Realty, auto and banking stocks were the major gainers in a flat market

Indian markets pared gains from the day’s high on concerns over a hike in the cash reserve ratio by the central bank to suck out excess liquidity from the banking system.

The Sensex declined 175 points from the day’s high of 17,361, ending the day at 17,186—up 16 points from the previous day’s close—while the Nifty closed at 5,132, up 8 points.

During the day, DLF remained flat. As per reports, the company’s founders plan to list their real-estate investment trust, DLF Assets, in Singapore in June 2010, to raise about $1.20 billion.

Rural Electrification Corp gained 2% after reports suggested that the State-run power finance firm’s follow-on share offer could hit the market between 21-27 January. The offer is expected to raise about Rs40 billion.

Oil and Natural Gas Corporation-led OVL—in association with the Hinduja Group and Petronet LNG—has entered into two broad enabling agreements with Iranian authorities, for participation in development of gas fields and liquidification facilities in Iran, in return for assured minimum 6 million tonnes of LNG per annum on a long-term basis. The stock was up 1%.

HCL Technologies has entered into a SAP implementation engagement with Sahara Petroleum Services Company, which provides services to oil & gas companies in the Middle East and North Africa. This implementation spans SAPESCO’s presence in Egypt, Libya and Syria. The stock was up 2%.

Indian markets remained in the green on expectations that the Union Cabinet would clear the Pension Fund Regulatory & Development Authority Bill that seeks to bring foreign direct investment (FDI) into the sector. The Bill proposes to allow foreign players to hold up to 26% stake in Indian pension fund companies. It would also permit pension funds to deploy part of their corpus abroad in approved instruments.

The pension Bill, originally introduced in Parliament in 2005, could not be cleared due to stiff opposition from Left parties. It was then referred to the Parliamentary Standing Committee on Finance, which recommended the Bill with some modifications.

According to Angel Gurria, secretary general of the Organisation for Economic Cooperation and Development (OECD), India needs reforms in its product and labour markets for high economic growth. OECD has forecast that the Indian economy will expand more than 7% in 2010 and 7.5% in 2011.

As per a survey, the business activity among Indian services companies expanded in November 2009 but at a slower pace than in the previous month, with broad growth across all sectors. The HSBC Markit Business Activity Index, based on a survey of 400 firms, fell to 55.20 in November after having climbed to a 13-month-high of 56.78 in October.

According to D Subbarao, governor, Reserve bank of India (RBI), the central bank’s main function is to maintain price stability. He also said that the central bank would revisit its growth target of 6% with an upward bias at its 27 January 2010 monetary policy review.

Usha Thorat, deputy governor, RBI, said that the central bank was likely to revise upwards the economic growth forecast for the current fiscal year to March when it reviews policy in January. She also said that money supply in the current year has been exhibiting slower growth. India’s exit from its loose monetary policy will be a challenge and managing the crisis was easier than managing the recovery now, she said.

As per data released by the government, food inflation soared to 17.47% in the third week of November from 15.58% a week ago, mirroring a shortage in supply that set in following the weak monsoon in the country while the primary article index rose 12.53%. The fuel price index was unchanged.

C Rangarajan, chairman of the prime minister’s Economic Advisory Council, said high inflation would require monetary action on liquidity and food prices must be controlled through supply-side measures. His comments reinforced market expectation of a hike in the cash reserve ratio (CRR) by the central bank to suck out excess liquidity from the banking system. He said tax receipts were expected to pick up and the government was likely to maintain its fiscal deficit target.

He also reiterated the government stance that the fiscal stimulus would remain in place till the end of the fiscal year in March.

As per the latest statement of the position of commercial banks from the Reserve Bank of India, bank credit for the fortnight ended 20 November 2009 increased by Rs7,056.63 crore to Rs28,98,769.90. In the preceding fortnight, bank credit increased by Rs23,147.60 crore. As per media reports, bankers said that credit growth is likely to pick up following the better-than-expected second quarter GDP growth numbers.

During the day, Asia’s key benchmark indices in Hong Kong, Singapore, Japan, Indonesia, Taiwan and South Korea rose between 0.09%-3.84%. However China’s index fell 0.16%.

On Wednesday, 2 December 2009, the Dow Jones Industrial Average was down 19 points while the S&P 500 was flat and the Nasdaq Composite was down 9 points.

As per US reports, the ADP National Employment Report showed that private employers shed 1,69,000 jobs from their payrolls in November 2009.

This figure was lesser than the jobs lost in October 2009 but more than expected.

Meanwhile the Fed’s beige-book report was the most upbeat in about two years. The report showed consumer spending up moderately, and an improvement in both home sales and construction. However, commercial
real-estate activity was noted as “deteriorating” and labour conditions remained weak.

However, Federal Reserve officials warned that timing withdrawal of the bank’s extraordinary support for the economy would prove difficult.

In premarket trading, the Dow was trading 36 points higher.
— Swapnil Suvarna