Post session - Quick review

After building on accelerating uncertainties that Italy would become the next domino to fall in Europe's debt crisis for the entire session, local bourses did make some head room for gains but that too for hoodwinking as the bourses by the end of the trade again resumed path for southbound journey. Bourses capitulated to trader’s safe sough strategy ahead of the parliamentary vote in Italy that would prove whether Prime Minister Silvio Berlusconi has enough support to stay in power and implement austerity measures. However, benchmark frontline indices after listlessly wandering between red and green, concluded the volatile, lightly traded session on a flat note with negative bias.

Although some optimism was observed at the dawn of the trade at Dalal Street as investor’s dwelled on the reports stating that Greece was stepping in the right direction towards forming a new government and ensuring that the nation receives its next round of aid. However, the small mount of optimism soon fizzled out as trader’s abandoning riskier assets, sought the security of safe heaven assets.

Indian equity markets drawing positive leads from Wall Street had commenced the session on an optimistic note. Overnight, on Wall Street, US stocks higher Monday on news that Greece would receive the latest installment of emergency aid as long as the country's two main parties commit to implementing economic reforms agreed to by the country's previous government. However, the diverse trend of the bourses failed to provide trajectory to the already perplexed Indian equity indices. Most of the Asian stock indices after struggling for direction advanced on Tuesday as Europe prepared to make good on its pledge to provide another installment of emergency aid to keep Greece from tumbling into insolvency.  Meanwhile, European shares bouncing from two days of losses, rose on Tuesday as upbeat corporate news from the likes of telecom heavyweight Vodafone helped offset some investors' concerns about the euro zone debt crisis. Vodafone rose 2.7 percent after edging its full-year outlook higher as growth in emerging markets and robust trading in northern Europe helped the world's largest mobile operator to post first-half results ahead of forecasts.

Back home, some disappointment came in the form of Bank of India’s result as the stocks tripped over poor Q2 earnings weighed by surge in provisions and contingencies. Bank of India's net profit declined due to 118.89% increase in provisions (other than tax) and contingencies to Rs 1,154.36 crore in Q2 September 2011 over Q2 September 2010. The bank's ratio of net non-performing assets (NPAs) as on 30 September 2011 was 1.98%, higher than 1.14% as on 30 September 2010.  Meanwhile, select sugar stocks also depicted the underlying weakness of the bourses.  Stocks of Uttar Pradesh based sugar companies fell after the UP government hiked procurement price of sugarcane by Rs. 40 per quintal to a maximum of Rs. 250 per quintal.

However, banking stocks received some solace after deputy governor of the Reserve Bank of India, Subir Gokarn said that bad loans were not threatening the entire banking system and the policy guidance given so far would hold until further notice. The RBI raised interest rates in late October for the 13th and possibly final time in a tightening cycle that began in early 2010, on expectations that persistently high inflation will finally begin to ease starting in December.
 On the BSE Sectoral front, stocks from Consumer Durable, Oil  & Gas and Power counters featuring in the best list of performers, counterbalanced the negative affect prevailing on account of stocks  from Realty, Healthcare and Auto counters, which in turn led to flat close of Dalal Street. Both 30 and 50 share barometer indices enticing some losses ended near to its neutral line. However, broader indices concluded the trade on mixed note.The market breadth on the BSE ended neutral; advances and declining stocks were in a ratio of 1421:1408 while 126 scrips remained unchanged.

The BSE Sensex lost 2.92 points or 0.02% and settled at 17,559.69. The index touched a high and a low of 17,632.23 and 17,455.22 respectively. 13 stocks advanced against 17 declining ones on the index (Provisional)

The BSE Mid-cap index gained 0.13% while Small-cap index was down 0.18%. (Provisional)

On the BSE Sectoral front, Consumer durables up 0.90%, Power up 0.13%, Oil & Gas up 0.13%, IT up 0.10% and Capital Goods up 0.08% were the top gainers while Realty down 1.49%, Health Care down 0.64%, Auto down 0.22%, Metal down 0.16% and FMCG down 0.04% were the only losers.

