Indian equities pare losses; trade continues in red

Indian equity markets pared losses but continued its weak trade in late afternoon session on account of selling in frontline counters. Traders were seen piling some position in Oil & Gas, Auto and Metal sector stocks while selling was witnessed in FMCG, Consumer Durables and Power sector stock. Banking stocks dampened the sentiments as Indian banks’ advances grew at a slower pace in 2012-13 compared with a year earlier, falling short of the central bank’s projection, hurt by lower demand for credit from companies in a slowing economy. Bucking the trend, sugar stocks continue to hog the limelight after the government yesterday partially decontrolled the Rs 80,000-crore sugar sector by giving freedom to millers to sell in the open market and removed their obligation to supply the sweetener at subsidized rates to ration shops. In scrip specific development, Oil India was trading in green after Jefferies initiated coverage of the company with a buy rating stating that the company will benefit from the government’s action to allow higher diesel prices, which reduces the subsidy burden. Adani Power was trading in red after the Haryana government said that it will challenge the power regulator’s ruling this week that allows the company to raise tariffs for electricity supplied to existing clients in two states.

On the global front, the Asian markets were trading in red barring Nikkei 225 while the European markets were trading on a mixed note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,600 and 18,500 levels respectively. The market breadth on BSE was positive in the ratio of 1379:1154 while 131 scrips remain unchanged.

The BSE Sensex is currently trading at 18,488.52, down by 21.18 points or 0.11% after trading in a range of 18,518.16 and 18,389.29. There were 18 stocks advancing against 11 declines while 1 stock remains unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index was up 0.23% and Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.55%, Auto up by 0.78%, Metal up by 0.73%, PSU up by 0.41% and Health Care up by 0.34% while, FMCG down by 1.32%, Consumer Durables down by 0.68%, Power down by 0.43%, Capital Goods down by 0.24% and Bankex down by 0.20% were the top losers on the BSE.

The top gainers on the Sensex were Maruti Suzuki up by 7.42%, Gail India up by 2.58%, Jindal Steel up by 2.35%, Wipro up by 2.22% and Tata Steel up by 2.17%. On the flip side, NTPC down by 2.77%, HDFC down by 2.52%, ITC down by 2.03%, ICICI Bank down by 1.57% and Bharti Airtel down by 1.24% were the top losers on the Sensex.

Meanwhile, worried over the slowing credit growth, bankers, in their customary pre-policy meeting with the central bank, have asked the Reserve Bank of India (RBI) to trim both the repo rate and the cash reserve ratio (CRR) in its annual monetary policy, which is scheduled to be held on May 3. The repo is the rate at which the RBI provides short-term liquidity to banks, while, CRR is the amount of funds that the banks have to keep with the central bank. At present, the repo rate stands at 7.50% and CRR is pegged at 4%.

For the first quarter of FY14, top lenders sought for one percentage point cut in the repo rate and a 50-basis-point reduction in CRR for an effective and immediate transmission into lending rates. However, there are a few others who are confident that RBI Governor D Subbarao will try to provide a spur to growth by slashing the repo by 25 basis points and then go into a monetary pause till inflation starts to ease.

The RBI, in its mid-quarter review of the monetary policy held last month, reduced the policy rate by 25 basis points, however, as per the RBI, the headroom for further easing is quite limited given the elevated food inflation, recent change in fuel prices and the ballooning current account deficit (CAD), which dashed hopes of another repo rate cut in the near future.

However, the banks did not pass the benefit of 25 basis points cut in repo rate to their borrowers, citing tight liquidity situation in the banking system and firm borrowing costs. India’s CAD hit an all-time high of 6.7% of the country's GDP for the quarter ended December 2012 due to rising imports of oil and gold, while exports recorded flat growth for the period owing to a global slowdown.

Further, Indian banks' advances is expected to grow by a slower pace in FY13 as compared with the previous fiscal growth at 17% and also fell short of the central bank's projection at 16%, mainly hurt by lower demand for credit from companies in a slowing economy.

The CNX Nifty is currently trading at 5,561.50, down by 13.25 points or 0.24% after trading in a range of 5,577.30 and 5,535.40. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were Maruti Suzuki up by 7.38%, HCL Tech up by 2.70%, BPCL up by 2.65%, Gail India up by 2.60% and Jindal Steel was up by 2.29%.

On the flip side, NMDC down by 3.98%, NTPC down by 3.18%, HDFC down by 2.44%, Ambuja Cement down by 2.24% and IDFC down by 2.22% were the major losers on the index.

Most of the Asian equity indices were trading in red; Hang Seng tumbled 2.73%, KLSE Composite declined 0.3%, Jakarta Composite down by 0.13%, Straits Times slipped 0.25% and KOSPI Composite was down by 1.64%.

On the flip side, Nikkei 225 was up by 1.58% was the only positive equity indices in Asian market. Markets in China and Taiwan remained shut for the trade today.

The European markets were trading on a mixed note; France’s CAC 40 added 0.05%, Germany’s DAX slipped 0.02% and United Kingdom’s FTSE 100 edged lower 0.52%.