NEW DELHI: Investors globally pulled out more than $3 billion from equity funds focused on emerging markets including India in a week amid concerns over the US Federal Reserve's plan of curtailing its stimulus drive starting later this year, says a report.

According to funds tracking company EPFR Global, over $3 billion has flown out of emerging markets equity funds during the week ending June 19.

Explaining the outflow, the report said "investors expected the outcome of the US Federal Reserve's latest meeting to be relatively benign".

However, equity funds attracted net inflows to the tune of $4.81 billion during the third week of June.

"While investors are distancing themselves from most of the top tier emerging markets such as China, Brazil, Russia and South Africa, they have retained their appetite for the smaller, riskier, faster growing ones," the report noted.

The US Federal Reserve's decision to curtail its liquidity measures with a goal of ending it in mid-2014 has been weighing on emerging market funds.

The EPFR did not disclose India-specific fund outflow data. But, according to information available with the Securities and Exchange Board of India ( Sebi), the foreign institutional investors (FIIs) pulled out $580 million from the Indian market during the week under review.

Most of emerging market focused equity funds invest in India as FIIs and the capital flows through this route are a key factor in the stock market trends here.

At the country level, Japan equity posted inflows for the straight 21 week, while Germany and Korea also attracted fresh money.

However, equity funds dedicated to China extended their losing run as a report from ratings agency Fitch raised new questions about the country's shadow banking system

MUMBAI: Ahead of the mid-quarter review of monetary policy tomorrow, the State Bank of IndiaBSE 1.31 % (SBI) has said if the apex bank cannot reduce CRR rate, which is a must for lending rate cuts by banks, they should pay interest on cash reserves that banks park with the monetary authority.

Incidentally, most analysts expect the RBI to hold rates during its mid-quarter monetary policy review.

"If a CRR cut cannot be done due to inflation worries, let the RBI pay us interest on CRR. We will then do the transmission for sure. If the RBI pays me Rs 500 crore on interest on my CRR, I promise to transmit the entire Rs 500 crore to borrowers by reducing my base rate," SBIBSE 1.31 % chairman Pratip Chaudhuri told PTI recently.

Last year he had triggered off a heated debate by calling for abolition of CRR. He felt that CRR is "dead money" and it had led to a public spat with K C Chakrabarty, the RBI deputy governor in charge of banking services, who said that if the SBI chairman is not comfortable working under existing regulations, he should look for "some other sector".

Explaining the rationale for SBI's as well as other banks' inability to cut lending rates with minor repo rate cuts that RBI has done by 125 basis points (1.25 per cent) since the middle of the past fiscal, Chaudhuri said, "The relationship between the repurchase rate and the bank lending rate is rather weak. Bank deposits rates are guided by postal deposit rates and not by RBI rates".

Further, he said that a 25 basis points reurchase rate cut will give an additional income of merely Rs 50 crore to the SBI.

"How do I distribute it to my borrowers when my loan book is Rs 7 trillion? Instead, if the RBI reduces CRR by 25 basis points, I get about Rs 3,000 crore. So, if there is a CRR cut, then the transmission is more pronounced," the SBI chairman argued.

Valuations of private sector banks are now slightly getting stretched even though there isn’t a doubt that these institutions have better-managed balance sheets than their public sector counterparts, says Sandeep Bhatia, executive director & head of sales, Kotak Institutional Equities, in an interview to CNBC-TV18. He advised investors to have no exposure to PSU banks.

Speaking on market, Bhatia said the current flow of liquidity from the US will tend to slowdown in the next two years although it will be in abundance in Europe and Japan and India can enjoy some of the benevolence coming from Japan.

Maintaining that both market and outperforming stocks are capped by valuations, Bhatia said there are not many investors on the street who would place their bets on cheaper stocks. He is doubtful of an improvement in India’s macro situation but remains bullish on the pharma sector .

Below is the verbatim transcript of his interview on CNBC-TV18

Q: What is the mood on banking right now because this quarter has been so disparate in terms of earnings good earnings from private sector but not so good from public sector banks?

A: Yes that is true. The balance sheets of the public sector are showing signs of strain. Our belief is that if the economy does not improve in the next 18 months there would be further strain on the balance sheets of the public sector banks.

