Benchmarks witness blood bath in early trade; Nifty down 0.50%

The Indian equity markets have made a soft start tracking weak cues from across the globe. The US markets continued their selloff for yet another day overnight as the crisis in Libya aggravated after the forces loyal to Libyan leader used power on the demonstrators that led to shut down of operations by many oil companies and oil prices surged to over two years high. Though Asian peers were also trading mostly in the negative terrain at this point of time, indicating somber investors sentiments. Back home, sustained selling in the heavyweights and broader indices were keeping the momentum on a negative side. NSE's -- Nifty -- was hovering near its crucial 5,400 level as investors remained cautious ahead of the expiry of February F&O series. On the sectoral front, healthcare, software and capital goods were the major losers, while there were no gainers in the trade. The broader indices too have witnessed lackluster trade in the early morning session. Meanwhile, PSU oil marketing companies viz BPCL, HPCL and IOC sustained bleeding in the trade on continuous rise in the crude prices. The market breadth on the BSE was negative; there were 616 shares on the gaining side against 848 shares on the losing side while 50 shares remained unchanged.

The BSE Sensex opened at 18,135.12; about 43 points lower compared to its previous closing of 18,178.33, and has touched a low of 18,067.60, while high remain its opening.

The index is currently trading at 18,094.62, down by 83.71 points or 0.46%. There were 9 stocks advancing against 21 declines on the index.

The overall market breadth has made a negative start with 40.69% stocks advancing against 56.01% declines. The broader indices too were bleeding; the BSE Mid cap and Small cap indices lost by 0.44% and 0.12% respectively.

All sectoral indices on the BSE were trading down; HC down by 0.86%, IT down by 0.83%, CG down by 0.77%, Bankex down by 0.66% and Oil and Gas down by 0.61%, were the major losers on the index.

The only gainers on the BSE were, Hero Honda up by 2.73%, Bharti Airtel up by 2.03%, Tata Steel up by 0.75%, DLF up by 0.59% and SBI up by 0.50%.

Maruti Suzuki down by 2.71%, Infosys down by 1.37%, L&T down by 1.20%, Jaiprakash Associates down by 1.07% and ICICI Bank down by 1.01% were the top losers on the index.

Given the high inflation that has been witnessed by Indian economy over last one year or so, the government may increase the tax exempted income limit in the forthcoming General Budget to be released on Feb 28, said the financial services conglomerate Goldman Sachs.

'Income tax relief can be provided to lower income brackets to compensate for inflation. This could take the form of raising the tax exemption limit from the current Rs 1.6 lakh,' it said in a report. Currently, income of Rs 1,60,000 is exempted from tax for individuals. However, the limit is higher at Rs 1,90,000 crore for women and Rs 2,40,000 for senior citizens.

In the direct tax code (DTC) to be applicable in next fiscal year according to the finance ministry, the tax exempted income ceiling has been pegged at Rs 2 lakh. However, inflation has been surging over last one year which has eroded the real income of individuals, particularly those at the lower end of the income pyramid. This has led to suggestions that tax exemption limit should be hiked for the coming fiscal itself which will help counter the impact of inflation by raising disposable income. 

However, the finance ministry also faces some serious constraints on how much relief it affords to give to the public. First, as per the revised fiscal consolidation path envisaged in the fiscal responsibility and budget management act, the government has to cut the fiscal deficit to 4.8% in 2011-12 as against 5.5% budgeted in the current year. Further, its spending on flagship social sector schemes like the Mahatma Gandhi National Rural Employment Guarantee Act etc will increase. This obviously necessitates raising the level of revenue and hence limits how much tax relief can be provided. The finance ministry therefore will have to draw a very fine balance between tuning taxation in line with inflation and ensuring buoyancy in revenue. 

The S&P CNX Nifty opened at 5,408.75; about 29 points lower compared to its previous closing of 5,437.35, and has touched a high and a low of 5,423.40 and 5,404.15 respectively.

The index is currently trading at 5,410.45, down by 26.90 points or 0.49%. There were 18 stocks advancing against 32 declines on the index.

The top gainers of the Nifty were Hero Honda up by 2.36%, Bharti Airtel up by 1.87%, Suzlon up by 1%, Sun Pharma up by 0.71% and SAIL up by 0.71%.

The top losers of the index were Maruti down by 2.77%, Kotak Bank down by 2.14%, BPCL down by 1.87%, Dr Reddy down by 1.77% and Reliance Capital was down by 1.39%.

Asian markets were trading mostly in the negative terrain; Jakarta Composite was down 24.18 points or 0.70% to 3,449.95, KLSE Composite was down 1.46 points or 0.10% to 1,509.65, Nikkei 225 was down 49.41 points or 0.47% to 10,529.69, Straits Times was down 1.14 points or 0.04% to 3,000.71 and Seoul Composite was down by 1.75 points or 0.09% to 1,959.88.

Shanghai Composite was up 8.04 points or 0.28% to 2,870.67, Hang Seng was up 21.96 points or 0.10% to 22,928.86 and Taiwan Weighted was up 71.41 points or 0.84% to 8,600.35.

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