Weakness persist in equity markets; Sensex down by 12 points

Following a positive start and a subsequent retreat, Indian equity markets remained weak amid lack of global and local cues. The 30-share BSE Sensex was down 12.65 points, while the 50-share NSE Nifty fell 9.40 points. In currency markets, rupee was trading lower against dollar on increasing dollar demand. On sectoral front, consumer durables, capital goods, oil and realty stocks were trading in red. Metals stocks, which participated in last week's rally, were also under pressure. Telecom stocks were finding support following the decision of the empowered group of ministers to slash the reserve price for CDMA spectrum by 30-50%. Select stocks from FMCG, auto and healthcare were trading in green. In global markets, most Asian shares were trading lower, as investors turned cautious ahead of corporate earnings season for the last quarter of 2012 and the European Central Bank's policy meeting due later in the week. Back home, the market breadth favoring negative trend; there were 1,311 shares on the losing side against 1,128 shares on the gaining side while 130 shares remain unchanged.

The BSE Sensex is currently trading at 19,678.77 down by 12.65 points or 0.06% after trading in a range of 19,710.74 and 19,638.54. There were 11 stocks advancing against 19 declines on the index.

The broader indices were also trading lower; the BSE Mid cap index was down by 0.23% and Small cap index was down by 0.33%.

The top gaining sectoral indices on the BSE were, Health Care up by 0.75%, FMCG up by 0.68% and Auto up by 0.34% while, Consumer Durables down by 1.42%, Capital Goods down by 1.18%, Metal down by 1.17%, Oil & Gas down by 0.56% and Realty down by 0.50% were the top losers on the index.

The top gainers on the Sensex were Sun Pharma up by 1.54%, ITC up by 1.50%, Cipla up by 1.45%, Dr Reddys Lab up by 1.15% and Mahindra & Mahindra up by 1.05%.

On the flip side, L&T was down by 1.73%, Hindalco was down by 1.60%, GAIL India was down by 1.54%, Sterlite Inds was down by 1.46% and Tata Steel was down by 1.43% were the top losers on the Sensex.

Meanwhile, following the Basel committee of banking supervision easing implementation of liquidity coverage ratio, the Reserve Bank of India (RBI) on Jan 7 hinted at allowing part of the statutory liquidity ratio (SLR) holdings of banks to be treated as liquid assets under the Basel-III guidelines, which will come into effect next fiscal.

If one looks at SLR, it is supposed to be maintained continuously. Therefore, question arises whether the banks add some more liquidity on top of SLR, which will be definitely not good for them. Hence, RBI is looking at carving out SLR so that a part of it can become usable, RBI Deputy Governor Anand Sinha reported on the sidelines of an event. However, Sinha did not reveal any details on how much of the SLR holdings could be converted.

In India, banks are mandated to keep 23 per cent of their net time and demand liabilities in government securities. However, statutory liquidity ratio (SLR) does not meet the Basel requirement for liquidity coverage ratio as the assets held by banks are not unencumbered and not liquid.

The Basel-III guideline, which aims to make banks more resilient against any unexpected economic crisis, seeks a higher liquidity coverage ratio that requires banks to hold marketable high quality liquid assets. As a matter of concern, ICRA in its report has stated that banks will need Rs 3.9-5 trillion capital over the next six years, out of which common equity requirements will be Rs 1.3-2 trillion; Rs 1.9 trillion for additional tier I; and Rs 1 trillion for tier II.

Of lately, providing additional time to some banks that need to enhance their capital base, RBI has rescheduled the start date for implementation of Basel III, the global capital norms for banks, by three months to April 1, 2013 from January 1, 2013. The norms are to be implemented in a phased manner by March 31, 2018. 

The S&P CNX Nifty is currently trading at 5,979.00 down by 9.40 points or 0.16% after trading in a range of 5,990.65 and 5,967.70. There were 16 stocks advancing against 34 declines on the index.

The top gainers of the Nifty were ITC up by 1.59%, Sun Pharma up by 1.38%, Cipla up by 1.21%, Dr Reddys Lab up by 1.18% and HCL Tech up by 1.07%.

On the flip side, IDFC down by 2.23%, L&T down by 1.67%, Tata Steel down by 1.64%, Hindalco down by 1.64%, and Axis Bank down by 1.49%, were the major losers on the index.

Most Asian equity indices were trading lower; Shanghai Composite down by 0.49%, Hang Seng dropped 0.79%, KLSE Composite slipped 0.33%, Nikkei 225 was down by 0.89%, Straits Times declined 0.19%, KOSPI Composite contracted 0.62% and Taiwan Weighted was down by 0.43%. On the flip side, Jakarta Composite gained 0.34%.