Indian stocks likely to see subdued opening: Wednesday Market Preview

Wall Street closed mixed on Tuesday on fears of lower earnings estimates and tracking the decline in the US markets, the ones in Asia opened lower on Wednesday

The local market is likely to see a lower opening today on lacklustre global cues. The market, which settled sharply lower yesterday on the hawkish monetary policy by the Reserve Bank of India (RBI), is expected to be weighed down as investors react to the details of the policy. On the global front, Wall Street closed mixed on Tuesday on fears of lower earnings estimates. Tracking the decline in the US markets, the ones in Asia opened lower on Wednesday. The SGX Nifty was down 23.50 points at 5,539 against its previous close of 5,652.50.

Yesterday, the Sensex and Nifty fell by 2.44% and 2.39%, taking a hard knock from the larger-than-expected rate hike announced by the Reserve Bank of India (RBI) in its annual monetary policy. This is the biggest drop in the market since 25 February 2011. The Sensex plunged 463 points to 18,535 and the Nifty dropped 136 points to 5,565. It is also for the first time since 23 March 2011 that the indices have closed below the 50-day moving average. The support for the Nifty now lies somewhere around 5,300.

Trading was range-bound and hovered about the neutral line in the mid-morning session when it also touched the day's high at about 10.45am. At the high point, the Sensex was up 27 points at 19,025 and the Nifty gained 10 points to 5,711. But as soon as details of the RBI policy trickled in, the indices slipped into negative terrain.

An across-the-board sell-off resulted in all sectoral gauges dipping into the red. In the afternoon, as two of three European benchmarks opened lower and US stock futures indicated a negative trend, the domestic indices continued to reel under pressure. Besides, increasing key rates, the central bank also underlined the need to adopt strong measures that could curb growth in the short term.

US markets closed mixed overnight on concerns of lower earnings estimates and continuing fall in crude prices. Pfizer plunged 2.8% on lower earnings, Chevron tanked 2.01% and Exxon Mobil declined 1.6%. On the other hand, Alcoa advanced 2.6% on rumours that Rio Tinto will make a bid for the metals company. MasterCard gained 2.6% on higher first quarter profit and Avon Products soared 4.5% on improved earnings due to lower costs.

In economic news, factory orders surged 3% to a seasonally adjusted $463 billion in March, as per data from the Commerce Department. The gain was the fifth in a row and beat analysts’ estimates for a 1.9%.

The Dow added 0.15 points to 12,807.51. The S&P 500 shed 4.60 points (0.34%) to 1,356.62 and the Nasdaq declined 22.46 points (0.78%) to 2,841.62.

Markets in Asia were in the red in early trade on Wednesday on lower oil prices and fresh concerns about the European debt issues. The South Korean index was lower on profit taking after recent gains.

Oil prices declined over 2% on Tuesday as gains in the dollar helped spark a technical sell-off. Brent crude for June delivery fell $2.67 to settle at $122.45 a barrel and US crude for June dropped $2.47 to settle at $111.05 a barrel.

Meanwhile, the Shanghai Composite declined 0.96%, the Hang Seng tanked 1.02%, the Jakarta Composite fell by 0.19%, the KLSE Composite slipped 0.48%, the Straits Times retraced 0.77%, the Seoul Composite tumbled 1.10% and the Taiwan Weighted was down 0.59%. The Nikkei 225 remained closed for trade.

Back home, the RBI on Tuesday said the uncertainty over issuing guidelines for new bank licences is likely to continue for some more time as it is in consultation with the government over the draft norms.

The central bank was hoping that the legislation would go through in the Budget session but it got curtailed. There is some uncertainty about the timeframe as some loose ends are still to be tied-up, RBI governor D Subbarao said.

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RBI to extend short-sale period for G-Secs to three months

Proposal aims to give a fillip to interest rate futures and term repo markets

Mumbai: The Reserve Bank of India (RBI) today said that it has proposed to extend the period of short sale in central government securities (G-Secs) from the current five days to a maximum of three months.

The move will provide a fillip to the interest rate futures market and the term repo market, the RBI said in its monetary policy statement for FY 12.

Intra-day short-selling in G-Secs was permitted in February 2006 based on the recommendations of the technical group on the central government securities market, PTI reports.

