Markets trading near its neutral line; bank, IT stocks find support

After witnessing a see saw trade, markets were edged up a bit in the late morning session amid selective buying across some blue chip counters. Division of investors was still opting to book some profits after the previous session's sharp gains. Meanwhile, the rupee surged to Rs 51.40 per dollar in early trades this morning on steady selling of the American currency by exporters. On sectoral front, banking stocks were showing major support along with IT stocks, while oil and retail stocks were pushing the market down. On the global front, most of the markets in the Asia-Pacific region were trading mixed. Back home, the market breadth was favoring the positive trend.

The BSE Sensex is currently trading at 16,502.30, up by 18.85 points or 0.11%. The index has touched a high and a low of 16,522.65 and 16,428.66 respectively. There were 13 stocks advancing against 17 declines on the index.

The broader indices were outperforming the benchmarks; the BSE Mid cap and Small cap indices were trading higher by 0.51% and 0.34% respectively.

The top gaining sectoral indices on the BSE were, Bankex up by 1.03%, IT up by 0.53%, CD up by 0.46%, Auto up by 0.46% and Metal up by 0.33%. On the flipside, Oil & Gas down by 0.73% and Realty down by 0.32% were the top losers on the BSE sectoral space.

The top gainers on the Sensex were Maruti Suzuki up by 2.39%, Tata Steel up by 1.84%, Tata Motors up by 1.69%, ICICI Bank up by 1.20% and HDFC Bank up by 0.89%.

On the other hand, RIL down by 1.19%, Bharti Airtel down by 1.17%, Hero MotoCorp down by 1.08%, Tata Power down by 0.97% and Bajaj Auto down by 0.78%.

Meanwhile, global rating agency Standard & Poor's (S&P) has affirmed investment grade with ‘stable’ outlook to ten Indian banks, which includes State Bank of India (SBI), Axis Bank, Bank of India, HDFC Bank, ICICI Bank, IDBI Bank , Indian Overseas Bank, Syndicate Bank, Union Bank of India and Indian Bank.

The rating affirmation has come after applying new rating criteria for banks, which was announced last month. The rating has been retained at BBB- with the outlook at stable. The move is contrast with the another global rating firm Moody’s, which has downgraded its rating on State Bank of India’s financial strength by one notch to D+ on account of the lender’s low Tier-I capital ratio and worsening asset quality. This downgrading by Moody’s had evoked sharp decline in the shares of SBI. And it has got sharp reaction from the government and SBI who described the Moody’s move as unwarranted as the Indian banks are better than their global counterparts.

In October a couple of days after Moody's lowered the outlook on SBI, S&P said that it has upgraded India's risk profile as measured by S&P's BICRA ( Banking Industry Country Risk Assessments) ranking. Within a month after the BICRA review, S&P has said that four banks, which include SBI, would have had a better credit rating if it was not constrained by the country rating. S&P does not assign a foreign currency rating higher than that of the sovereign since local bank assets are predominantly in India.

Geeta Chugh, Director, Standard & Poor's said 'the rating review factors in some tolerance towards deterioration in asset quality and compression in earnings. The stable outlook takes into account expected developments in the next 18 to 24 months'. By adding further Chugh said the standalone credit profiles of these four banks are higher than the sovereign. But since in India we do not assign bank ratings above the sovereign, the overall rating is in line with that of India.

Indian Bank's high standalone credit profile reflects its superior funding and liquidity position and it is the only public sector bank with an adequate capital position. A decade ago Indian Bank was described as a weak bank, has turned around dramatically and it is now an outlier because of its superior position as compared to rivals.

As per the S&P, on the whole Indian banks benefit from good economic growth prospects in the country. The growth in business is expected to enable the banks maintain sound financial health. 'Indian banks benefit from high levels of stable, core customer deposits.

The liquidity position for many Indian banks is strong and is underpinned by the growing retail deposit base, low reliance on short-term wholesale borrowings and a sizable amount of government bonds and central bank balances. Given the strong balance sheet growth ... capital is therefore a rating weakness for these banks,' the rating agency said. The government has infused Rs 3,100 crore into public sector banks in FY11. 'The government's planned capital injection in banks in 2012 and subsequently to ensure that the government owned banks have at least 8% tier I capital will be beneficial for these banks,' S&P added.

The S&P’s rating affirmation for the Indian banks comes a day after S&P downgraded its rating for as many as 15 large banks globally, which includes large American banks like Bank of America, Citigroup and Goldman Sachs, which can be seen as another blow to the already-struggling banking sector in the weak global economic scenario. The rating agency has also downgraded rating of United States based banking giants such as JP Morgan, Morgan Stanley, Wells Fargo, whereas some European banking titans like Barclays, HSBC, Lloyds Banking Group, RBS (Royal Bank of Scotland) and Rabobank have also been downgraded.

The S&P CNX Nifty is currently trading at 4,947.60, higher by 10.75 points or 0.22%. The index has touched a high and low of 4,952.25 and 4,918.40 respectively. There were 31 stocks advancing against 19 declines on the index.

The top gainers of the Nifty were Ambuja Cements up by 3.63%, Maruti Suzuki up by 2.38%, IDFC up by 1.99%, BPCL up by 1.91% and Tata Steel up by 1.91%.

On the flip side, Bharti Airtel down by 1.35%, Sesa Goa down by 1.27%, Reliance Industries down by 1.23%, Ranbaxy down by 1.16% and Tata Power down by 1.02% were the losers on the index.

Asian markets were trading mixed; Shanghai Composite lost 1.21%, Hang Seng was down by 0.21%, Jakarta Composite declined by 0.38%, Straits Times lowered by 0.39%, Seoul Composite lost 0.30% and Taiwan Weighted declined by 0.53%.

On the other hand, KLSE Composite rose by 0.14% and Nikkei 225 added 0.43%.