Benchmarks languish in red; broader indices too succumb to selling pressure

Although recovering  a tad from intra-day’s low level, benchmark equity indices continue to languish in red terrain on frenzied selling activity in Power, Capital Goods (CG) and Fast Moving Consumer Goods (FMCG) counters. Brushing aside positive global development, sentiment at D-street continue to remain cautious after the Reserve Bank of India (RBI) meeting half of street’s expectation lowered repo rate and CRR by 25 bps, but made further rate cuts conditional on government moves to control fiscal deficit. Thus, trading in proximity to intra-day’s low, 30 share barometer index, Sensex, on BSE, is currently trading off its 20,000 mark. In the similar way, 50 share widely followed index, Nifty, on NSE was trading off its 6050 bastion. Meanwhile, succumbing to selling pressure, even broader indices slipped into red terrain.

On the global front, Asian shares were trading jaunty as investor confidence in the global economic outlook strengthened on solid U.S. data and ahead of the U.S. Federal Reserve's monetary policy decision due later in the session.

Back home, stocks from Consumer Durable, Realty and Oil & Gas counters, were restricting further downside chances of the bourses. Besides, surge of two index heavyweights, Reliance Industries and ICICI Bank, over 1%, were also cutting short some of the bourses’ loses. Shares of oil & gas major RIL advanced after a 4-day fall on hopes that the issue related to the Defence Ministry's classification of KG-D6 areas as 'no-go' will be sorted out today. Meanwhile, ICICI Bank gained over 1% ahead of its earnings results on Thursday. The overall market breadth on BSE is in the favour of declines which have thumped advances in the ratio of 1346:1079, while 136 shares remained unchanged.

The BSE Sensex is currently trading at 19971.86 down by 19.04 points or 0.10% after trading in a range of 20073.46 and 19965.23. There were 15 stocks advancing against 15 declines on the index.

The broader indices too succumbed to selling pressure; the BSE Mid cap and Small cap index was trading lower by 0.05% and 0.11% respectively.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.59%, Realty up by 1.28%, Oil & Gas up by 0.51%, Metal up by 0.28% and Health Care up by 0.22%. While, Power and Capital Goods  were down by 0.64%, FMCG down by 0.59%, Auto down by 0.43% and PSU down by 0.31% were the top losers on the index.

The top gainers on the Sensex were Cipla up by 1.75%, Hindustan Unilever up by 1.58%, Sterlite Inds up by 1.37%, RIL up by 1.27% and Coal India up by 1.12%.

On the flip side, Gail India down by 2.94 %, Tata Power down by 1.74%, ITC down by 1.57%, Tata Motors down by 1.40% and BHEL down by 1.12% were the top losers on the Sensex.

Meanwhile, RBI Governor Duvvuri Subbarao although obliged the markets by lowering the benchmark interest rate and banks' cash reserve ratio, maintained a cautious undertone for its upcoming monetary policy stance, since the current third quarterly monetary policy review failed to reveal that move taken to support the economy set for its slowest growth in a decade, was the beginning of a lower interest rate cycle.

Governor D Subbarao, pointed Current Account Deficit (CAD), as being another indicator in addition to inflation that poses a limitation on the easing of monetary policy. Monetary policy cannot be eased further due to the high CAD in a slowing economy, which is being financed by capital flows, most of which are short term, governor underscored. He added, ‘by far, the biggest risk for inflation and for macroeconomic development is current account deficit, in the context of slowing growth and high fiscal deficit.’

The CAD, which is the difference between the country's imports of goods and services and exports, touched a historic high of 5.2% of GDP in the quarter ended September 2012. According to the RBI, the CAD as a percentage of the GDP is likely to have risen further in the quarter ended December 2012, which is a matter of serious concern for the central bank as the CAD is rising during a slowdown, when imports also dwindle.

Moreover, central bank chief explaining, the vicious cycle of current account deficit and fiscal deficit, highlighted that the widening of the CAD to record levels, in the background of a large fiscal deficit and sluggish growth, exposes the economy to the risks from twin deficits.

The S&P CNX Nifty is currently trading at 6,047.45, down by 2.45 points or 0.04% after trading in a range of 6,071.95 and 6,044.15. There were 29 stocks advancing against 21 declines on the index.

The top gainers of the Nifty were DLF up by 3.62%, Hindustan Unilever up by 1.76%, Cipla up by 1.67%, Axis Bank up by 1.53% and Reliance Industries up by 1.21%.

On the flip side, GAIL down by 3.01%, PNB down by 2.55%, Bank of Baroda down by 1.84%, Tata Power down by 1.83% and ITC down by 1.41% were the major losers on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite added 0.80%, Hang Seng increased 0.72%, Jakarta Composite rose 0.04%, Nikkei 225 soared 2.28%, Straits Times jumped 0.61%, KOSPI Composite added 0.43% and Taiwan Weighted advanced 0.40%. On the flip side, KLSE Composite down by 0.79% was the lone loser amongst Asian pack.