Markets trade lower; banking continue to weigh

The markets continue to remain under pressure in late-afternoon trades though are moving within a narrow range. The Asian markets, with an exception of Taiwan Weighted were trading higher today. Nikkei jumped 1.65% on manufacturing growth and a declining yen. On the Dalal Street, though the BSE's 30-share Sensex was trading above its psychological 20,500 level, the NSE's 50-share Nifty was trading a tad lower than the 6,150 level. On the sectoral front, Fast Moving Consumer Goods, Oil & Gas and Healthcare shares topped the gainers list in trade. On the flip side, Bankex, Auto and public sector undertaking stocks remained subdued at this point of time. Meanwhile, Suzlon Energy is topping the volume charts and rose over 5%, hitting the monthly high of Rs 57.30, on reports that Spain's Gamesa Corporacion Tecnologica is in talks to pick up a stake in the company. According to reports, the deal is likely to value Suzlon at market capitalization of around $3 billion. The broader indices were looking directionless and were hovering around the neutral line with positive bias in trade. The BSE Mid-cap and Small-cap indices advanced 0.01% and 0.20%, respectively. The market breadth on the BSE was marginally in favor of advances in the ratio of 1396:1316 while 95 scrips remained unchanged.

The BSE Sensex declined 43.25 points or 0.21% at 20,517.80. The index touched a high and a low of 20,651.21 and 20,449.01, respectively.

The BSE Mid-cap and Small-cap indices advanced 0.01% and 0.20%, respectively. The main gainers in the BSE sectoral space were Fast Moving Consumer Goods (FMCG) up 1.33%, Oil & Gas up 0.65%, Healthcare (HC) up 0.52%, Information Technology (IT) up 0.35% and Power up 0.31%.

On the other hand, Bankex down 1.84%, Auto down 0.62%, Public Sector Undertakings (PSU) down 0.32%, Capital Goods (CG) down 0.30% and Consumer Durables (CD) down 0.15% were the major losers in the BSE sectoral space.

Meanwhile, 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 top gainers on the Sensex were HUL up 2.17%, Reliance Infra up 1.86%, ITC up 1.52%, Jindal Steel up 1.32% and NTPC up 1.21%.

Bajaj Auto down 2.95%, ICICI Bank down 2.61%, SBI down 2.48%, Hindalco Inds down 1.67% and Reliance Communications down 1.45%, were the top losers on the index.

With the Indian economy growing at higher-than-expected pace of 8.9% in the first half of the fiscal and tax revenue collections remaining robust, the government may revise upwards the revenue collection target given in the general budget for current fiscal.

According to the finance ministry officials, the tax revenue collections are likely to be somewhat higher than budgeted levels. However, the ministry will wait for some more days to let things get clearer before officially revising up the targets. Till December 2010, the government has reached 69% of direct tax collections and 67% of the indirect tax revenue target.

Buoyancy in tax revenue went down sharply with the onset of global financial crisis in last quarter of 2008 and remained down in the last fiscal owing to slower growth and the fiscal stimulus launched by the government. However, things started to improve in 2010 as growth recovered. Also, the partial withdrawal of fiscal stimulus by the finance ministry in Feb 2010 has helped push up tax revenue growth.

Further, the government has already exceeded its non tax revenue target owing to the windfall it got on sale of third generation telecom spectrum at Rs 1.06 lakh crore. This compared with a budgeted figure of Rs 35,000 crore. It is also likely to reach close to its target of Rs 40,000 crore from disinvestment. As such, the excess non-tax revenue and higher than budgeted amount of tax revenue should ensure that fiscal deficit target of 5.5% of GDP is met even if the government has to spend more on fuel and fertilizer subsidies.

The S&P CNX Nifty dipped 8.95 points or 0.15% to 6148.65. The index touched a high and a low of 6181.05 and 6124.40, respectively. 

The top gainers on the Nifty were Suzlon Energy up 4.61%, Ambuja Cement up 2.34%, HUL up 2.16%, Reliance Infra up 2% and Cairn India up 1.92%.

The top losers on the index were Bajaj Auto down 3.02%, ICICI Bank down 2.72%, SBI down 2.42%, Reliance Communications down 1.72% and Hindalco Inds down 1.54%.

Other Asian markets, with an exception of Taiwan Weighted down 0.31%, were trading in the positive terrain. Shanghai Composite was up 1.59%, Hang Seng was up 0.81%, Jakarta Composite was up 0.38%, KLSE Composite was up 0.89%, Nikkei 225 was up 1.65%, Straits Times was up 0.62% and Seoul Composite was up or 0.73%.

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