In January 2007, based on the feedback received, the period of short-sale was extended to five days. The apex bank now proposes to extend the period of short-sale to a maximum period of three months.

The RBI also said that foreign institutional investors (FIIs) would be allowed to cancel and re-book up to 10% of the market value of the portfolio as at the beginning of the financial year. Currently, FIIs are permitted to cancel and re-book 2% of the market value of the portfolio as at the beginning of the financial year.

The move is in response to the large positions held by FIIs, and in view of the increased depth of the Indian forex market to absorb the impact on the exchange rate, the RBI said. Detailed guidelines on this would be issued separately.

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Share prices reel under RBI policy pressure: Tuesday Closing Report

Sell the rallies. The next support for the Nifty lies at 5,300

Today, the Sensex and Nifty fell by 2.44% and 2.39%, taking a knocking from the larger-than-expected rate hike announced by the Reserve Bank of India (RBI) in its annual monetary policy. This is the biggest drop in the market since 25 February 2011. The Sensex plunged 463 points to 18,535 and the Nifty dropped 136 points to 5,565. It is also for the first time since 23 March 2011 that the indices have closed below the 50-day moving average. The support for the Nifty now lies somewhere around 5,300.

The market opened lower on speculation that the RBI would hike policy rates to curb rising prices. Trading was range-bound and hovered about the neutral line in the mid-morning session when it also touched the day's high at about 10.45am. At the high point, the Sensex was up 27 points at 19,025 and the Nifty gained 10 points to 5,711. But as soon as details of the RBI policy trickled in, the indices slipped into negative terrain.

An across-the-board sell-off resulted in all sectoral gauges dipping into the red. In the afternoon, as two of three European benchmarks opened lower and US stock futures indicated a negative trend, the domestic indices continued to reel under pressure. Besides, increasing key rates, the central bank also underlined the need to adopt strong measures that could curb growth in the short term, and this pulled the market down nearly 2.50% by the close. The advance-decline ratio on the National Stock Exchange was a poor 269:1504.

The market has slipped lower each day over the past seven consecutive trading days. Since 1990, the market has been down for seven consecutive trading days 37 times (including the current fall). Of these 37 occasions, it has turned positive on the eighth day 21 times, and stayed negative 16 times.

The broader indices also suffered a similar fate. The BSE Mid-cap index tumbled 1.86% and the BSE Small-cap index slipped 2.08%.

Rate-sensitive sectors were mauled. BSE Auto (down 3.74%), BSE Realty (down 3.11%), BSE Bankex (down 2.91%), BSE Consumer Goods (down 2.65%) and BSE Capital Goods (down 2.51%) were the top losers. There were no sectoral gainers today.

BHEL (up 0.19%) was the solitary gainer among Sensex stocks. Jaiprakash Associates (down 8.05%), Tata Motors (down 5.30%), Bajaj Auto (down 5.02%), Mahindra & Mahindra (down 4.47%) and Larsen & Toubro (down 4.17%) were the top losers on the benchmark.

The RBI today raised its short-term lending (repo) rate and short-term borrowing rate (reverse repo) by 50 basis points each to 7.25% and 6.25%, respectively. This is the ninth time that the central bank has increased its key interest rates since March 2010.

The apex bank also increased the savings bank rate by 50 basis points to 4% from the current rate 3.5%, a move that will give higher returns to depositors in the wake of continuing high inflation. However, the RBI has lowered its economic growth projection for the current fiscal to 8%, compared to the 9% estimate by finance ministry.

Barring the Shanghai Composite, all other Asian bourses settled with losses. Investors in the region are worried that like China and now India, other central banks may also take harsh steps to curb rising prices. Automakers and refining companies pulled the South Korean market down, becoming the worst performer among Asia-Pacific markets today.

The Hang Seng declined 0.37%, the Jakarta Composite fell 0.92%, the KLSE Composite was down 0.23%, the Straits Times slipped 0.83%, the Seoul Composite tumbled 1.27% and the Taiwan Weighted fell 0.69%. Bucking the trend, the Shanghai Composite gained 0.71%. The Japanese market was closed for a local holiday.

Back home, institutional investors were sellers in the equities segment on Monday. Foreign institutional investors were net sellers of stocks worth Rs261.03 crore and domestic institutional investors were net sellers of shares worth Rs150.52 crore.

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