Benchmarks negotiate additional gains amidst pessimistic global set-up

Benchmark equity indices have manage to negotiate some additional gains, amidst negative global cues, thanks to sustained buying in rate sensitive Realty and Bankex  counters along with rally of Capital Goods counter. Although stocks from Consumer Durable, Auto and Oil & Gas space, are limiting the further upside chances of the bourses, the trend seems to be decently moving ahead in the favour of green. 30 share barometer index, Sensex, gaining close to 2/ 10 percent, is holding the fort above 20,000 mark, while 50 share index, Nifty, is gyrating above 6050 mark. Additionally, the broader indices too are holding their territory in green. Finance Minister P Chidambaram’s statement that Reserve Bank of India (RBI) must strike a balance between needs of pushing growth and controlling inflation, is mainly doing well for the markets, thereby fueling the expectation of rate cut by Reserve Bank of India, as early as next week, a factor that has spurred gains in Bankex and Realty counters.

Further even reports suggesting of India Ratings affirming stable outlook for country’s banking sector, is auguring well for the banking pivotal. Giving a ‘stable’ outlook for the country’s banking sector, India Ratings, however cautioned that lenders may face funding issues which will make passing on of lower interest rates untenable. Sentiment at D-street also was buttressed after Finance minister P Chidambaram promised not to raise taxes, a statement that comes just a month before the budget and is likely to calm individuals who were apprehending that the cash-strapped government might draw upon the US model and look to impose a heavier burden on the ‘super rich’. On the global front, Asian shares are trading in red on Wednesday amid caution as the earnings season gathers pace, with Tokyo stocks falling to three-week closing lows in response to a firm yen.

Closer home, Telecom stocks are ringing loud after Bharti Airtel and Idea Cellular raised call tariffs sharply upwards. In a blow to consumers, both Bharti Airtel and Idea Cellular have increased their call tariff rates by nearly 100 per cent. Bharti Airtel has doubled the call rates from Re 1 per minute to Rs 2 per minute, Idea has also gone for a steep hike from 1.2 paise per second to 2 paise per second. The overall market breadth on BSE is in the favour of declines which are outpacing advances in the ratio of 1193:785, while 41 shares remained unchanged.

The BSE Sensex is currently trading at 20017.54, up by 35.97 points or 0.18% after trading in a range of 20055.07 and 19991.88. There were 16 stocks advancing against 14 declines on the index.

The broader indices succumbed to selling pressure; the BSE Mid cap and Small cap index were trading lower by 0.26% and 0.08% respectively.

The top gaining sectoral indices on the BSE were Realty up by 0.64%, TECk up by 0.42%, Bankex up by 0.33%, Capital Goods up by 0.10% and Health Care up by 0.08%. While, Consumer Durables down by 0.65%, Auto down by 0.64%, Oil & Gas down 0.52%, PSU down 0.49% and Power down by 0.36% were the top losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 3.85%, ITC up by 1.51%, HDFC Bank up by 1.20%, HDFC up by 1.13% and Cipla up by 1.09%.

On the flip side, Hindustan Unilever was down by 4.96%, Tata Motors was down by 1.84%, ONGC was down by 1.38%, Hindalco Industries down by 1.21% and Bajaj Auto down by 0.96% were the top losers on the Sensex.

Meanwhile, giving a ‘stable’ outlook for the country’s banking sector, India Ratings, however cautioned that lenders may face funding issues which will make passing on of lower interest rates untenable. As per India Ratings, the funding issues will arise from the asset liability mismatches of the banks, which are carrying low tenor deposits and lending for longer duration. Also the banks require $45 billion by FY’18 to comply with the Basel-III regulations.

India Ratings Senior Director Ananda Bhoumik said that banks may face a 'conundrum', wherein they will not be in a position to lower interest rates even if the RBI eases its policy rates. Further he said that a cut in deposit rates will soften the high lending rates, but coupled with inflation staying elevated, will result in a further reduction in real interest rates and hurt the deposit rates.

Regarding the policy perspective, he stated that the effect of any monetary easing during 2013-14 may be diluted due to the twin impact of higher refinancing pressures on banks and slower deposit accruals in a low real interest rate regime.

Further, Bhoumik added that in Indian banking system the refinancing risk is raising especially for the state run banks and the ratio of total deposits and borrowings maturing in a year are standing at an all time high of 20% of the total assets for the public sector banks.

On banking outlook, as per Bhoumik, the continued support being rendered by the government is a positive for the banks and underlined the need to allow them to issue infrastructure bonds, as is being mooted at present. Additionally, some banks are also tweaking their deposit profiles, which is good for them and a likely stabilisation on asset quality concerns by mid-2013 will also work positive for Indian banking sector.

The S&P CNX Nifty is currently trading at 6,054.40, up by 5.90 points or 0.10% after trading in a range of 6,069.80 and 6,049.40. There were 24 stocks advancing against 26 declines on the index.

The top gainers of the Nifty were Bharti Airtel up by 3.75%, DLF up by 1.64%, UltraTech Cement up by 1.59%, ITC up by 1.33% and HDFC Bank up by 1.26%.

On the flip side, Hindustan Unilever down by 4.79%, HCL Tech down by 2.44%, BPCL down by 2.18%, IDFC down by 2.15% and Tata Motors down by 1.95% were the major losers on the index.

Most of the Asian equity indices are trading in red; Shanghai Composite down by 0.09%, Hang Seng down by 0.10%, Jakarta Composite declined 0.17%, Nikkei 225 declined 2.08%, KOSPI Composite declined 0.81%, and Taiwan Weighted was down by 0.19%. On the flip side, KLSE Composite up by 0.40% and Straits Times up by 0.28%, were the only gainers amongst Asian pack.