Local equity markets continue to totter under pressure; Nifty remains sub 5400 mark

Local equity markets continued to totter under selling pressure, as gloomy global set-up, added to investor’s distress. However, sentiment at Dalal Street was spooked since early deals, after Reserve Bank of India (RBI), pouring cold water on the hopes of rate cuts in upcoming mid-quarterly monetary policy review, in its Annual Report 2011-12’, stated that “lower interest rates alone are unlikely to jump-start the investment cycle”.  Worst hit on this report, were stocks from rate sensitive’s counters, namely, Bankex, Auto and Realty.  Besides, these stocks from Power, Consumer Goods and Capital Goods counters, also exerted pressure.  However, defensive buying in Health Care, Fast Moving Consumer Goods, limited some part of the bourses losses. 30 share barometer index, Sensex, on BSE, despite losing over 50 points, appearing distinctly close to 17800 crucial mark, while the widely followed 50 share index of National Stock Exchange (NSE), Nifty, continued to stagger sub 5400 level.  However, broader indices pruned some of the losses.

On the global front, Asian shares too were gloomy on signs of economic weakness across the globe, while lingering doubts about more easing by the Federal Reserve and renewed worries over Europe's debt crisis were seen weighing on the sentiment. Meanwhile, European shares too got off to flattish to negative start, on account of growing caution ahead of key meetings of Greece's prime minister with France and Germany and as hopes of any more stimuli from the U.S. Federal Reserve fade.

Closer home, shares of diesel car makers also edged lower after Oil Ministry has sought additional duty on diesel cars. The Ministry has sought Rs 1.70 lakh additional duty on small diesel cars and Rs 2.55 lakh on medium and large cars, averring that the huge difference of Rs 27.14 a litre between the price of petrol and diesel had led to an abnormal growth of diesel car. Reeling under pressure were stocks of Maruti Suzuki, Tata Motors and Mahindra & Mahindra. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1333:922, while 133 shares remained unchanged.

The BSE Sensex is currently trading at 17,799.14, down by 51.08 points or 0.29% after touching a high of 17822.50 and low of 17,734.26. There were 9 stocks advancing against 21 declines on the index.

The broader indices too pruned some loss; the BSE Mid cap index was down by 0.46%, while Small cap index was down by 0.36%.

The only gainers on the BSE sectoral space were, HC up by 0.33% and FMCG up by 0.16% and while Realty down by 1.40%, Capital Goods down by 0.93%, Bankex down by 0.69%, Power down by 0.64% and Consumer Durable down by 0.63% were top losers on the index.

Coal India up by 1.24%, HDFC up by 1.16%, Cipla up by 0.77%, Sterlite Industries up by 0.27% and HDFC Bank up by 0.26% were major gainers on the Sensex, while Tata Steel down by 2.28%, Mahindra & Mahindra down by 2.06%, Hindalco Industries down by 1.59%, ICICI Bank down by 1.42% and Jindal Steel down by 1.41% were major losers on the index.

Meanwhile, in a bid to make the banking industry ‘more efficient’, Country’s largest public sector lender, State Bank of India’s (SBI) Chairman Pratip Chaudhuri, has strongly proposed phasing out cash reserve ratio (CRR). The ratio (CRR) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes, which currently stands at 4.75% of total bank deposits.

On the sidelines of FICCI Banking Conclave, the chairman of PSU bank averred that, ‘the apex bank should either do away with CRR or compensate the banks for the losses incurred as the banking system does not earn any interest on it.’  Although the chairman  accepted that RBI just could not do way with CRR overnight, but highlighted that it should to be phased out within a reasonable time-frame as impounding of this large quantum of lendable resources in a capital-scarce economy with vast requirement for infrastructure, does not stand justifiable.

Besides raising question of the same not being applied to insurance and other companies which are mobilizing deposits from the public, the chairman, highlighted that Statutory Liquidity Ratio (SLR), (currently at 23%), as being sufficient tools to address the issues of solvency and liquidity. Reasoning CRR being non-effective from any-body, the chairman proposed increasing SLR on lines of CRR percentage as deposits under this window are interests bearing.

Meanwhile, downplaying NPA’s concern, Chaudhuri said there is urgent need to change NPA norms to calm down unwarranted jitters that crop up whenever cases of doubtful debts go up in the banking sector.  ‘NPAs are largely in the mid-corporate and SME sectors. But with a little consideration, a little understanding and stretching the repayment period, most of these accounts can be upgraded,’ Chaudhuri added.

The S&P CNX Nifty is currently trading at 5,387.85, down by 27.50 points or 0.51% after trading in a range of 5,399.65 and 5,373.90. There were 13 stocks advancing against 37 declines on the index.

The top gainers on the Nifty were BPCL up by 1.65%, HUL up by 1.27%, Coal India up by 1.04%, HDFC up by 1.00%, and Ranbaxy up by 0.65%. While, Reliance infra down by 2.83%, JP Associaties down by 2.45%, Tata Steel down by 2.33%, Axis Bank down by 2.66% and DLF down by 1.94% were the top losers on the index.

All the Asian indices were reeling in pressure; Straits Times declined 0.28%, Kospi Composite Index lost 1.17%, Nikkei 225 plunged 1.17%, Hang Seng index plummeted 1.26%, Jakarta Composite edged lower by 0.27%, KLSE Composite descended by 0.13%, Shanghai Composite surrendered 0.93% and Taiwan Weighted shed 0.37%.

European markets got a flat to negative start; CAC 40 declined 0.42%, DAX and FTSE 100 lost 0.15% each.