Benchmarks slash losses; broader indices continue to underperform

Benchmark equity indices have bounced back in mid morning trade snapping earlier losses. The recovery is the contribution made by some key heavyweights like RIL, ICICI Bank and ONGC which were up by over 1.5% each.  Local equity market earlier drifted lower in trade due to sustained foreign capital outflows amidst mixed trend on other Asian bourses; thanks to the selective buying in few blue chip stocks at lower levels, the benchmark indices have inched higher. The broader indices however are unable to retreat from the intense selling pressure as they are ruling down by over 1% each. On the global front, Asian markets were trading in red as China raised interest rates on Tuesday for the second time in just over six weeks, while US future indices were showing an uptick on the screen trade. Back home, on the BSE Sectoral front, stocks from Realty, Power and Metal continued to remain under pressure, while stocks from Oil & Gas, Healthcare and Bankex are contributing to the recovery. The overall breadth on BSE was in the favour of declines which outnumbered advances in the ratio of 1792:623, while, 77 shares remained unchanged.

The BSE Sensex is currently trading at 17,835.70, up by 60.00 points or 0.24%. The index touched a high of 17,853.34 and a low of 17,593.79 respectively. There were 12 stocks advancing against 18 declines on the index.

The broader indices continued their downtrend; the BSE Mid cap and Small cap indices lost 1.08% and 1.54% respectively.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.48%, Bankex up by 0.66% and Healthcare up by 0.10%.While, Realty down by 3.02%, Power down by 1.21 %, Metal down by 0.98%, Fast Moving Consumer Goods down by 0.64% and Public Sector Undertaking down by 0.47% were the major losers on the index.

The only gainers on the BSE were, M&M up by 2.84%, Reliance Industries up by 2.14%,ICICI Bank up by 1.99%, ONGC up by 1.77%, and HDFC up by 1.46%.

Bajaj Auto down by 2.86%, Hindalco down by 2.54%, BHEL down by 2.31%, RCom down by 2.08% and  DLF down by 1.82% were the top losers on the index.

Meanwhile, India's central bank has once again raised concern of the Chinese government artificially keeping its currency cheaper, a move that the Reserve Bank of India (RBI) feels will hurt the Indian exports to the fastest growing large economy in the world, and thus widen India's merchandise trade gap against China.   

Governor of the RBI, D Subbarao, said on Tuesday that India was running a huge trade gap with China which was not good for the health of country's current account balance. "It (trade balance between India and China) is decisively in favour of China but China is keeping its currency Yuan low that hurts India in some ways," he commented.

The Indian government has been somewhat soft in criticizing the currency policies of the Chinese government, which has come under severe attack from the US on the same matter, probably in wake of the two Asian giants looking to improve relations. However, the central bank had raised the same issue earlier as well and seems to reflect a feeling deeper in the Indian policy makers, particularly in wake of surging trade gap with China. 

India's current account deficit (CAD) is becoming a significant macro-economic challenge and is likely to reach 3.5% of the gross domestic product (GDP) of Indian economy. The central bank and the independent economists have alike been concerned that rising CAD can impact macro-economic stability of the country in case there was a significant outflow of foreign capital from the country in the event of a global shock like that seen in late 2008 and resulting deleveraging.

Also, a related issue is that off-late the Indian economy has been attracting more foreign institutional investment, but the direct investment has gone down considerably in the current financial year. For FY11, estimate is that overall direct investment from overseas will go down by around 30%. Since the institutional investment tends to be inherently volatile, the RBI has been saying that more efforts should be made to attract more of the direct investment.

The S&P CNX Nifty is currently trading at 5,329.15, up by 16.60 points or 0.31 % from its previous close. The index and touched a high and a low of 5,336.75 and 5,253.55 respectively. There were 18 stocks advancing against 32 declines on the index.

The top gainers of the Nifty were Kotak Bank up by 5.05%, Sun Pharma up by 4.26%, M&M up by 3.25%, HDFC up by 2.35% and Reliance Industries up by 2.11%.

The top losers of the index were Bajaj Auto down by 2.93%, Hindalco Inds down by 2.63%, HCL Technologies down by 2.25%, BHEL down by 2.18% and RCom down by 1.99%.

Asian markets were mostly in the red; Hang Seng down by 0.64%, Jakarta Composite down by 1.63%, KLSE Composite down by 0.31%, Straits Times down by 1.07%, Seoul Composite down by 1.31% and Taiwan Weighted was down by1.07% and Nikkei 225 down by 0.19%.

On the flip side; Shanghai Composite was marginally up by 0.05%.

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