The private sector banks have carved themselves a very good niche. They are focused on the retail side of the asset much more. Their balance sheet management and working processes are much more stringent. So, clearly we see less stress on the balance sheets there but valuations are getting stretched on the private sector banks. This differentiation between private sector and public sector will run for some more time but it will be clearly stretched valuation for private sector banks which have to be watched for.

Q: How are you mapping the whole infra space now, which is connected to the banking world very closely. Are you seeing any signs of recovery because company earnings have been quite weak almost without exception over the last four-five days?

A: For a long time we have been saying that we do not see a quick recovery in infrastructure space. Their balance sheets are stretched, execution is still not happening, so clearly there are issues which will not go away soon. There needs to be a significant change in policy confidence, which is not going to come in a hurry. Therefore, the public sector banks will bear the brunt of this and which is why the markets have been differentiating between public sector and private sector banks.

There doesn’t seem to be a quick way out of the woods for infrastructure, and the public sector banks exposure to these companies.

MUMBAI: Markets have corrected sharply on concerns about a halt in quantitative easing in the US, which spooked investors. China's flash HSBC Purchasing Managers' Index for May, which fell to 49.6, for the first since October also led to a global sell-off.

Reacting to the meltdown in global equities, Finance Minister P Chidambaram said that the US Federal Reserve Chairman's statement has been misunderstood by the market. He said that foreign inflows into India in May have been copious and there is no need for investors to be nervous.

According to him, WPI inflation has come down below 5 per cent and investors should look forward to next quarter with greater confidence.

According to analysts, the current correction in Indian markets is on account of profit booking after the recent sharp rally and bearish sentiment in global markets. Fundamentally, there is no strong reason why the investors would exit the Indian equities at a time when the interest rates are expected to go down. They don't expect heavy outflows from the FIIs but some moderation in inflows is not ruled out if the US markets continue to move higher.

"This fall is like a blessing as we feel the Nifty will bottom out by roughly correcting 1-1.5 per cent and then stage a rally all the way to 6,400-6,500 in next 5 - 6 months. Best sectors to go long at the time of recovery would be banks, metals, capital goods and cement," said Manoj Muralidharan, AVP- Derivatives, IIFL PReMIA.

At 01:40 p.m., the S&P BSE Sensex was at 19,753.12, down 309.12 points or 1.54 per cent. It touched an intraday low of 19,697.44 and a high of 20,027.56.

The S&P BSE Midcap Index was down 1.85 per cent and the S&P BSE Smallcap Index fell 1.90 per cent.

Standard & Poor's reiterated its negative rating outlook on India's credit rating, which is one notch above junk status, warning of risks if the government carries out less reform than the agency says is needed to boost growth.

The rating agency, which warned of at least a one-in-three chance of a downgrade within the next 12 months, said the major risks for a lower rating are a high fiscal deficit and heavy government borrowing.

India's benchmark 10-year yield rose 4 basis points to 7.41 percent from levels before the statement. The yield closed at 7.39 percent on Thursday.

"If India's general government fiscal or current account deficits worsen contrary to our expectations, we may lower the ratings," S&P said in a release on Friday, after affirming India's BBB- rating with a negative outlook.

Finance Minister P Chidambaram has said he will stick to a budgeted fiscal deficit target of 4.8 percent of GDP in the fiscal year ending March 2014 after being able to restrict the deficit to around 5 percent in the previous fiscal year.

"We may revise the outlook to stable if the government carries through with its plans to unleash public and private investments (for example, by enacting the land acquisition bill), to implement a nationwide government sales tax, or to further trim fuel and fertilizer subsidies," S&P said.

India's growth slipped to a decade low of 5 percent in the fiscal year that ended in March 2013 after posting nearly double digit growth in 2008. Recent corruption scandals have prevented the government from passing key reform bills in the parliament.

NEW DELHI: Indian markets are likely to trade in a range with a positive bias on Wednesday. The immediate support level for Nifty is around 5981.

"The Nifty is expected to head higher till 6080. In this period the key support will be at around 5981 and resistance will be at 6050," said Somil Mehta, Senior Tech Analyst (Equity) at Sharekhan.

"The Nifty has closed above the 78.6% retracement level (5971; that is the 78.6% retracement of the fall from 6111 to 5477), which was a very crucial resistance," he added.

