Indian markets trade cautiously in early deals ahead of RBI policy meet

Continuing their cautious run, Indian equity benchmarks were trading flat in the early deals near their neutral lines as investors opted to remain on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review and US Federal Reserve meeting. Sentiments also remained dampened after Indian rupee weakened in early trades tracking the non-deliverable forwards (NDF) market. The rupee was trading at Rs 63.38 compared with previous close of Rs 62.85 per dollar. Meanwhile, Prime Minister's key economic advisor C Rangarajan, pitching for a non-restrictive regulation in the financial sector has said that too many norms can impede financial innovations.

Global cues too remained mixed with the US markets ending mostly higher, extending their gains into new week, markets were rejoicing the news that former Treasury Secretary Larry Summers has withdrawn his name from consideration to replace Federal Reserve Chairman Ben Bernanke. However, most of the Asian equity benchmarks were trading in the red at this point of time as Federal Reserve begins a two-day policy meeting at which it will decide the pace of reduction of its US bond buying.

Back home, on the sectoral front, software witnessed the maximum gain in trade followed by technology and auto, while power, realty and capital goods remained the top losers on the BSE sectoral space. The broader indices too were struggling to get some traction, while the market breadth on the BSE was negative; there were 464 shares on the gaining side against 654 shares on the losing side while 51 shares remain unchanged.

The BSE Sensex opened at 19721.90; about 20 points lower compared to its previous closing of 19742.47, and has touched a high and a low of 19779.26 and 19635.44 respectively.

The index is currently trading at 19751.68, up by 9.21 points or 0.05%. There were 13 stocks advancing against 17 declines on the index.

The overall market breadth has made a weak start with 39.97% stocks advancing against 55.54% declines. The broader indices, the BSE Mid cap and Small cap indices were down by 0.29% and 0.07% respectively. 

The few gaining sectoral indices on the BSE were, IT up by 3.41%, Teck up by 1.93%, Auto up by 1.82% and Health Care up by 0.05%, while Power down by 1.25%, Realty down by 1.07%, Capital Goods down by 0.91%, Bankex down by 0.83% and PSU down by 0.45% were the only losers on the sectoral index.

The top gainers on the Sensex were Wipro up by 3.00%, Dr Reddys Lab up by 2.53%, TCS up by 1.48%, Maruti Suzuki up by 1.14% and Coal India up by 1.13%. On the flip side, BHEL was down by 2.43%, NTPC was down by 2.03%, Tata Steel was down by 1.80%, Sun Pharma was down by 1.75% and Tata Power was down by 1.51% were the top losers on the Sensex.

Meanwhile, in order to restrict rising imports of electronic products and to boost domestic industry as well as bring down the widening current account deficit (CAD), the government is looking to raise duties on electronic items, which are not covered by the duty-free Information Technology Agreement (ITA) of the World Trade Organisation.  In the previous fiscal, Indian electronics goods exports stood at $31 billion, which was around 7 per cent of total imports. Imports of electronics items have already crossed $10 billion mark in April to July period of current fiscal, despite various measures taken by the government to promote domestic industry.

As per the commerce department, efforts are continued to identify products that are not part of the IT Agreement (ITA) but have escaped higher duties, as the government has lost track over the years of electronic items that may not be part of the pact on account of several changes in the Import-Export Classification Code for products in India after WTO’s ITA. Information Technology Agreement, signed by 29 members including India and was implemented in 1996 and all signatories of the ITA agreed to eliminate duties on identified electronic products.

Meanwhile, the government looks concerned to check imports to bring down the CAD, which widened to a record high at 4.8% in the previous fiscal. Therefore, it recently set up a sub-committee of officials from the Revenue Department, the Commerce Department and the IT Ministry to examine the present classification of electronic items, including IT products, and trace them back to the 1996 classification to arrive at what products were actually covered originally by the pact. With the completion of process, the government will decide where it can increase import duties electronic products without violating WTO rules.   

The CNX Nifty opened at 5,824.20; about 16 point lower as compared to its previous closing of 5,840.55, and has touched a high and a low of 5,846.40 and 5,804.90 respectively.

The index is currently trading at 5,832.15, down by 8.40 points or 0.14 %. There were 23 stocks advancing against 27 declines on the index.

The top gainers of the Nifty were Ranbaxy up by 2.97%, HCL Tech up by 2.77%, Dr. Reddy's Laboratories up by 2.61%, UltraTech Cement up by 1.83% and TCS up by 1.66%. On the flip side, Axis Bank down by 3.03%, Bank of Baroda down by 2.92%, IndusInd Bank down by 2.88%, Sun Pharmaceuticals down by 2.02% and IDFC down by 1.96% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite declined 19.98 points or 0.90% to 2,211.42, Hang Seng dipped 63.20 points or 0.27% to 23,189.21, Jakarta Composite dropped 34.03 points or 0.75% to 4,488.21, Nikkei 225 slipped 25.07 points or 0.17% to 14,379.60, Seoul Composite shed 12.38 points or 0.61% to 2,000.99 and Taiwan Weighted was down by 25.89 points or 0.31% to 8,229.45.

On the flip side, KLSE Composite rose 0.46 points or 0.03% to 1,771.26 and Straits Times was up by 6.09 points or 0.19% to 3,185.57.