Local equity markets continue to trade lower

The local equity markets continue to trade lower in late morning session as traders continued to book profits on the back of recent rally in Nifty, which has surged by about 5% in past two trading sessions after last week's steep fall. The other Asian markets were also trading on mixed note and US index futures were showing negative trend, weighing on the sentiments of the local pivotal. On the sectoral front, Realty Capital Goods (CG), IT, Metal and TECk stocks are among the worst hit while Bankex, Oil & Gas and PSU counters were giving some support to the markets. The broader markets too continue to trade weak, the BSE Mid cap and Small cap indices were down by 0.39% and 0.07% respectively. The market breadth has turned weak; the losers thrashed the gainers in the ratio of 1402:1086 while 84 shares remained unchanged.

The BSE Sensex trimmed 39.02 points or 0.21% to 18,163.18.The index touched a high of 18,278.62 and a low of 18,050.48 respectively.

The BSE Mid cap and Small cap indices were down by 0.39% and 0.07% respectively.

In BSE sectoral indices Bankex up 1.06%,Oil & Gas up 0.42%  and PSU up 0.20% were the only sectoral gainers .

On the other hand Realty was down by 1.50%, CG was down by 1.45%, IT down was down by 0.94%, Metal down by 0.78% and TECk down by 0.73%.

The top gainers of the BSE Sensex were Tata Power up by 2.15%, ICICI Bank up 1.89%, Reliance Communication up by 1.39%, Bajaj Auto up by 1.25% and RIL up by 0.86%

The losers on the BSE were, JP Associates down by 3.04%, M&M down by 3%, BHEL down by 2.59%, TCS down by 2.58% and L&T was down by 1.75%.

The fiscal deficit of the Union Government is likely to remain close to 5% for the next fiscal as well. Most economists feel that somewhat higher deficit can stem from increasing expenditure needs to continue and expand the social sector schemes like the national rural employment guarantee scheme etc.

While the government is committed to fiscal consolidation, it will not be easy for it to bring down the fiscal deficit in a hurry. The government had in last Budget accepted the revised timeline for fiscal consolidation as recommended by the Thirteenth Finance Commission (TFC). The finance ministry is in pretty good position to meet the deficit target for current fiscal despite higher spending on subsidies, due to bumper revenue on the non-tax frontier from the third generation (3G) telecom spectrum auction.

However, things will be much more difficult in the next fiscal. There will be no onetime major receipt like the one from spectrum auction this fiscal. Spending on the other hand, will continue to surge as allocation for social sector schemes is likely to show substantial increase. With commodity prices surging, fuel and fertilizer subsidy will also remain high.

In this wake, while the finance ministry will manage deficit target for current fiscal easily, it will be significantly challenging to bring it further down for the next fiscal in line with TFC's recommendations. However, going by the statements of finance ministry so far, it does seem very much inclined to follow the TFC's time path for fiscal consolidation. It will be interesting to see therefore how the finance ministry manages the trade-off between social inclusion and fiscal deficit.

The S&P CNX Nifty declined 9.05 points or 0.17% to 5,446.95 .The index touched a high of 5,474.45 and 5,408.35 respectively. There were 11 stocks advancing against 39 declines on the index.

The top gainers of the Nifty were Tata Power up by 2.23%, BPCL up by 1.82%, ICICI Bank up by 1.76%, Kotak Bank up by 1.63% and IDFC up by 1.50%.

The top losers of the index were JP Associates down by 3.20%, M&M down by 3.18%, Hindalco down by 2.48%, TCS down by 2.43% and suzlon was down by 1.74%.

The other regional peers were trading in mixed note; Shanghai Composite surged 0.25%, Nikkei 225 advanced 0.20% and Taiwan Weighted advanced by 0.42% while Hang Seng declined 0.45%, Straits Times dropped 0.85% and Seoul Composite down0.20%

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