Markets make a cautious but positive start, Nifty trades above 5,100

The Indian equity markets made a positive but cautious start of the F&O expiry session, though the cautiousness was also due to the RBI’s second quarter policy review to be announced later in the day. While, some rate sensitive sectors are reeling in red as some seems to have factored in the expected 25 basis points hike from the central bank. However, in its macroeconomic and monetary development report released ahead of the second quarter review of the monetary policy, the apex bank reiterated that inflation remained “sticky”, but shifted focus to the rising “downside risks” to growth and a weakening investment climate. It stated that growth may fall below 8 per cent in 2011-12. Industrial activity has slowed down and investment demand is softening. Its shifting focus to growth has led investors to hope for a pause in its rate hike spree. Back on street, the benchmarks continue to hold their crucial levels of 17,000 (Sensex) and 5,100 (Nifty), though the broader indices are still to get pace and were underperforming their peers. Sectorally, consumer durables despite the Diwali season was witnessing the maximum cut, down by over 2.5%, followed by marginal decline in realty, power and PSU. On the other hand, IT pack has taken the lead and was up by over one percent while technology and CG too are showing good gains. The overall market breadth was in the favour of declines which outpaced advances in the ratio of 1081:844, while 73 shares remained unchanged.

The BSE Sensex opened at 17,012.79; about 73.51 points higher compared to its previous closing of 16,939.28, and has touched a high and a low of 17,053.76 and 16,984.83 respectively.

The index is currently trading at 17,015.84, up by 76.56 points 0.45%. There were 20 stocks advancing against 10 declining ones on the index.

The overall market breadth was divided and more in the favour of declines as 54.22% stocks were declining, whereas there were 41.25% of stocks on advancing side. However, the broader indices since the inception of the trade are gyrating in the red zone; the BSE Mid cap and Small cap indices were down by 0.32% and 0.29% respectively.

The top gaining sectoral indices on the BSE were IT up by 1.05%, TECk up by 0.90%, CG up by 0.54%, Bankex up by 0.32% and Metal up by 0.31%.

On the flip side, CD down by 2.54%, Realty down by 0.24%, Power down by 0.21%, PSU down by 0.11% and Auto down by 0.09% were the top loses on the index.

The top gainers on the Sensex were Infosys up by 1.98%, Sterlite Industries up by 1.90%, L&T up by 1.29%, Maruti Suzuki up by 1.19% and Hindalco Industries up by 1.17%.

On the flip side, BHEL down by 1.05%, Coal India down by 0.57%, DLF down by 0.44, HDFC Bank down by 0.43% and Cipla down by 0.38%.

Meanwhile, the Reserve Bank of India (RBI), expects government to miss its targets for revenue and disinvestment for the current financial year, which is likely to push the fiscal deficit above the targeted level of 4.6% of the Gross Domestic Products (GDP).

The RBI in its mid-year economic review said that the growth in 2011-12, is likely to moderate below 8%, against earlier projection of around 8%. 'Given growth outlook, there is a risk of not meeting tax collection target,' RBI said. For 2011-12, the government has set a tax collection target of around Rs 7 lakh crore, but because of the slowdown in the economic activities, growth rates is expected to decline below 8%, which means tax collection will decline. 

On the disinvestment target for the current financial year, RBI said that the government could miss the Rs 40,000-crore disinvestment target, putting further pressure on the government finances. 'There is a possibility of the central government missing its disinvestment target, which would add to the pressures of achieving the budgeted fiscal deficit for 2011 12,' RBI added.

In 2010-11, the government was able to bring down the fiscal deficit to 4.7% in 2010-11 from 6.6% in 2009-10. This was because of the huge capital inflow from 3G and broadband auctions. Current situation indicates that the central government's deficit targets for 2011-12 are likely to be breached.

In the first half of the current fiscal year, the government was able to raise around Rs 1,143 crore through disinvestment of PFC, further the government is also targeting to raise around Rs 40,000 crore this fiscal, which is expected to miss because of unfavorable conditions in global as well as in domestic economy. 'The fiscal position during the course of the year will be shaped by the eventual growth outcome and its impact on tax revenues as well as the government's commitment towards controlling expenditure,' the RBI said.

On the international commodity prices and its impact on government’s subsidy bill, the RBI said with oil prices remaining at elevated levels, the subsidy burden of the government is expected to be much higher than budgeted. The subsidy on petroleum products, including LPG, kerosene and domestic cooking gas, for the current fiscal is budgeted at Rs 23,640 crore. 'Hence, the process of fiscal consolidation is likely to suffer a setback.'

The S&P CNX Nifty opened at 5,137.90; about 39.55 points higher compared to its previous closing of 5,098.35, and has touched a high and a low of 5,137.90 and 5,112.20 respectively.

The index is currently trading at 5,121.35, higher by 23.00 points or 0.45%. There were 32 stocks advancing against 17 declines on the index, while 1 stock remained unchanged.

The top gainers of the Nifty were Cairn India up by 2.41%, ACC up by 2.08%, Infosys up by 2.01%, Sterlite Industries up by 1.86% and L&T up by 1.41%

On the flip side, Sesa Goa down by 2.30%, BHEL down by 1.07%, RPOWER down by 0.96%, TCS down by 0.73% and Tata Motors down by 0.62%.

Most of the Asian equity indices too were trading on a cautious note; Shanghai Composite gained 16.45 points or 0.69% at 2,386.79, Hang Seng gained101.28 points or 0.54% at 18,873.10, Jakarta Composite gained 2.76 points or 0.07% at 3,709.54, and Taiwan Weighted gained 26.08 points or 0.35% at 7,496.38.

On the flip side, KLSE Composite down by 0.87 points or  0.06% at 1,449.15, Nikkei 225 down by 35.34 points or 0.40% at  8,808.64, Straits Times down by 2.89 points or 0.10% at 2,758.06, and Seoul Composite down by 3.85 points or 0.20% at 1,894.47.