Benchmarks trade slightly in red in early deals

Indian equity benchmarks have made a sluggish start and are trading slightly in red in early deals. Markets especially the banking sector stocks reacted negatively to the Reserve Bank of India's (RBI) surprise move during the weekend, ordering banks to transfer 100% of their cash under the central bank's cash reserve ratio (CRR) from deposits generated between September 16 and November 11. However, losses remained capped as some comfort came with Fitch Ratings’ latest statement that it expects India's GDP growth trend higher than China's in the medium term despite demonetization. It added that in India it expects GDP growth to accelerate in FY2018 on the back of reform implementation, monetary easing of the past year and infrastructure spending.

On the global front, Asian markets were trading mostly in green at this point of time, though sliding oil prices were weighing down the sentiments on Asian energy stocks, amid concern over the outcome of this week’s OPEC meeting. The US markets ended modestly higher in the last session, even though the trade deficit in goods widened much more than expected in October. Back home, the broader indices, however, were trading with traction, while the market breadth on the BSE was positive; there were 1,184 shares on the gaining side against 620 shares on the losing side while 96 shares remain unchanged.

The BSE Sensex is currently trading at 26270.39, down by 45.95 points or 0.17% after trading in a range of 26183.22 and 26335.65. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.56%, while Small cap index was up by 0.50%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.47%, Telecom up by 1.16%, Power up by 1.08%, Utilities up by 1.01% and Realty up by 0.89%, while Bankex down by 1.23%, Finance down by 0.71%, IT down by 0.31%, Consumer Durables down by 0.18% and TECK down by 0.07% were the top losing indices on the BSE.

The top gainers on the Sensex were Power Grid up by 2.24%, Cipla up by 1.85%, Bharti Airtel up by 1.33%, GAIL India up by 1.26% and Hero MotoCorp up by 1.24%. On the flip side, SBI down by 2.18%, ICICI Bank down by 1.87%, Axis Bank down by 1.63%, HDFC down by 1.52% and TCS down by 1.38% were the top losers.

Meanwhile, Reserve Bank of India’s (RBI) in a surprise move has ordered banks to transfer 100% of their cash under the central bank's cash reserve ratio (CRR) from deposits generated between September 16 and November 11. The measures follow the banking system being flooded with liquidity triggered by a heavy inflow of deposits, due to the ongoing demonetisation exercise.

RBI in its circular though said that CRR will remain unchanged at 4 per cent of outstanding net demand and time liabilities (NDTL), but the increase in NDTL between September 16, 2016 and November 11, 2016, scheduled banks shall maintain an incremental CRR of 100 per cent, effective the fortnight beginning November 26, 2016. This is intended to absorb a part of the surplus liquidity arising from the return of SBNs to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy.

The measure is intended to absorb a part of the surplus liquidity arising from the return of the demonetised Rs 500 and Rs 1,000 bank notes, while leaving adequate liquidity with banks to meet the credit needs of various sectors. The central bank assessing that the magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead said that in view of this, it has been decided to absorb a part of this surplus liquidity by applying an incremental CRR as a purely temporary measure.

RBI has further stated that, as the incremental CRR is intended to be a temporary measure within the Reserve Bank’s liquidity management framework to drain excess liquidity in the system, it shall be reviewed on December 9, 2016 or even earlier. RBI governor Urjit Patel has said that once the government issues adequate quantum of MSS bonds, which they have promised to, we will immediately review the incremental CRR.' Currently, all banks are required to maintain minimum CRR balances up to 95 per cent of the average daily required reserves for a reporting fortnight on all days of the fortnight.

The CNX Nifty is currently trading at 8099.90, down by 14.40 points or 0.18% after trading in a range of 8066.50 and 8119.95. There were 29 stocks advancing against 21 stocks declining on the index, while one stock remained unchanged..

The top gainers on Nifty were BPCL up by 3.22%, Grasim Industries up by 2.27%, Power Grid up by 1.59%, Cipla up by 1.50% and Zee Entertainment up by 1.50%. On the flip side, Bank of Baroda down by 3.07%, SBI down by 2.20%, ICICI Bank down by 1.98%, Axis Bank down by 1.71% and TCS down by 1.47% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI rose 1.64 points or 0.1% to 1,628.90, KOSPI Index gained 6.89 points or 0.35% to 1,981.35, Shanghai Composite added 16.57 points or 0.51% to 3,278.51, Taiwan Weighted surged 66.27 points or 0.72% to 9,225.34 and Hang Seng was up by 161.63 points or 0.71% to 22,885.08.

On the flip side, Nikkei 225 decreased 73.44 points or 0.4% to 18,307.78 and Jakarta Composite was down by 14.46 points or 0.28% to 5,107.65.