Moneycontrol
Dec 13, 2012 01:25 PM IST | Source: Moneycontrol.com

Nifty trades below 5900, shrugs off Asia rally; ITC slumps

Indian equity benchmarks continued to remain in a tight range with a negative bias, despite positive cues from Asian markets. Nikkei is up nearly 2 percent as exporters are buoyed by a weaker yen on mounting expectations that the Bank of Japan will implement more aggressive monetary easing.

Nifty trades below 5900, shrugs off Asia rally; ITC slumps

Moneycontrol Bureau


Indian equity benchmarks continued to remain in a tight range with a negative bias, despite positive cues from Asian markets. Nikkei is up nearly 2 percent as exporters are buoyed by a weaker Yen on mounting expectations that the Bank of Japan will implement more aggressive monetary easing.
 
At 12.20 hrs IST, the Sensex is down 22.36 points or 0.12 percent at 19332.90, and the Nifty down 1.75 points or 0.03 percent at 5886.25.


ITC slumped as much as 3.9 percent after FTSE lowered its free float weighting for the cigarette maker in its global equity index series, according to the web site of the index provider. The changes, which are effecting as of the close of trade on December 21, would impact passive trackers of FTSE indexes. Citigroup said in a note the change in free float weighting could lead to selling of 36 million shares in ITC, amounting to USD 200 million.


FTSE also increased Kotak Mahindra Bank's free float weighting to 35 percent from 33 percent and IndusInd Bank's to 49 percent from 24 percent.


ITC shares were down 3.7 percent as of 11:32 a.m., but IndusInd Bank gained 2.3 percent. Kotak Mahindra was down 0.2 percent.


Shares in Hindustan Unilever fell more than 2.5 percent, down for the second day, on concerns that it may face higher royalty payments to its parent Unilever PLC. Concerns came after Unilever Indonesia agreed on Wednesday to pay a higher royalty payment to the parent company.


Broadly, shares from the auto and realty sectors were in demand, while IT shares failed to build on Wednesday gains and were under pressure.


Meanwhile, Credit Agricole expects the rupee to strengthen to 52 a dollar by the end of 2013, with the currency trading at relatively attractive valuations in REER terms and having priced in "many of the fundamental problems it faces."


Key imbalances in India's economy, including the current account deficit, will gradually diminish next year, says the brokerage. However, risk-adjusted returns will be "less impressive" given the relatively high volatility in the USD/INR, it adds.


The rupee will also not benefit much from improvements in risk appetite given a "very low" correlation with risk appetite, Credit Agricole says.


The dollar rupee has been more sensitive to gyrations in the dollar, and Credit Agricole expects a gradual appreciation in the USD index over 2013 to constrain any strong rally in INR.

(With inputs from Reuters)

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