Benchmarks witness blood bath in early trade; Nifty down 0.93%

The Indian equity markets have made a soft start tracking weak cues from Asian counterparts. All the Asian peers barring Japanese Nikkei were trading in the negative terrain at this point of time as China raised interest rates on Tuesday for the second time in just over six weeks, indicating somber investors' sentiments. Though, the US markets continued their bull run overnight on the back of good earnings announcements. Back home, sustained selling mostly in all the heavyweights and broader indices were keeping the momentum on a negative side and led the NSE's -- Nifty -- below its crucial level of 5,300. On the sectoral front, realty, consumer durables and metal were the major losers, while there were no gainers in the trade. The broader indices too were bleeding badly in the trade, both small cap and mid cap indices were down by about two percent. Meanwhile, the investors are waiting for the Union Budget 2011-2012 slated to be unveiled by the finance minister Pranab Mukherjee on 28 February 2011, which will be the next major trigger for the stock market. The investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The market breadth on the BSE was negative; there were 305 shares on the gaining side against 1496 shares on the losing side while 47 shares remained unchanged.

The BSE Sensex opened at 17,723.99; about 52 points lower compared to its previous closing of 17,775.70, and has touched a low of 17,616.34, while high remain its opening.

The index is currently trading at 17,631.41, down by 144.29 points or 0.81%. There were just 3 stocks advancing against 27 declines on the index.

The overall market breadth has made a negative start with 16.50% stocks advancing against 80.95% declines. The broader indices too were bleeding; the BSE Mid cap and Small cap indices lost by 1.95% and 2.35% respectively.

All sectoral indices on the BSE were trading down; Realty down by 4.40%, CD down by 2.18%, Metal down by 2%, Auto down by 2% and Power down by 1.74%, were the major losers on the index.

The only gainers on the BSE were, ONGC up by 0.78%, Reliance Industries up by 0.29% and Cipla up by 0.03%.

DLF down by 4.10%, RCom down by 3.79%, Bajaj Auto down by 3.42%, Hindalco down by 2.65% and Tata Motors down by 2.45% were the top losers on the index.

Meanwhile, in order to give some relief to inflation hit Indians, the government is likely to hike the tax exempt income ceiling from current Rs 1.6 lakh in the forthcoming General Budget to be presented by Union Finance Minister Pranab Mukherjee in the Parliament on February 28.

The government has already committed to raise the income tax exemption limit to Rs 2 lakh when it implements the Direct Taxes Code (DTC) in 2012-13. However, given the high inflation seen throughout the current fiscal, which has also been dubbed as main reason for slow growth in consumption of non-durables, the government may limit it to Rs 2 lakh in FY12 itself.

Further, in order to give a boost to savings in the country, the government is also likely to enhance the limit of investment in accepted instruments to claim deduction from taxable income. At present the investment limit for which tax can be deducted stands at Rs 1.2 lakh including Rs 20,000 in infrastructure bonds. The same might be hiked to Rs 1.4-1.5 lakh to encourage long-term savings.

The idea behind the potential move is that a higher saving rate gets translated into a higher investment rate, and higher investment as a percentage of gross domestic product (GDP), higher is the potential growth that an economy can achieve. For instance, the saving and investment rates in Indian economy were around 20 and 24% respectively in late 1990s when the economy was growing at around 6%. The same increased to 30/34% in early years of current decade that resulted in growth surpassing the 9% level in three years before the global financial crisis. China, which has seen growth in excess of 10%, has its saving/investment rates in mid-40s. 

The S&P CNX Nifty opened at 5,293.05; about 19 points lower compared to its previous closing of 5,312.55, and has touched a high and a low of 5,294.65 and 5,260.90 respectively.

The index is currently trading at 5,262.90, down by 49.65 points or 0.93%. There were just 6 stocks advancing against 44 declines on the index.

The top gainers of the Nifty were Sun Pharma up by 1.18%, ONGC up by 0.43%, Reliance Industries up by 0.32%, Power Grid up by 0.10% and Cipla up by 0.06%.

The top losers of the index were RCom down by 3.85%, Bajaj Auto down by 3.82%, GAIL down by 3.68%, IDFC down by 3.39% and Reliance Power was down by 3.36%.

All the Asian markets barring Japanese Nikkei were trading in the red; Shanghai Composite was down 0.74 points or 0.03% to 2,798.22, Hang Seng was down 99.93 points or 0.43% to 23,384.37, Jakarta Composite was down 56.02 points or 1.62% to 3,403.91, KLSE Composite was down 5.46 points or 0.35% to 1,534.09, Straits Times was down 37.75 points or 1.19% to 3,147.61, Seoul Composite was down 27.47 points or 1.33% to 2,042.23 and Taiwan Weighted was down by 68.25 points or 0.75% to 9,043.21.

On the flip side, Nikkei 225 was up 4.57 points or 0.04% to 10,640.55.

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