Benchmark equity indices trim gains; caution prevails

Benchmark equity indices have trimmed part of their gains owing to the underlying cautious tone of Indian equity markets, ahead of the vote on Foreign Direct Investment or FDI in multi-brand retail in Rajya Sabha. Although, the street widely expects government to win the vote after Bahujan Samaj Party (BSP), which had abstained in Lok Sabha, announced its support yesterday, yet the sentiment remains somewhat cautious. Moreover, stocks from IT, Metal and Bankex counters, were adding to the pessimistic milieu. However, stocks from Consumer Durables, Auto and Capital Goods counters, have kept the benchmarks hooked into green.

On the global front, Asian shares have touched fresh 16-month highs on Friday as investors await U.S. nonfarm payrolls data due later today, with sentiment encouraged by signs that China's economy is stabilizing. However, some of bourses loses could be attributed to Asian Development Bank, slightly slashing its 2012 and 2013 growth estimates for developing Asia, as frail global demand continues to drag on the region. Moreover, European stock futures are indicating to higher start of European markets, with hints of renewed efforts to avert the U.S. 'fiscal cliff' of scheduled tax rises and spending cuts improving sentiment ahead of jobs data.

Closer home, the BSE Sensex is currently trading at 19512.00, up by 25.20 points or 0.13% after trading in a range of 19561.87-19458.08. There were 15 stocks advancing against 14 declines on the index, while 1 stock remained unchanged.  

The overall market breadth on BSE is in the favour of advances which thumped declines in the ratio of 1522: 1105, while 133 shares remained unchanged.

The broader indices too trimmed gains; the BSE Mid cap and Small cap index indices were holding up by 0.68% each.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.27%, Auto up by 1.25%, Capital Goods up 0.94%, PSU was up by 0.44% and Realty was up by 0.24%, while IT down by 0.69%, TECK down by 0.28%, Metal and Bankex were down by 0.05% were the only losers on the BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.89%, BHEL up by 2.01%, Tata Motors up by 1.89%, Coal India up by 1.65%, and M&M was up by 1.48%.

On the flip side, HDFC down by 0.65%, Tata Steel down by 0.64%, TCS down by 0.63%, NTPC down by 0.62% and Infosys down by 0.58% were the top losers on the Sensex.

Meanwhile, the demand for accounting relief for the short-term foreign currency loans has been turned down by the centre stating that corporates would have to continue taking their forex losses on short-term foreign currency loans to the profit and loss account every quarter/year.

Corporate India has been demanding the accounting relief in respect of long-term foreign currency loans be extended to short-term foreign currency loans also, due to fluctuation losses on short-term foreign currency loans. Responding to industry chamber Assocham’s request for accounting relief on short-term foreign currency loans, the Corporate Affairs Ministry has conveyed that accounting relief provided in the Accounting Standard-11 are available only to long-term borrowings.

Further, the ministry insisted the management of every company to follow prudent risk management policies/practices to mitigate the foreign exchange risks by obtaining hedges under the conditions where the volatility in the exchange rates is probable. However, the industry submission has not convinced the Corporate Affairs Ministry, which is in no mood to provide any accounting relief for short-term foreign currency borrowings.

The Corporate Affairs Ministry had in December last year issued two notifications to provide relief for corporates that had sizeable long-term foreign currency loan exposure in their balance sheet, a huge respite for large corporate houses, such as Reliance Group and the Tatas as well as public sector majors, including Indian Oil Corporation and GAIL.

 The S&P CNX Nifty is currently trading at 5,933.15, up by 2.25 points or 0.04% after trading in a range of 5,949.85-5,918.10. There were 25 stocks advancing against 25 declines on the index.

The top gainers of the Nifty were Maruti Suzuki up by 2.90%, Coal India up by 1.74%, M&M up by 1.73%, Tata Motors up by 1.62% and BHEL was up by 1.61%.

On the flip side, HCL Tech down by 1.71%, DLF down by 1.48%, Axis Bank down by 1.24%, Grasim down by 1.13% and Power Grid Corporation of India down by 0.96% were the top losers on the Nifty.

Asian markets were still mostly in green, Shanghai Composite surged 1.67%, Hang Seng added 0.20%, Straits Times advanced 0.90%, Seoul Composite shot higher by 0.40% and Taiwan Weighted added 0.25%. On the other hand, Jakarta Composite was down by 0.18%, KLSE Composite edged tad lower by 0.03% and Nikkei 225 was down by 0.19%.