Local bourses after showcasing a bit of optimism in early deals are currently treading water on Friday, as investors shunning large bets have opted to stay on the bay ahead of Federal Reserve Chief Ben Bernanke's closely watched speech at Jackson Hole later in the day. Benchmarks spiraling around the neutral line have stuck in tight ranges as uncertainty over whether Bernanke would use the speech to signal further steps to stimulate the ailing U.S. economy have kept traders uneasy.
On the global front, U.S. stocks fell on Thursday as investors raised cash ahead of a critical speech from Fed chairman Ben Bernanke. Meanwhile, Asian shares too were showcasing positive momentum. Moreover, the US future indices too are showing an uptick on the screen trade. Back home, on the BSE sectoral front, buying in Auto, Information Technology and TECk counters have provided a ceiling to the bourses loss, however, Realty, Power and Bankex are the one amongst the most battered space. Banking shares have been pummeled in trade on prevailing asset quality concern as the Reserve Bank of India ruling out concerns over a systemic risk to the country's banking system owing to a potential economic slowdown, said that the rising interest rates may hurt quality of loans.
The 30 scrip sensitive index -Sensex- on Bombay Stock Exchange after crossing the 16200 mark, has recoiled and is currently trading up over 25 points. Similarly, the 50 share index-Nifty-on NSE-gaining close to 5 points is trading nearer to its neutral line. The broader indices with no exception are tailing the footsteps of the larger counterparts. The overall market breadth on BSE is slightly higher in the favour of advances which have outpaced declines in the ratio of 1068:1066, while 106 shares have remained unchanged.
The BSE is currently trading at 16,175.24, up by 28.91 points or 0.18%. The index has touched a high and low of 16,256.38 and 16,113.82 respectively. There were 17 stocks advancing against 13 declines on the index.
The broader indices descended in red; the BSE Mid cap index was down by 0.37% while, Small cap index was down by 0.05%.
The top gaining sectoral indices on the BSE were, Auto up by 1.00%, IT up by 0.60%, TECk up by 0.50%, CG up by 0.27%, and HC up by 0.22%. While, Realty down by 1.12%, Power down by 0.90%, Bankex down by 0.47%, Metal down by 0.42%, and FMCG down by 0.30% were the top losers on the index.
The top gainers on the Sensex were Mahindra &Mahindra up by 1.87%, Tata Motors up by 1.53%, Bharti Airtel up by 1.11%, Hero Moto Corp up by 1.00% and TCS up by 0.97%.
On the flip side, up by 1.87%, Tata Power down by 3.30%, DLF down by 2.09%, Jaiprakash Associates down by 1.85% SBI down by 1.35% and NTPC was down by 1.03% were the top losers on the Sensex.
Meanwhile, the Small and Medium Enterprises (SMEs) sector is expected get credit at subsidized rates as the government is mulling over the recommendation of commerce department of Interest Subvention Scheme for the SMEs. As per the commerce department proposal, SMEs selling both in domestic and international markets would be eligible for subsidized loans.
The recommendation of commerce department is expected to have positive impact on financial health of SMEs as the sector is going through a difficult time in accessing credit and they get it at the highest rate. The commerce department is discussing the proposal with the Ministry of Finance and it anticipates getting favorable decision on the recommendation.
However, the proposed interest subvention scheme for the SMEs sector does not include large exporters as commerce department feels that exports are doing well and department is unlikely to extend the scheme for exporters in general. For the first time, a financial support scheme has been recommended for entire SME sector. The financial support scheme which lapsed on March 31 covered only SME exporters in addition to export sectors such as carpets, handloom and handicraft. The subvention scheme offered a 2% discount on the interest rate charged by banks.
However, subvention rate for SMEs might be higher. A commerce department official said, 'Banks give credit to SMEs at rates much higher than what is offered to large producers. We have not yet arrived at the subvention rate that would be offered to SMEs, but we are trying to get them a higher discount.'
The interest rate charged by banks to SME sector is around 13-15% whereas banks charge around 10-11.5% to large producers, according to the experts, this subvention scheme would give access to finance. Although the SME sector is included in the priority sector lending directive by Reserve Bank of India to banks, along with the other sector like housing, which is more attractive for banks.
The small exporters from SME sectors were demanding financial support from government for long time, as the increased cost of capital due to nonstop hike by RBI, had increased difficulties for small exporters to get credit from banks. However, on the other hand, large exporters have the view that the financial support must be offered to all exporters from labour intensive sectors, so that they can compete with other countries such as China. In the subvention scheme, banks offer loans to the identified sectors at lower interest rates depending on the rate of subvention which is later reimbursed by government.
The S&P CNX Nifty is currently trading at 4,844.05, higher by 4.45 points or 0.09%. The index has touched a high and low of 4,872.00 and 4,829.55 respectively. There were 24 stocks advancing against 26 declines on the index.
The top gainers of the Nifty were M&M up by 1.86%, TCS up by 1.48%, Tata Motors up by 1.43%, Cipla up by 1.14% and GAIL up by 1.13%.
On the flip side, Tata Power down by 3.34%, Reliance Capital down by 2.86%, Sesa Goa down by 2.66%, Power Grid Corporation of India down by 2.56% and Reliance Communication down by 2.47% were the major losers on the index.
Most of the Asian counterparts were trading in the red; Shanghai Composite was down by 0.79%, Hang Seng was down by 0.21%, Jakarta Composite was down by 1.01%, KLSE Composite was down by 1.24%, Nikkei 225 was down by 0.11% and Straits Times was down by 0.73%.
On the flip side, Seoul Composite was up by 0.38% and Taiwan Weighted was up by 0.19%.
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