Selling intensifies across the street; Nifty below 5,700 mark

Indian equities extended losses to continue weak trade near the lowest point of the day in the late afternoon session on the back of selling in frontline counters and tailing European counterparts. Traders were seen piling some position in Capital Goods, Health Care and PSU sector while selling was witnessed in Consumer Durable, FMCG and Auto sector. In the scrip specific development, ITC was trading in red extending yesterday’s losses by an announcement from the Ministry of Health and Family Welfare that it has notified new pictorial health warnings to be depicted on tobacco product packs which will come into effect from 1 April 2013. Kingfisher Airline was locked in lower circuit after the employees rejected the airline’s offer for payment of three months’ salary. While, Peninsula Land was locked in upper circuit extending its previous day’s rally after reporting six-fold jump in net profit at Rs 82.71 crore for the quarter ended September 2012.

On the global front, Asian markets were trading mixed, while the European markets were trading on a pessimistic note. Moody’s Investors Service, a week after deciding against cutting Spain’s credit-rating to below investment grade, lowered Catalonia and four other Spanish regions. Catalonia, which accounts for a fifth of Spain’s economy, was reduced two steps to Ba3 from Ba1. Moody’s decision to cut the regions was driven by the deterioration in their liquidity positions, as evidenced by their very limited cash reserves as of September 2012 and their significant reliance on short-term credit lines to fund operating needs. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,700 and 18,800 levels respectively. The market breadth on BSE was negative in the ratio of 1228:1409 while 123 scrips remain unchanged.

The BSE Sensex is currently trading at 18721.14, down by 72.30 points or 0.38%. There were 7 stocks advancing against 22 declines while 1 stock remained unchanged on the index.

The broader indices too continued to trade in red; the BSE Mid cap and Small cap indices were down by 0.08% and 0.04% respectively.

The top gaining sectoral indices on the BSE were, Capital Goods up by 0.92%, Health Care up by 0.26% and PSU up by 0.02%. On the other hand, Consumer Durable down by 0.91%, FMCG down by 0.81%, Auto down by 0.80%, IT down by 0.67% and Metal down by 0.53% were the top losers on the BSE.

The top gainers on the Sensex were L&T up by 1.69%, ICICI Bank up by 0.64%, Coal India up by 0.57%, Bharti Airtel up by 0.33% and Dr. Reddy’s Lab up by 0.29%.

On the flip side, Hero MotoCorp down by 2.22%, Jindal Steel down by 1.51%, Hindalco Industries down by 1.22%, ITC down by 1.12% and Infosys down by 0.98% were the top losers on the Sensex.

Meanwhile, the Reserve Bank of India (RBI) is examining whether a part of banks’ investment in government securities (SLR) can be considered for the purpose of calculating liquidity under the Basel III regulatory norms, aimed at preventing a recurrence of 2008 like financial crisis. The first sign that central bank may dilute the Basel III norms on capital and liquidity comes in backdrop of strong opposition of the banking industry.

Basel-III norms prescribe banks to build a liquidity coverage ratio. However, banks in India are already mandated to maintain the minimum liquidity at 23 per cent of net demand and time liabilities as the Statutory Liquidity Ratio (SLR) under RBI norms.

Hence, as per the central bank’s governor, Anand Sinha, redefining liquidity coverage ratio will not make a substantial change in the Indian context since banks are mandated to own 23% of their deposits in government bonds, but cannot be traded. Further, the deputy governor also pointed out the concern that banks might raise lending rates to compensate for the increase in cost of capital.

The guidelines that would come into effect in a phased manner starting January 1 next year, would have to be fully implemented by March 31, 2018. Further, Sinha underscored that, there have been studies by the Basel-III committee that the macroeconomic impact of new regulations are modest if the implementation is phased over a transition period.

The S&P CNX Nifty is currently trading at 5691.20, down by 25.95 points or 0.45%. There were 14 stocks advancing against 36 declines on the index.The top gainers of the Nifty were Siemens up by 1.64%, L&T up by 1.48%, BPCL up by 1.31%, Lupin up by 0.82% and ICICI Bank up by 0.36%.

On the flip side, Hero MotoCorp down by 2.14%, Kotak Bank down by 2.12%, Jindal Steel down by 1.71%, JP Associates down by 1.61% and ITC down by 1.39% were the major losers on the index.

Asian markets were trading mixed, Shanghai Composite lost 0.86% Kospi Composite declined 0.76%, Taiwan Weighted shed 0.48% and Jakarta Composite shed 0.46%. On the other hand, KLSE Composite gained 0.18%, Nikkei 225 added 0.04% and Straits Times gained 0.17%.  Meanwhile, Hong Kong markets are closed for a holiday today.

The European markets were trading in red with, France’s CAC 40 dropped 0.55%, Germany’s DAX descended 0.90% and the United Kingdom’s FTSE 100 lost 0.69%.