Markets gaining trend sustain; Sensex remain above 19k

The Indian equity markets after trading in negative terrain in the initial hours have changed their side  in mid morning session extending the smart turnaround witnessed in yesterday's session, though the markets are not really building up at the moment, but strong global cues and strong earnings are capping any slide too. The 30 share index--Sensex-- on BSE is trading above 19000 mark and 50 share index-Nifty-on NSE is trading above its 5700 mark respectively. The investor's are keeping aside the interest rate hike fears for a while and are betting on strong corporate earnings, boosted by the good results HCL Technology. On the global front, Asian shares, with an exception of Jakarta Composite and KLSE Composite, are doing well, while US future indices too are showcasing smart gains. Back home,   Financials, which have been hammered since the beginning of the month on fears that a likely interest rate hike will hurt loan growth, have today reversed the trend as investors hoped that banks would report improved results for the December quarter. On the BSE sectoral front, stocks from Metal, Realty, Consumer Durables, Auto and Bankex counters were the flavor of the session, while, stocks from Capital Goods, Information Technology, TECk space witnessed some selling. Broader indices too have garnered gains and have continued outperforming their larger peers. The market breadth on BSE is in the favour of advances outnumbering declines in the ratio of 1686: 766, while, 87 shares remained unchanged.

The stocks that are buzzing in trade today include, Bajaj Auto and Tata Steel. The country's no. 2 motorcycle maker--Bajaj Auto has declined 0.49% before it announce its quarterly earnings as the results are likely to be subdued on the back of rising material cost, while Tata steel has gained 1.08% on BSE.  The Follow on public offering (FPO) of 57,000,000 equity shares of the company has opened today for subscription.

The BSE Sensex is currently trading at 19,135.40, up by 43.35 points or 0.23%. There were 20 stocks advancing against 10 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.81% and 0.83%, respectively.

The top gaining sectoral indices on the BSE were, Metal up by 1.60%, Realty up by 0.83%, Consumer Durables up by 0.78%, Auto up by 0.71%, and Bankex was up by 0.71 %. While, CG down by 0.95%, IT down by 0.60%, TECk down by 0.28%, were the only losers on the index.

The top gainers on the Sensex were Reliance Infra up by 3.00%, Sterlite Industries up by 2.85%, Hindalco Industries up by 2.42%, M&M up by 2.34% and ICICI Bank was up by 2.14%.

L&T down by 1.57%, Infosys down by 1.27%, BHEL down by 0.95%, SBI down by 0.78% and Wipro down by 0.69% were the top losers on the index were.

Meanwhile, India's banking system continues to suffer with massive liquidity deficit despite a slew of measures taken by the central bank so far. There was some ease in cash conditions in the early days of January however the situation is again back to square with banks raising over Rs 1 lakh crore from the Reserve Bank of India (RBI) on first couple of days of the current week.

Banks borrowed Rs 1,08,400 crore on Tuesday under the RBI's liquidity adjustment facility (LAF) at the repo rate. Banks were borrowing a similar amount under LAF in December as well but the average liquidity deficit declined in first fortnight of the 2011 came down slightly to Rs 80,000 crore, suggesting the measures taken by the central bank might have been helping easing the cash crunch. However, deficit has again returned back to the December levels it seems.

Bankers however point out that there is a possibility that cash conditions ease somewhat by end of the week as liquidity is usually tighter at the start of a fortnight. However, overall scenario will still remain substantially in deficit. Further, if the public sector majors like ONGC raise money from the market this quarter, as is being stated by the government, it will further tighten the liquidity scenario.

Cash conditions in Indian financial system have remained in the deficit mode consistently since September last year with average daily injection increasing significantly in the following months. In order to alleviate frictional liquidity pressure, the central bank announced a second LAF and also allowed scheduled commercial banks to avail of additional liquidity support under the LAF to the extent of 2.0% of their net demand and time liabilities (NDTL) and later cut the statutory liquidity ratio (SLR) by 1% to 24% in its mid-quarterly Dec review.

These measures have already resulted in infusion of around Rs 48,000 crore in the system. The RBI had also announced buy-back of government securities worth a similar amount in December. Both these actions were expected to significantly reduce the liquidity deficit in January. However, if this does not turn out to be the case, the RBI will be under greater pressure. The problem of the central bank is that at a time when it is tightening monetary policy by raising short term lending rate to check inflation expectations, it cannot be seen as infusing too much money into the system which will work contradictory to the policy tightening.

The S&P CNX Nifty is currently trading at 5,735.35, up by 11.30 points or 0.20%. There were 29 stocks advancing against 20 declines on the index while one stock remained unchanged.

The top gainers of the Nifty were HCL Tech up by 3.90%, SAIL up by 3.21%, Reliance Infra up by 3.18%, Sterlite Industries up by 2.79% and Hindalco up by 2.57%.

The top losers of the index were GAIL down by 2.14%, L&T down by 1.77%, Infosys down by 1.37%, BHEL down by 0.96% and ACC down by 0.94%.

Shanghai Composite was up by 1.06%, Hang Seng gained 0.82% , Nikkei 225 increased up by 0.18% , Straits Times bagged 0.06%, Seoul Composite rose 0.92% and Taiwan Weighted was up by 0.77%.

On the flip side, Jakarta Composite was down by 0.61% and KLSE Composite was declined 0.26%

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