Local equity markets remain sluggish

The local equity markets remained sluggish in the late-morning as investors were keen on taking some profits off the table, though most of the regional peers are trading poisitive, the Dow futures were also trading with gain in the screen trade.Back home, on the Dalal Street, banking counters continued to witness hammering from the bears. Segment biggies, ICICI Bank and SBI, were topping the losers list in trade today. Auto, Reality, Capital Goods and public sector undertaking counters were the other major losers at this point of time. On the other hand, buying in FMCG, Oil and Gas, IT, Health Care (HC) and Power pockets were keeping the bulls active on the street. ITC, which holds major weightage in both the key indices, gained one percent in trade and also another index scrip Suzlon Energy has advanced by nearly 4% on the BSE, amid media reports that Spanish wind turbine manufacturer Gamesa is likely to pick up a majority stake in the Indian wind energy firm.The broader indices were gyrating in a tight band. The market breadth on the BSE is slightly negative; there were 1321 shares on the loser's side against 1271 shares on the gainers side, while 95 shares were unchanged. The S&P CNX Nifty may face resistance around 6180 and 6242 levels whereas support will be around 6080 and 6030 mark for the day.

The BSE Sensex trimmed 103.66 points or 0.50% at 20,457.39. The index touched a high and a low of 20,651.21 and 20,454.05, respectively.

The BSE Mid-cap index was down by 0.09% while Small-cap index rose 0.06%.

The main gainers in the BSE sectoral space were FMCG up 1.05%,  Oil and Gas up 0.45%  IT up 0.19%  Health Care (HC)  up 0.10%  and Power  up 0.07% On the other hand, Bankex down 1.95%, Auto down 1.14% Reality down 0.52%, Capital Goods down 0.47% and PSU down by 0.40% were the losers in the BSE sectoral space.

The major gainers on the Sensex were  HUL up 2.14 % ITC up 1.23% Jindal Steel up 1.05%  Reliance Infra up 0.82% and Sterlite Industries  up 0.70%

On the flip side, Bajaj Auto down 3.57%, ICICI Bank down 2.59%, SBI down 2.47%, HDFC Bank down, 1.90% and Hindalco down 1.79% were the major losers in the BSE sectoral space

The Reserve Bank of India (RBI) on Monday said that it will purchase government securities worth Rs 12,000 crore on Wednesday as part of its decision to inject Rs 48,000 crore into the system. "There is an overall aggregate ceiling of Rs 12,000 crore for all the securities in the basket put together. There is no security-wise notified amount," said the central bank in a press release on Monday.

India's money market is currently under stress owing to tight liquidity conditions. In fact the liquidity has been in the deficit mode for every single day since middle of September 2010. Further, the deficit has been far more than central bank's comfort zone of 1% of net demand and time liabilities (NDTL) of the banking industry which works out be around Rs 50,000 crore.

The RBI has announced a number of measures in recent days to ease liquidity. It had first allowed additional liquidity support of 2% of the statutory liquidity ratio (SLR) to individual banks. Following this, in the last monetary policy review, it announced a cut in SLR by 1% to 24%, releasing Rs 48,000 crore in the system and said it would conduct open market operations to buy government securities worth Rs 48,000 crore.

So far however the liquidity has continued to remain substantially in the deficit mode. On Monday, commercial banks borrowed Rs 103,510 crore from the repo window of the central bank through its liquidity adjustment facility (LAF). This includes the amount borrowed through the special repo started buy the central bank in November to extend additional liquidity support in wake of the cash crunch. Average deficit over the last quarter has been close to Rs 80,000 crore.

The latest announcement of purchase of Rs 12,000 crore worth of securities is part of the Rs 48,000 crore plan announced in the December policy review. Economists however feel that liquidity crunch may continue to persist in the short term at least. The RBI has itself said that liquidity will ease considerably only after the government's cash balance with the central bank, which is currently over Rs 80,000 crore, comes down. Further, banks will have to push up deposit growth which continues to remain well below the loan growth rate.  

The S&P CNX Nifty declined 30.45 points or 0.49% to 6127.15. The index touched a high and a low of 6,181.05 and 6,124.40, respectively.

The top gainers on the Nifty were Suzlon up 4.15% Cairn up 2.25%, HUL up 1.80%, GAIL up 1.32% and Jindal Steel up 1.20%

The top losers on the index were Bajaj Auto down 3.61%, ICICI Bank down 2.63% SBI down 2.60% HDFC Bank down 1.93%, and Reliance Communication down 1.92%

All regional peers were trading in the green; Shanghai Composite advanced 1.42%, Hang Seng increased  by 0.51%, Jakarta Composite advanced 0.16%, KLSE Composite rise by 0.94%, Nikkei increased  1.65%, Straits Times inched 0.56% and Seoul Composite surged 0.73%  whereas Taiwan Weighted trimmed 0.31%.

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