Trade remains sluggish despite some good earnings report

Indian markets continue to show sluggish trade in the noon session, lacking any supportive cues. Though, there was little spurt on some reports that the fiscal deficit will be below 4.8 per cent of GDP, Finance Minister P Chidambaram had earlier said that he is confident of Indian economy growing “step-by-step” and getting back to the high growth path in  the next three years as global economy recovers. Also, in a big relief rating agency Moody's said that India's sovereign downgrade is not on the cards, keeping the markets in range. However, traders were concerned about the weak economic recovery and upbeat economic readings from the US that may led Federal Reserve to further reduce its bond buying programmes. Profit booking was being witnessed in stocks and sectors that moved higher in last session's rally.

Besides, some of the Asian peers who traded in green since morning too have given up their gains and added pressure to the Indian markets. The good going earnings season too was unable to support the markets, as after solid numbers from HCL Tech in morning, LIC Housing Finance and Axis Bank too have reported good set of numbers for the third quarter. LIC Housing posted a net profit of Rs. 326.59 crore for the quarter ended December 31, 2013 as compared to Rs 236.25 crore for the quarter ended December 31, 2012. On the other hand, Axis Bank reported 20% growth in its NII year on year, though it’s net NPA increased marginally to 0.42%.

The BSE Sensex is currently trading at 21234.02 down by 55.47 points or 0.26% after trading in a range of 21379.29 and 21199.65. Gainers and losers were evenly distributed with 15 stocks trading in green, while other 15 trading in red on the index. The market breadth on BSE was negative in the ratio of 962:1433 while 169 scrips remained unchanged.

The broader indices too were marginally in red; the BSE Mid cap index was down by 0.16%, while Small cap index was lower by 0.19%.

The gaining sectoral indices on the BSE were Metal up by 1.82%, Power up by 0.19% and IT up by 0.18%. On the other hand, top losers included FMCG down by 1.08%, Auto down by 0.82%, Realty down by 0.53%, Healthcare down by 0.48% and TECK index down by 0.41%.

The top gainers on the Sensex were Coal India up by 2.47%, Hindalco up by 1.98%, Tata Steel up by 1.87%, BHEL up by 1.81% and SSLT up by 1.70%. On the flip side, Bharti Airtel down by 4.52%, Tata Motors down by 2.06%, Sun Pharma down by 1.85%, ONGC down by 1.34% and ITC  down by 1.23% were the major losers.

Meanwhile, in order to secure Indian banks from the impact of unhedged foreign currency exposure of corporate, the Reserve Bank of India (RBI) has asked the domestic lenders to calculate the incremental provisioning for them to entities with unhedged exposure at least once in a quarter. Meanwhile, the calculation should be done on monthly basis during periods of high US Dollar-INR volatility.

Highlighting that unhedged foreign currency exposures of the entities has become an area of concern not only for an individual entity but also for the entire financial system, the central bank has noted that extent of corporates’ unhedged foreign currency exposures continues to be significant and is increasing the probability of default in times of high currency volatility. Conversely, Reserve Bank also suggested the entities to hedge foreign currency exposure as unhedged exposure can lead to significant losses for them due to exchange rate movements. Corporates’ losses reduce their capacity to service the loans taken from the banking system and thereby affect the health of the banking system.

However, the RBI had earlier also issued norms suggesting banks to closely monitor the unhedged foreign currency exposures of their borrowing clients and also factor this risk into the pricing.

The CNX Nifty is currently trading at 6,306.85, down by 14.05 points or 0.22% after trading in a range of 6,346.50 and 6,299.85. There were 25 stocks advancing against 25 declining ones on the index.

The top gainers of the Nifty were HCL Tech up by 3.27%, Coal India up by 2.37%, Hindalco up by 1.89%, Jindal Steel up by 1.87% and BHEL was up by 1.74%. On the flip side, Bharti Airtel down by 4.52%, Tata Motors down by 2.36%, Sunpharma down by 1.91%, JP Associates down by 1.76% and ITC down by 1.52% were the major losers on the index.

The Asian equity indices were showing mixed trend; Hang Seng was up by 0.31%, Shanghai Composite gained 0.02%, Seoul Composite was up by 0.21% and Taiwan Weighted gained 0.11%. On the flip side, Jakarta Composite was down by 0.36%, Nikkei 225 lost 0.39% and Straits Times declined by 0.17%.