Nifty slips below 5400 mark; food inflation data eyed

After witnessing some resistance at the onset of the trading session the markets have shed off further weight on the back of unsupportive global cues. The local markets are trading weak ahead of the F&O series  expiry today and the weekly food inflation data due to be announced later in the day which have kept the cautious investors off the bay refraining to build any positions amidst anxiety over the Union Budget. Global uncertainty and the consolidations of the markets pre budget have taken the markets in red. As on the global front, the Dow closed lower overnight for a second session falling 107 points to 12,105, while the Asian markets extended losses on Libya unrest and rising crude. The US future indices too are trading in red. Back home, on the BSE Sectoral front, stocks from Capital Goods (CG), Auto and Bankex counters are taking utmost beating, while rest all counters too are not spared and have succumbed to selling pressure. The barometer indices have lost their psychological level of 18000 (Sensex) and 5400(Nifty) respectively. While the broader indices too are clobbered out of shape and are suffering with a cut of 1.13% (midcap index) and 0.94% (Small cap index) respectively. The markets breadth has no bent more in the favour of declines which are thrashed advances in the ratio of 1554: 613, while, 102 shares remained unchanged.

The BSE Sensex is currently trading at 17,999.19, down by 179.14 points or 0.99 %. The index has touched a high of 18,135.12 and a low of 17,962.68 respectively. There were 5 stocks advancing against 25 declining one's on the index.

The broader indices too were bleeding; the BSE Mid cap and Small cap indices lost 1.13% and 0.94% respectively.

All sectoral indices on the BSE were in red; Capital Goods (CG) down by 1.86%, Auto down 1.55%, Bankex down by 1.29%, Public Sector Undertaking (PSU) down 1.20% and Health Care down by 1.16% were the major losers on the index.

The only gainers on the BSE were, Hero Honda up by 2.91%, Bharti Airtel up by 1.42%, DLF up by 0.79% Wipro up by 0.46% and HUL up by 0.11 %.

Tata Motors down by 3.03%, L&T and M&M down by 2.64%, ONGC down by 2.18%, Sterlite Industries down by 1.68% were the top losers on the index.

The finance ministry is in a good position to meet the fiscal deficit target for current fiscal and is likely to end the year with around 5% deficit than 5.5% budgeted last year. This is mainly due to windfall revenue from 3G spectrum auction. However, for the next year it will be difficult to bring down deficit equally sharply.

Meanwhile, the finance ministry may settle for a deficit figure of 4.8% of the GDP, which was recommended by the thirteenth finance commission (TFC) in its revised roadmap to fiscal consolidation under the fiscal responsibility and budget management act (FRBMA) last year. Even as the revenue growth is likely to remain strong, the lack of any significant one time revenue like 3G auction is likely to limit the ability of finance ministry to further cut the deficit.

Now, even as the deficit next fiscal will be close to the final figure of current year, market borrowings might be much higher. This is because deficit would be computed as a percentage of GDP for next fiscal which is likely to be around 15% higher. Fiscal heads like market borrowing and budget deficit are obviously computed on a nominal GDP basis which is expected to grow around 14-15% of a real GDP growth of 9% is to be achieved, as the government has been contending.

Economists are expecting that the government may peg the net market borrowing at around 3.75 lakh crore, which will be significantly above the last year's number at Rs 3.45 lakh crore (budgeted) in absolute terms. Gross borrowings, which include the redemptions over the fiscal, will in this case reach around Rs 4.5 lakh crore. Clearly this is a rather huge amount in absolute sense and significantly higher than last year's level of Rs 4.2 lakh crore (budgeted), but as a percentage of GDP it is likely be remain close to the last year's levels itself.

Bond markets already seem to have factored in this kind of borrowings and if the expectation does come true, bond yields are likely to range between 8-8.25%, given that inflation follows the expected gradual declining trajectory. However, if the government somehow manages to bring down the borrowings below this level, it will be certainly positive for the bond markets and general investor sentiments as well.  

The S&P CNX Nifty is currently trading at 5,380.20, down by 57.15 points or 1.05%.The index has touched high of 5,423.40 and a low of 5,371.55 respectively. There were 9 stocks advancing against 41 declines on the index.

The top gainers of the Nifty were Hero Honda up by 2.67%, Bharti Airtel up by 1.31%, Cairn India up by 1.05%, DLF up by 0.93% and Wipro up by 0.33%.

The top losers of the index were Kotak Bank down by 3.66%, Tata Motors down by 3.09%, BPCL down by 2.96%, Reliance Capital down by 2.88% and M&M down by 2.70%.

Asian markets were trading mostly in the negative terrain; Jakarta Composite down by 0.63%, KLSE Composite declined 0.08%, Nikkei 225 shed 0.85%, Straits Times slid 0.03% and Seoul Composite lost 0.74%.

Shanghai Composite was up by 0.28%, Hang Seng  gained 0.07% and Taiwan Weighted added 0.34%.

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