Markets recoup losses ahead of RBI's annual credit policy announcement

Equity markets are showing sign of recovery led by stocks from banking sector. Though, the benchmark indices recouped all their losses to trade flat with positive bias, the trade at Dalal Street remains quite rangebound as investors are treading cautiously ahead of the much-debated announcement coming from the RBI stable-the Credit Policy. For markets, banks and economists, it is almost certain that RBI will raise interest rates by a minimum of 25 basis points on Tuesday in order to bring down prices .Further, in its report on macroeconomic and monetary developments, which is a prelude to its policy announcement, RBI said that "as prices continue to remains stubbornly high, there is a need to continue with its anti-inflationary monetary policy stance". The report also said that despite RBI's measures, inflation was expected to stay high for some time. The central bank warned that in coming months it may be forced to make a trade-off between inflation and growth. Back on street, negative global equities are also restricting the gains of the local shares as after the lower close of US markets overnight, Asian shares are now trading in the red territory. On the BSE Sectoral front, apart from Bankex that has led to the recovery, stocks from Metal, PSU and Helath care sectors have also contributed to the gains of the markets. However, stocks from Auto, Realty and Consumer Durable space.  Both the benchmark indices, i.e. Sensex on Bombay Stock Exchange (BSE) and Nifty--on NSE were trading above its physiological level of 19000 and 5700 respectively. Meanwhile, broader indices continued trading in green and were ruling up by 0.21 (BSE Midcap Index) and 0.09 %( BSE Smallcap Index) respectively. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1090:986, while 94 shares remained unchanged.

The BSE Sensex is currently trading at 19,002.36, up by 4.34 points or 0.02%. The index has touched a high and low of 19,008.21 and 18,898.08 respectively.  There were 12 stocks advancing against 17 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices gained 0.21% and 0.09%, respectively.

The top gaining sectoral indices on the BSE were, Bankex up by 0.53%, Metal up by 0.39%, PSU up by 0.33%, HC up by 0.29% and Power was up by 0.28%. While Auto down by 0.52%, Realty down by 0.35%, CD down by 0.27%, CG down by 0.12% and FMCG down by 0.10% were the top losers on the index.

The top gainers on the Sensex were Sterlite Industries up by 1.78%, BHEL and SBI were up by 1.09%, Reliance Infra up by 1.08% and Tata Power was up by 0.93%.

On the flip side, M&M down by 1.29%, L&T down by 0.89%, Bharti Airtel down by 0.85%, Maruti Suzuki down by 0.76% and JP Associates down by 0.70% were the top losers on the index.

Menwhile, India's fuel retailers are set to lose record money in the current financial year until there is a dramatic decline in international crude oil prices or the domestic retail prices of fuels are hiked sharply. With none of these looking to happen soon, the oil marketing companies (OMC) are looking at serious losses for FY12.

In the last financial year, OMCs lost Rs 78,000 crore owing to selling petrol, diesel and kitchen fuel below cost. A third of these under-recoveries were borne by upstream companies including ONGC, GAIL India, and Oil India through supplying cheaper crude. Fuel retailers also got Rs 38,386 crore as government subsidy for first three quarters and are still waiting for the fourth quarter subsidy, which would be much higher. This is because India's crude oil basket reached $101 a barrel in Q4 compared with around $78 a barrel in first three.

Going by that, under-recoveries are set to surge further in current quarter where crude has continued to remain close to $120 a barrel so far. According to estimates prepared by the Kirit Parekh committee, at current levels of crude prices, OMCs' losses will surge to around Rs 1,80,000 crore over the full fiscal year, which by any means is beyond what the government can manage with its current finances. For a general idea, at this level, under-recoveries will be around 3% of India's gross domestic product and nearly 20% of Indian government's full fiscal revenue.

Even if the upstream companies bear 33% of the losses, the downstream companies are not in position to bear even 10% of such a mammoth figure. The rest will have to be borne by the government. Since the government does not have resources to put in such a huge amount of subsidy, it will have to hike retail fuel prices at some stage to partially pass on the higher crude prices through higher retail fuel prices. 

The S&P CNX Nifty is currently trading at 5,704.50, up by 3.20 points or 0.06%. The index has touched a high and low of 5,708.00 and 5,673.00 respectively. There were 25 stocks advancing against 24 declines, while 1 stock remained unchanged on the index.

The top gainers of the Nifty were Kotak Bank up by 2.37%, Sterlite Industries up by 1.84%, SBI up by 1.07%, IDFC up by 1.04% and BHEL up by 1.02%.

M&M down by 1.42%, GAIL down by 1.39%, Powergrid Corporation of India down by 1.08%, L&T down by 1% and JP Associates down by 0.86% were the major losers on the index.

Asian markets were trading mostly in the red; Jakarta Composite declined 0.86%, KLSE Composite lost 0.24%, Straits Times dropped 0.74%, Seoul Composite plunged 1.68%, and Taiwan Weighted shed 1.10%.

On the flip side, Shanghai Composite gained 0.18%, Hang Seng added 0.18%. Stock markets in Japan remained closed today on account of Japan's annual Golden Week holiday 

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