Benchmarks reverse gears; slip into negative territory

After getting weak start, Indian benchmark indices showed some strength in early trades, but the sentiments turned pessimistic in late morning trades and indices start drifting lower,  on account of selling in frontline blue chip counters. Sentiments came under pressure with the private report that state governments are likely to run wider fiscal deficit in financial year 2016-17 because of higher interest bill and wage hike pressures. According to the report, despite higher transfers from the centre, an analysis of 18 state budget documents suggests that the state governments on aggregate clocked slightly wider deficits than budgeted at the start of the year. Besides, participants remain edgy ahead of the March series futures and options contracts expiry due on Thursday. However, investors got some comfort with Prime Minister Narendra Modi’s statement that India will live up to the global expectation of being a bright spot for growth with requisite policy as also administrative reforms on a sustained basis. Moreover, Finance Minister Arun Jaitley also give some confidence with the statement that the Indian government has resolved various legacy issues with regard to taxation and is gradually working to bring down the corporate tax rates to the global level at 25 per cent from 30 per cent currently. Some support also came with the report that foreign institutional investors' (FII) inflow in the Indian market so far this month is the highest single-month investment since May 2013. According data from NSDL and SEBI, FIIs have put in Rs 18,437 crore ($2.74 billion) thus far in the Indian market during the current month (till March 23, 2016).

On the global front, Asian stocks mostly slipped in narrow trading Tuesday after downbeat US economic data contributed to an uninspiring session on Wall Street and pressured the dollar. Investors also turned cautious ahead of the US Federal Reserve chair Janet Yellen's speech on the US economy in New York later in the day, which might potentially shed some light on the outlook for interest rates. Meanwhile, Japan stocks declined after Japan released consumption data that showed household spending was growing but retail sales were weakening.

Back home, stocks from Metal, Banking and FMCG counters were supporting the markets’ uptrend, while those from Capital Goods, PSU and IT counters were adding to the underlying cautious undertone.  In scrip specific development, shares of Excel Industries have surged after the company announced that its board approved buyback of equity shares of the company at a price not exceeding Rs 275 per share from the open market purchase. Furthermore, ARSS Infrastructure Projects gained after the company’s JV bagged a work order worth Rs 109.27 crore. The market breadth on BSE was negative, out of 2173 stocks traded, 664 stocks advanced, while 1395 stocks declined on the BSE.

The BSE Sensex is currently trading at 24863.05, down by 103.35 points or 0.41% after trading in a range of 24863.05 and 25053.73. There were 11 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.62%, while Small cap index down by 0.62%.

The top gaining sectoral indices on the BSE were Metal up by 0.23%, Bankex up by 0.20%, FMCG up by 0.11% and Auto up by 0.10%, while Capital Goods down by 0.77%, PSU down by 0.42%, TECK down by 0.42%, IT down by 0.41% and Consumer Durables down by 0.27% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.28%, Maruti Suzuki up by 1.20%, Axis Bank up by 0.76%, Reliance Industries up by 0.75% and ITC up by 0.62%. On the flip side, Lupin down by 10.99%, Cipla down by 4.70%, Sun Pharma down by 3.30%, Dr. Reddys Lab down by 2.88% and GAIL India down by 2.68% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan who is known for his criticism of unconventional’ monetary policies of central banks, has said that there should be guidelines for responsible monetary policy behaviour globally, as aggressive actions by one nation can lead to significant adverse cross- border spillovers on others. Rajan said that we can pretend all is well with the global monetary non-system and hope that nothing goes spectacularly wrong, or we can start building a system fit for the integrated world of the twenty-first century.

RBI governor in a working paper titled ‘Rules of Monetary Policy’ with Prachi Mishra, advisor, RBI, has suggested that aggressive monetary policy actions by one country can lead to significant adverse cross-border spillovers on others, especially as countries contend with the zero lower bound. If countries do not internalize these spillovers, they may undertake policies that are collectively suboptimal. Perhaps instead, countries could agree to guidelines for responsible behaviour that would improve collective outcomes.

He further suggested that policies that generally have positive or domestic effects could be rated green, policies that should be used temporarily and with care could be rated orange, and policies that should be avoided at all times could be rated red. Rajan has also stated in the paper that the temptation to shift costs can create inefficiencies when countries set their policies unilaterally.

However, noting that economic analysis of the issues is at an early stage, Rajan said it is unlikely 'we will get strong policy prescriptions soon, let alone international agreement on them, especially given that a number of country authorities like central banks have explicit domestic mandates'. Following the global financial crisis of 2008, many central banks in developed countries, had followed ‘unconventional monetary policies’ by keeping their policy rates close to zero for long periods to boost economic activity.

The CNX Nifty is currently trading at 7592.95, down by 22.15 points or 0.29% after trading in a range of 7584.15 and 7645.80. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 2.04%, Tata Steel up by 1.67%, Idea Cellular up by 1.47%, BPCL up by 1.20% and Maruti Suzuki up by 1.17%. On the flip side, Lupin down by 11.24%, Cipla down by 4.50%, Sun Pharma down by 2.98%, GAIL India down by 2.89% and Dr. Reddys Lab down by 2.66% were the top losers.

Asian markets were trading mostly in red; Taiwan Weighted was down by 0.99%, Hang Seng declined by 0.08%, Shanghai Composite down by 1.32% and Nikkei 225 down by 0.34%. On the flip side, Jakarta Composite rose 0.07%, KOSPI Index increased 0.27% and FTSE Bursa Malaysia KLCI was up by 0.59%.