors at large took to risk aversion after the agency kept the coveted AAA credit rating for France and the UK on negative watch while it downgraded the ratings of Italy, Portugal, Spain, Slovakia, Slovenia and Malta. However, the encouraging WPI inflation numbers for January provided the much needed support to the local markets and prevented downside chances for the bourses. The wholesale price index slowed to its lowest level in more than two years in January to 6.55% against 7.47% in December. Investors piled up positions in the rate sensitive counters like Realty, Banking and Auto post the announcement of better than expected inflation numbers on expectations that the pressure on RBI will now increase to cut rates to prop up the country's economy growth momentum. On the earnings front, SBI traded with strong gains a day after announcing higher than expected growth in revenues. On the global front, Asian markets are trading on weak note while European stock futures too are indicating a lower opening for the markets there as worries over Euro-zone’s debt crisis are looking far from easing after Moody’s slashed credit ratings of six European nations.

Moreover, the broader markets were trading on a firm note with over half a percent gains, outperforming their larger peers. The bourses rose on good volumes of over Rs 0.50 lakh crore while market breadth on BSE was in favor of advances in the ratio of 1459:1162 while 127 scrips remained unchanged.

The BSE Sensex is currently trading at 17,815.43 up by 42.59 points or 0.24% after trading as high as 17,850.82 and as low as 17,742.58. There were 17 stocks advancing against 13 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.68% and Small cap rose 0.66%.

On the BSE sectoral space, Realty up 1.15%, Bankex up 0.92%, Auto up 0.91%, PSU up 0.72% and Capital Goods up 0.56% were the major gainers while Power down 0.28%, Healthcare down 0.28%, IT down 0.03% and TECk down 0.03% were the only losers in the space.

SBI up 3.20%, Hindalco up 2.66%, M&M up 1.80%, Hero Moto up 1.43% and Sterlite up 1.35% were the major gainers on the Sensex, while Cipla down 5.24%, Tata Power down 4.02%, Jindal Steel down 1.02%, ONGC down 0.98% and Bajaj Auto down 0.93% were the major losers in the index.

Meanwhile, in an effort to boost demand in the housing sector and align tax deductions to rising interest rates, the Parliamentary Standing Committee on Finance has suggested that the government should consider raising the tax exemption on interest paid on housing loans to up to Rs 3 lakh annually from the existing limit of Rs 1.5 lakh in the coming budget. If the proposal is implemented, individual borrowers can hope to have extra disposable income of anything between Rs 15,000 and Rs 45,000 a year which in turn could boost consumption spending as well as savings.

Currently, a deduction of up to Rs 1.5 lakh is allowed from taxable income towards interest on loans taken to purchase a house. Besides, borrowers also enjoy tax exemption on the payment of the principal amount. The government is considering a proposal to double the tax deduction limit on interest on home loans to Rs 3 lakh per annum. CII Director General Chandrajit Banerjee has recommended that the existing tax deduction limit on income tax of an individual be increased from the current level of Rs 2.5 lakh to at least Rs 5 lakh. Of this, Rs 3 lakh should be towards interest payments to offset the impact of high interest rates, and the remaining Rs 2 lakh be exclusively towards principal loan repayment as the present limit of Rs 1 lakh is already overcrowded with several other items.

As per other media reports, the Standing Committee has also favored a higher limit for deduction of house rent. It is believed that the Committee feels that since the cost of renting out accommodation is rising for a common man, the proposed monetary limit of Rs 2,000 a month for deduction in respect of rent paid should be enhanced to Rs 5,000 a month. It has also advised to revise the limit periodically to keep it in sync with the prevailing market conditions.

The draft report is being discussed by the Committee and is expected to approve the report by March 2, 2012 post which it will be submitted to the Lok Sabha Speaker.

The S&P CNX Nifty is currently trading at 5,405.80, higher by 15.60 points or 0.29% after trading as high as 5,415.60 and as low as 5,377.95. There were 31 stocks advancing against 19 declines on the index.

The top gainers on the Nifty were SBI up 3.21%, Hindalco up 2.79%, IDFC up 2.76%, R Com up 2.13% and BPCL up 1.98%.

Cipla down 5.06%, Tata Power down 3.94%, Siemens down 1.40%, Bajaj Auto down 1.19% and Jindal Steel down 1.11% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.45%, Jakarta Composite eased 0.16%, Seoul Composite slipped 0.15% and Taiwan Weighted shed 0.36%.

On the flipside, Hang Seng rose 0.07%, Nikkei 225 advanced 0.59% and Straits Times added 0.07%.