Benchmarks erase most of the early losses; trade flat in afternoon deals

Indian equity benchmarks, paring almost all of its losses, were trading flat with negative bias in afternoon deals on account of some bargain buying activities, which got triggered at lower levels. Meanwhile, sentimental boost also was received after RBI, painting an optimistic picture on the external front, underscored that the country was ready for the US Federal Reserve's tapering, while pegging the current account deficit at below 3% for this fiscal in its eighth Financial Stability Report. In its report, it noted that “delay in the tapering of the $85 billion-a-month bond buyback programme by the US Fed (tapering will start from January 1) gave the country time to replenish the forex reserves and rein in the high current account gap”. Recouping most of its early losses, Sensex and Nifty, were trading above the crucial 21,150 and 6,300 levels respectively. However, broader indices outperforming larger peers with fat margins were up with gains of over quarter of a percent.

Besides, positive global set-up restricted further downslide of the markets. On the global front, Asian shares were mostly higher in light pre-holiday trading, led by gains in Japan's Nikkei 225 index as the weakening yen piqued buying interest in exporters.

Closer home, stocks from Metal, FMCG and Auto counters were slogging to limit the downtrend of the bourses, stocks from Realty, IT and TECK space were endorsing them. Among other stocks, railway stocks are on a roll and trading higher by up to 7% on reports that the government may allow foreign direct investment (FDI) in railways. Meanwhile, select telecom stocks, viz, Bharti Airtel and Idea Cellular, were ringing loud after Department of Telecom (DoT) postponed the bidding for next spectrum auction by 10 days from January 23 to February 3 amid pending issues, including spectrum usage charges, and a demand from operators seeking more time. On the flip side, Information Technology stocks slid as investors booked profit in the penultimate trading session of the year, banking shares too witnessed drubbing after RBI in its eight FSR, highlighted that risks to the banking sector increased in last six months. The overall market breadth on BSE is in the favour of advances which thumped declines in the ratio of 1221:980; while 125 shares remained unchanged

The BSE Sensex is currently trading at 21185.49 down by 8.09 points or 0.04% after trading in a range of 21,304.70 and 21,123.30. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices added gains; the BSE Mid cap index was up by 0.25%, while Small cap index up by 0.50%.

The gaining sectoral indices on the BSE were Metal up by 0.62%, FMCG up by 0.54%, Auto up by 0.41%, Consumer Durables up by 0.23%.  While, Realty down by 1.26%, IT down by 0.67%, TECK down by 0.46%, bankex down by 0.44%, Power down by 0.40%,. 

The top gainers on the Sensex were SSLT up by 1.76%, Tata Motors up by 1.58%, Gail India up by 1.17%, HUL up by 1.08% and Coal India up by 0.99%. On the flip side, Infosys down by 1.53%, Bajaj Auto down by 1.30%, Tata power down by 0.95%, Sun Pharma down by 0.83% and L&T down by 0.80%.

Meanwhile,Reserve Bank of India (RBI), in its ‘Financial Stability Report – December 2013’, has underscored that risks to the banking sector have increased during the past half-year and that all the risks dimensions captured in the banking stability indicator show increase in vulnerabilities in the banking sector. As per the report banking stability measures, based on co-movements in banks' equity prices, also indicate that the distress dependencies within the banking system have risen during this period.

Further, the analysis shows that failure of a major corporate or a major corporate group could trigger a contagion in the banking system due to exposures of a large number of banks to such corporates. Additionally, RBI in its report expressed concerns over asset quality of banks. It highlighted that macro stress tests on credit risk suggest that if the adverse macroeconomic conditions persist, the credit quality of commercial banks could deteriorate further. However, it also underscored that under improved conditions, the present trend in credit quality may reverse during the second half of 2014-15.

Moreover, RBI remained more distressed over asset quality of Scheduled Commercial Banks (SCBs). It noted that Gross Non-performing Assets (GNPA) ratio of SCBs as well as their restructured standard advances ratio increased and therefore the total stressed advances ratio rose significantly to 10.2 per cent of total advances as at end September 2013 from 9.2 per cent of March 2013.  

The CNX Nifty is currently trading at 6,303.75, down by 10.05 points or 0.16% after trading in a range of 6,344.05 and 6,287.70. There were 19 stocks advancing against 31 declining on the index.

The top gainers of the Nifty were SSLT up by 1.66%, Tata Motors up by 1.37%, Gail up by 1.19% Hindustan Unilever up by 1.05% and Coal India up by 1.01%. On the flip side, DLF down by 2.92%, Infosys down by 1.62%, Kotak Bank down by 1.44%, ACC down by 1.34% and Bajaj Auto down by 1.31% were the major losers on the index.

Most of the Asian equity indices were trading in green; KLSE Composite up by 0.01%, Straits Times up by 0.28%, Jakarta Composite up by 0.82%, Nikkei 225 up by 0.69%, Taiwan Weighted up by 1.04%, Seoul Composite up by 0.45%. While, Hang Seng down by 0.21% and Shanghai Composite down by 0.04%.