Weak trade persists; Nifty below 6,000 mark

Indian equities pared losses but continued its weak trade in the late afternoon session taking cues from subdued European counterparts. The sentiments on the street were on cautious mood ahead of corporate earnings season for the last quarter of 2012 and after Fitch Ratings reiterating about its negative outlook on India’s sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook. Traders were seen piling some position in FMCG, Health Care and Auto sectors while selling was witnessed in Consumer Durables, Metal and Capital Goods sectors. In the scrip specific movement, Larsen & Toubro (L&T) was trading under pressure after global brokerage firms Citigroup and Barclays downgraded the company and cut the target price. Debt laden Kingfisher Airlines was trading in red on reports that the lenders will drag the company to court for loan default. Sugar stocks were showing mixed trend after reports suggested that government raising the levy price of sugar - the rate at which it buys the sweetener from mills to sell through ration shops - by over Rs 2 to about Rs 22 per kg for the current year. Jaiprakash Power Ventures was trading in green after foreign research firm Credit Suisse upgraded the stock to outperform. IFCI is trading firm on reports that stake sale of the company by government may take place after recast.

On the global front, Asian markets were trading in red while the European markets were trading on a mixed note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 6,000 and 19,700 levels respectively. The market breadth on BSE was negative in the ratio of 1251:1526 while 121 scrips remain unchanged.

The BSE Sensex is currently trading at 19,681.99, down by 9.43 points or 0.05% after trading in a range of 19,710.74 and 19,632.59. There were 12 stocks advancing against 18 declines on the index.

The broader indices were too trading in red; the BSE Mid cap and Small cap index were down by 0.19% and 0.39% respectively.

The top gaining sectoral indices on the BSE were, FMCG up by 0.83% Health Care up by 0.55%, Auto up by 0.10% and Realty up 0.03% while, Consumer Durables down by 1.96%, Metal down by 1.33%, Capital Goods down by 1.03%, IT down by 0.77% and Oil & Gas down by 0.58% were the top losers on the index.

The top gainers on the Sensex were ITC up by 1.99%, Sun Pharma up by 1.30%, Cipla up by 1.26%, HDFC up by 1.17% and Mahindra & Mahindra up by 0.89%.

On the flip side, Tata Steel down by 1.83%, Infosys down by 1.79%, Wipro down by 1.72%, Hindalco Industries down by 1.60% and Jindal Steel down by 1.59% were the top losers on the Sensex.

Meanwhile, in a move towards deepening the bond markets, the Reserve Bank of India (RBI) has eased the norms for trading in corporate repo markets thereby allowing short-term debt securities also qualified for it, and by widening the credit default swaps basket. The apex bank said short-term corporate debt could be traded in the repo market, where holders of securities pledge them to borrow funds with a promise to buy them back at a future date.

The central bank notified that repo in corporate debt shall also be permitted on commercial papers, certificates of deposit and non-convertible debentures of less than one year of original maturity. In short-term securities like commercial paper and certificate of deposit, the liquidity is higher, so the price discovery will be better. The Indian bond market has been shallow because of tight regulations. However, for this move to improve trading volumes, SEBI has to permit mutual funds to borrow against their assets to meet at least their temporary payment needs.

The RBI also allowed credit default swaps (CDS), an insurance against default, on unlisted corporate debt securities and those with less than one year maturity. Further RBI said ‘in addition to listed corporate bonds, CDS shall also be permitted on unlisted but rated corporate bonds even for issues other than infrastructure companies and CDS shall also be permitted on securities with original maturity up to one year like commercial papers, certificates of deposit and non-convertible debentures with original maturity less than one year as reference/deliverable obligations’.

Central bank also reduced the minimum discount that lenders have to withhold, while lending against a security. For AAA Securities, it is 7.5% now from 10%, and for AA+ bonds, it is 8.5% from 12%.

The S&P CNX Nifty is currently trading at 5,978.95, down by 9.45 points or 0.16% after trading in a range of 5,990.65 and 5,964.40. There were 17 stocks advancing against 33 declines on the index.

The top gainers of the Nifty were ITC up by 2.02%, Reliance Infrastructure up by 1.87%, Power Grid up by 1.44%, HDFC up by 1.31% and Sun Pharma up by 1.18%.

On the flip side, IDFC down by 2.42%, Tata Steel down by 2.00%, Wipro down by 1.98%, Sesa Goa down by 1.85% and BPCL down by 1.83% were the major losers on the index.

All Asian equity indices were trading in red; Shanghai Composite down by 0.41%, Hang Seng dropped 0.94%, KLSE Composite slipped 0.42%, Nikkei 225 was down by 0.86%, Straits Times declined 0.57%, KOSPI Composite contracted 0.66%, Taiwan Weighted was down by 0.43% and Jakarta Composite slipped by 0.05%.

The European markets were trading on a mixed note with, France’s CAC 40 added 0.25%, Germany’s DAX descended 0.26% while the United Kingdom’s FTSE 100 dropped 0.06%.