Domestic benchmarks have come off from the high points of the day in the afternoon trade as selling pressure got intensified in rate sensitive banking majors like HDFC Bank ahead of its quarterly earnings announcement. While cautious investors are also attempting to cash in on positions at higher levels, lacking conviction of markets sustaining the initial optimism. However, broad based buying in blue-chip stocks is keeping the frontline indices afloat above the neutral line. Better than expected earnings of FMCG major HUL and metal heavyweight Hindalco have also provided the much needed lift to local sentiment. The index bellwethers like Reliance Industries and ONGC also made their presence felt by adding 0.43% and 1.79% respectively. Moreover leads from across the globe too remained encouraging as majority of Asian equity indices exhibited positive trends, the European counterparts on the other hand too opened in the green zone while the shrink back in international crude oil prices also supported investor's morale.
Meanwhile, the broader markets are trading with moderate gains and the midcap index added 0.28% while the smallcap index climbed by 0.44% points. The market breadth on the BSE was in favor of advances in the ratio of 1388:1056 while 138 scrips remained unchanged.
The BSE Sensex advanced 63.43 points or 0.34% at 18,592.39. The index touched a high and a low of 18,689.37 and 18,485.42 respectively.
On the BSE sectoral front, FMCG up 1.57%, Realty up 0.76%, Oil and Gas up 0.63%, IT up 0.63% and Metal up 0.50% were the major gainers.
On the flipside, Consumer Durables down 0.96%, Bankex down 0.54%, Healthcare down 0.05% and CG down 0.02% were the only laggards in the space.
The top gainers on the Sensex were HUL up 4.17%, R Com up 2.63%, Sterlite up 2.42%, NTPC up 2.37% and TCS up 1.84%.
On the flip side HDFC Bank down 0.84%, Tata Power down 0.42%, ICICI Bank down 0.24%, Tata Steel down 0.24% and Hero Honda down 0.10% were the only losers on the index.
Meanwhile, banks in India are already showing signs of slowdown in credit off-take as they are feeling the heat of Reserve Bank of India's anti-inflationary stance. According to the data released by the Reserve Bank of India (RBI) on April 22, bank advances declined by 0.95% to Rs 3,919,000.47 crore compared with the previous fortnight. For the fortnight ended April 8, total bank credit had posted a marginal (0.45%) increase as against the fortnight before while on a year on year basis, though, bank credit was up 21.89% for the fortnight ended April 22. On the other hand, deposit growth remained flat over the fortnight ended April 22, 2011 but on a yearly basis, deposit growth improved to 18%.
Reverberations of the Reserve Bank of India's aggressive stance to rein in the inflationary pressure on the economy have already started to emerge and its recent double whammy of hiking Repo and reverse repo rates by 50 bps and savings bank rate to 4% from 3.5%, may prove even worse for banks which are already struggling with higher borrowing costs compounded by the inability to raise lending rates sharply on concerns of moderating loan demand.
Credit growth for banks is usually subdued in the initial months of a fiscal year because corporate bodies are busy with their audits. However, expectations are rife that credit growth may stay slack for a longer period as retail credit growth, in sectors like housing, automobiles and consumer durables would be largely affected. After the RBI's 50 basis points hike in key policy rates, banks at large are on a spree to hike their base rates, which are touching double digits and making funds costlier for the corporate bodies as well as retail borrowers.
In the last fiscal year, the central bank had hiked rates eight times, to which the banks did not respond with base rate hikes of the same quantum. According to RBI norms, banks have to review their base rates at least once every quarter. Credit growth is the biggest and most potent contributor to demand-side inflation and therefore banks, the largest channel of loan disbursements, are seen as the most effective tool to manage inflation. Banks expect credit growth of 18-22% in FY12, with high interest rates impacting demand for loans from customers.
The S&P CNX Nifty gained 21.55 points or 0.39% at 5,572.65. The index touched high and low of 5,592.90 and 5,537.50, respectively.
The top gainers on the Nifty were HUL up 4.27%, Sterlite up 2.48%, NTPC up 2.40%, RCom up 2.24% and TCS up 1.70%.
On the other hand, Sun Pharma down 1.07%, HDFC Bank down 1%, Hero Honda down 0.76%, Ambuja Cement down 0.50% and HDFC down 0.46% were the major losers on the index.
On the Asian front Shanghai Composite added 0.39%, Jakarta Composite added 0.19%, KLSE Composite added 0.22%, Nikkei 225 added 0.25% and Straits Times added 0.57%.
On the flipside only Taiwan Weighted was down by 0.14%.
Stock markets in Hong Kong and South Korea remained shut for public holiday.
The European markets have opened on a positive note as the France's CAC 40 added 0.89%, Germany's DAX was up by 0.50% and London's FTSE 100 gained by 0.45%.
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