The top gainers on the Sensex were SBI up 1.81%, Tata Motors up 0.69%, HUL up 0.57%, BHEL up 0.54% and HDFC Bank up 0.51%.

On the flip side, Sun Pharma down 2.16%, DLF down 1.99%, Cipla down 1.26%, Jindal Steel down 1.18% and Bajaj Auto down 1.15% were the top losers on the index. (Provisional)

Meanwhile, the Reserve Bank of India’s (RBI) deputy governor Subir Gokarn said, the RBI will stick to its exchange rate policy and the guidance provided on monetary policy would hold until further notice. 'We have repeatedly said that the rupee is now a floating currency within the boundaries of the regime of structural capital controls on debt inflows’. By adding further he said, 'there is no intent to intervene with a particular exchange rate target in mind.'

In the current year, rupee has been one of the worst performing currencies in Asia, it has fell by more than 9% against the American dollar. Today, rupee weakened by 18 paise to trade at Rs 49.28 against the dollar. On this, Gokarn said that the rupee's losses are due to global conditions and capital reallocations around the world have impacted many currencies.

The apex bank hiked its key policy rates for 13 times to tame high inflation which has been hovering around two digit mark for quite some time. However, RBI expects inflation to moderate from December 2011, which reduces the chances of another hike in short term lending and borrowing rates. Gokarn said it was unlikely to raise rates again in December and may remain on hold subsequently if inflation follows its projected trajectory.

'We gave the guidance two weeks ago. If we want to change the guidance we will change the guidance...Unless there is something dramatic that happens to change it, that guidance remains. So let us say, the guidance remains the same until further notice at this stage,' Gokarn said.

However, the government owned oil firms earlier this month raised petrol prices by almost 2.7%, the move, which is expected to reduce losses of oil firms, is likely to add pressure to stubbornly high inflation in Indian economy.  Earlier, RBI had said that it will only consider easing monetary policy if inflation falls below 7%. Experts from government and private sector are of the view that the RBI may consider reversing its tight monetary stance as inflationary woes start to recede next month.

The rupee plunged breaching the psychological barrier of 50 a dollar amidst a mood of negativity in the economy. The rupee has been depreciating on the back of debt crisis in European economies and fears of another slowdown in US. The uncertainties in the global economy were stronger than in 2009 when the rupee moved to similar low levels against major currencies. For more than a month, domestic foreign exchange markets were testing low levels the rupee could reach against the dollar.

India VIX, a gauge for market’s short term expectation of volatility gained 1.19% at 23.71 from its previous close of 23.43 on Friday. (Provisional)

The S&P CNX Nifty lost 0.70 points or 0.01% to settle at 5,283.50. The index touched high and low of 5,304.25 and 5,252.00 respectively. 23 stocks advanced against 27 declining ones on the index. (Provisional)

The top gainer on the Nifty were, Cairn India up 5.11%, RCOM up 4.50%, Reliance Infra up  3.96%, Reliance Power up 3.06%  and SBI up 1.77%.

 On the other hand, BPCL down 3.33%, Sun Pharma down 2.81%, IDFC down 2.79%, HCL Tech down 2.52% and DLF down 2.40% were the top losers. (Provisional)

The European markets are trading in green, with France's CAC 40 up 1.25%, Germany's DAX up 1.35% and FTSE 100 up 1.18%.

Asian shares wiped off their earlier gains and ended the session on a weak note on Tuesday, weighed by concerns that surging bond yields could stifle debt-ridden Italy’s fund raising ability and throw the euro zone deeper into financial turmoil, while Greece struggled to pick a new leader. Nikkei lost over a percentage point, weighed by a dive of almost 30 percent in scandal-hit camera maker Olympus as well as ongoing concerns over the euro-zone while, Chinese benchmark Shanghai Composite closed slightly lower as caution prevailed ahead of the release of the country’s inflation data due the following day, with weakness in property issues offsetting gains in banking and energy stocks. Seoul shares too edged lower in the trade, pressured by falls in banks like KB Financial Group, with persistent concern over Europe’s debt woes keeping investors cautious.