Indian equities stage swift recovery in Monday noon trades

Indian equity markets managed to swiftly pare the losses in Monday afternoon trading session and are trading just below the previous closing levels. The frontline indices got firm support around the psychological 16,700 (Sensex) 5,000 (Nifty) levels as they rebounded from thereon, thanks to the hefty buying in Capital Goods and Power sectors. Sentiments in the session remained cautious, lacking any significant upside triggers to take the key gauges to higher levels. The downside for the markets was limited by encouraging developments from the European front where Italy's cabinet unveiled austerity measures in the weekend. However, cautiousness prevailed largely across the Asian region since marketmen looked ahead to a meeting between France and Germany to save the euro as well as the European Central Bank's policy meeting later in the week. Back home, concerns over the ruling government's ability to implement important reform measures came to the fore, keeping investors’ mood under check. Meanwhile, retail stocks continued to reel under the hefty selling pressure despite government’s stand that they will try to evolve a consensus on the issue. On the BSE sectoral space, Consumer Durables counter sank by three fourth of a percent, being the top laggard in the space followed by the defensive FMCG pocket that shed around half a percent. On the other hand, the Capital Goods and Power counters garnered some traction and rose close to a percent each.

Moreover, the broader markets traded on a flat note as the indices barely budged from previous closing levels. The bourses traded on weaker volumes of over Rs 0.50 lakh core. The market breadth on BSE was in favor of declines in the ratio of 1199:1170 while 127 scrips remained unchanged.

The BSE Sensex is currently trading at 16,746.45 down by 100.38 points or 0.60% after trading as high as 16,845.87 and as low as 16,691.21. There were 10 stocks advancing against 20 declines on the index.

The broader indices were trading on a flat note; the BSE Mid cap index eased 0.03% and Small cap rose 0.02%.

On the BSE sectoral space, Bankex up 1.20%, Metal up 1.05%, IT up 0.87%, Auto up 0.86% and Consumer Durables up 0.85% were the major gainers while Realty down 0.35% and Oil & Gas 0.22% were the only losers in the space.

Maruti up 2.65%, Tata Steel up 2.48%, Sterlite up 2.23%, Tata Motors up 1.83% and JP Associates up 1.54% were the major gainers on the Sensex, while Bharti Airtel down 1.04%, Tata Power down 0.81%, Hero Moto down 0.79%, ONGC down 0.60% and RIL down 0.33% were the major losers in the index.

Meanwhile, Reserve Bank of India (RBI) has indicated that it may intervene the currency market to stop the decline of Indian rupee. The RBI deputy governor Subir Gokarn said, India's central bank will use all available tools to stem a fall in the rupee if the currency's downward spiral escalates and will take steps to keep liquidity in the country's markets at comfortable levels.

Since July 2011, the partially-convertible rupee has decline around 16.5% as risk-averse investors flee emerging markets, increasing concerns for the government hit by high inflation, slowdown growth and increasing trade deficit.

Subir Gokarn said, 'we do have the instruments and the capacity to enhance the supply of foreign exchange into the markets, and as demonstrated by the recent actions, will use them as appropriate. If we do see the short-term risk of a downward spiral escalating, we will not hesitate to use all available instruments.'

Rupee fell snapped a four week falling trend on December 02 after weakening by 6.7% in November, which is its biggest fall since January 1995.

Gokarn further indicated that the RBI will also continue to inject liquidity into Indian markets to make sure smooth functioning of the financial markets given the bank’s forecast for tight conditions in the near future.

'Currently, the Indian banking system holds government securities to the tune of 29% of net demand and time liability (NDTL), which is above the statutory requirement of 24%. Gokarn said, ‘this reflects a relatively large capacity for liquidity infusion as and when the need arises'. By adding further he said, ‘we have been injecting liquidity into the market through the liquidity adjustment facility and open-market operations, and we will continue to do so as conditions warrant.’

Last week, the RBI bought Rs 57.83 billion worth of bonds via open market operations (OMO), just after a week, buying Rs 94.35 billion through the same process. The OMO is a tool by which central bank control the short term interest rate and the supply of base money in economy, thus indirectly controlling the total money supply.

The S&P CNX Nifty is currently trading at 5,026.40, lower by 23.75 points or 0.47% after trading as high as 5,049.70 and as low as 5,002.55. There were 16 stocks advancing against 34 declines on the index.

The top gainers on the Nifty were BHEL up 2.58%, R Com up 1.75%, JP associates up 1.63%, Axis Bank up 1.58% and Cairn up 1.32%.

Sun Pharma down 1.85%, R Power down 1.72%, Tata Steel down 1.71%, Seas Goa down 1.66% and HDFC down 1.36% were the major losers on the index.

Asian markets traded on a mixed note, Shanghai Composite declined 0.63%, KLSE Composite eased 0.01%, Straits Times dropped 0.33%, and Taiwan Weighted dipped 0.55%.

On the flipside, Hang Seng gained 0.39%, Jakarta Composite rose 0.05%, Nikkei 225 advanced 0.39% and Seoul Composite climbed 0.55%.