Benchmarks exhibit choppy trade on penultimate day of F&O expiry

Indian equity indices exhibited a bleak session of performance on Tuesday, erasing all their previous session’s gains, as market participants adopted cautious approach on the penultimate day of F&O October series expiry as tomorrow being a holiday on account of Dussehra. Bourses tried hard to remain above their pre-close mark in morning trade supported by PSU stocks, which moved higher ahead of the chiefs of PSUs meet with the Prime Minister, they are expected to highlight interference by their administrative ministries in the meeting. But, the frontline gauges lost their crucial 5,700 (Nifty) and 18,750 (Sensex) levels as investors kept themselves busy in offloading positions in sectors like power, software, auto and FMCG amid global weakness.

The selling got intensified in second half of trade as European markets, after a positive start, entered into red terrain as third quarter results presented a mixed picture, hitting a one-week low that analysts said might encourage some investors back into the market. Cues from regional peers too remain subdued as most of the Asian equity indices shut shop in the negative trajectory with the corporate reporting season getting underway in the region, as investors stayed cautious after global shares faltered overnight on weak earnings reports and outlook.

Back home, some amount of pessimism also came in from money markets as rupee falls to 53.59/60 versus its previous close of 53.47/48 as oil importers stepped up dollar purchases to meet month-end import commitments in a holiday-shortened week. Sentiments also remain dampened after rate sensitives banking and realty space ended lower as Reserve Bank of India (RBI) is unlikely to take any key policy measures in its upcoming policy meet on October 30, 2012 as inflation remains sticky. Some amount of pressure also came in from Metal which dropped near a percent after copper prices slipped in the global market on Tuesday as investors played safe ahead of a US Federal Reserve policy meeting.

However, the downside remain capped as sentiments got some support from Idea Cellular’s second quarter numbers. The company, on consolidated basis, reported 126.97% rise in its net profit after tax at Rs 240.04 crore for the quarter ended September 30, 2012 as compared to Rs 105.76 crore for the same quarter in the previous year. Moreover, Cairn India too beat the street expectation, on consolidated basis, posted a rise of 204.34% in its net profit after tax at Rs 2322.18 crore for the quarter ended September 30, 2012 as compared to Rs 763.03 crore for the same quarter in the previous year. Better than expected numbers from United Phosphorus, Bank of Maharashtra, Tata Coffee and JK Lakshmi Cement too aided the sentiments.

The NSE’s 50-share broadly followed index Nifty fell by twenty five points ending below its psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by over eighty points to finish below the psychological 18,750 mark. The broader markets however, tried to stay in the green but dropped below their pre-close level and snapped the session with a cut of quarter percent. The market breadth remained in favor of declines as there were 1,308 shares on the gaining side against 1,490 shares on the losing side while 146 shares remain unchanged.

Finally, the BSE Sensex lost 83.42 points or 0.44% to settle at 18710.02, while the S&P CNX Nifty declined by 25.75 points or 0.45% to end at 5,691.40.

The BSE Sensex touched a high and a low of 18,812.93 and 18,689.38, respectively. The BSE Mid-cap index was down by 0.23% and Small-cap index was down by 0.25%.

L&T up 1.91%, ICICI Bank up 0.53%, Coal India up 0.18%, Hindustan Unilever up 0.16% and Dr Reddys Lab up 0.13% were the major gainers on the Sensex. On the flip side, Jindal Steel down 2.43%, Hero MotoCorp down 1.90%, Hindalco down 1.56%, Infosys down 1.42% and ITC down 1.29% were the major losers on the index.

The only gainer on the BSE sectoral space was Capital Goods (CG) up 0.90%, while Consumer Durables (CD) down 0.98%, IT down 0.88%, Metal down 0.84%, FMCG down 0.84% and Power down 0.82% were top losers on the BSE sectoral space.

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 touched a high and a low of 5,720.80 and 5,681.45 respectively.

The top gainers on the Nifty were BPCL up 1.91%, L&T up 1.74%, Siemens up 1.01%, IDFC up 0.72% and Coal India up 0.46%.

The top losers on the index were Jindal Steel down 2.57%, Hero MotoCorp down 1.98%, Kotak Bank down 1.97%, Lupin down 1.68% and Hindalco down 1.52%.

European markets were trading in red. France’s CAC 40 down 1.26%, Germany’s DAX down 1.22% and Britain’s FTSE 100 down by 0.92%.

Asian shares closed mixed as investors remained cautious after global shares faltered overnight on weak earnings reports. Japan Nikkei erased early gains and ended marginally higher as gains stemmed from the yen's undermining because of expectations that the Bank of Japan will opt to ease monetary conditions further when its board meets to review policy on October 30. Seoul shares slipped ahead of quarterly results from domestic blue chip stocks, while Chinese shares went home with red mark as investors await a turnaround in the domestic economy.

Hong Kong markets were closed for a holiday and will resume trading on Wednesday.