Mehta is of the view that the short term bias for the Nifty remains positive for a target of 6111 with reversal around 5925. The medium-term outlook also remains positive with reversal around the 20-daily moving average (DMA).

Here is a list of thirteen stocks which are likely to remain in focus in morning trade:

HDFC Ltd will be in focus ahead of its quarterly results. It is expected to report net profit of Rs 1515 cr for the quarter ended March 2013 up 14.2 per cent YoY, as compared to Rs 1326.10 crore reported in the year ago period, according to ET Now estimates.

Glenmark Pharmaceuticals Ltd BSE 1.80 %, after the company posted 10.93 per cent rise in consolidated net profit at Rs 166.79 crore for the fourth quarter ended March 31, 2013, on the back of robust sales in both international and domestic markets.

Shriram Transport Finance Ltd, after the non-banking finance company reported a 16.63 per cent rise in consolidated net profit at Rs 383.46 crore for the fourth quarter ended March 31, 2013, driven by a sound rise in loan growth.

Ceat Ltd BSE 4.93 %, after the tyre maker reported 32.83 per cent increase in consolidated net profit at Rs 64.90 crore for the fourth quarter ended March 31, 2013.

Ranbaxy Laboratories Ltd will be in focus ahead of its quarterly results. The pharma major is expected to report a net profit of Rs 163 cr for the quarter ended March 2013, as compared to Rs 1247 cr reported in the year ago period.

Reliance Industries Ltd, after the government has asked for certain clarifications from RILBSE 0.10 % on the revised investment plan the company had submitted for the main gas producing fields in the eastern offshore KG-D6 block.

NMDC Ltd BSE 0.15 %, after state-owned company is now examining two proposals for acquiring coal mines in the African country.

Infosys Ltd, after country's second largest software firm, said it has partnered with enterprise solutions provider SAP for developing mobile applications for the retail industry.

Wipro Ltd BSE 0.26 %, after the software exporter said it is investing $ 30 million for a minority stake in New Jersey headquartered big data analytics firm, Opera Solutions.

GlaxoSmithKline Pharmaceuticals BSE 1.75 %, after the pharma major reported a 37.52 per cent rise in its net profit to Rs 169.01 crore for the first quarter ended March 31, 2013 from the same period previous fiscal.

Axis Bank Ltd BSE -0.58 %, after the private sector lender will replace state-run Bank of India (BoI) as the trustee bank for the National Pension System (NPS) from July onwards.

UCO Bank BSE -4.08 %, after the bank reported nearly 80 per cent slide in its net profit figure to Rs 50 crore for the quarter ended March 31, 2013. Provisioning increased by 114 per cent to Rs 977 crore (Rs 456 crore).

Dewan Housing Finance Ltd (DHFL), after the company recorded over two-fold jump in net profit at Rs 196.93 crore for the fourth quarter ended 31 March 2013.

NEW YORK: US stocks traded mostly higher on Tuesday, paring initial losses, as home prices and consumer data offset a decline in regional business activity.

Technology stocks led the gainers in the S&P 500, which closed at a record high on Monday. The benchmark index was on track to post its sixth consecutive month of gains.

Apple shares rose 2.3 per cent to $438.83 to lead the S&P 500 slightly higher. The iPhone maker came to market with what could turn out to be the largest non-bank bond sale in history, as it seeks funding to return cash to shareholders.

On the economic front, US home prices rose in February at their fastest rate in almost seven years while consumer confidence rebounded in April. However, business activity in the US Midwest unexpectedly contracted in April to its lowest level since September 2009.

Any pullback in the market has been viewed as a buying opportunity, traders and analysts said.

"The consumer confidence data seemed to mark the lows in the market," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

"The continued market strength is drawing people reluctantly off the sidelines and into equities. Whether you want to buy stocks or not, the strength is forcing your hand."

The Dow Jones industrial average fell 10.12 points or 0.07 per cent, to 14,808.63. The S&P 500 gained 1.04 points or 0.07 per cent, to 1,594.65. The Nasdaq Composite added 14.8 points or 0.45 per cent, to 3,321.82. Equities continue to draw support from expectations that central banks will maintain low interest rates and other economic stimulus measures. A statement from the Federal Reserve due Wednesday is expected to keep in place the central bank's pace of bond buying to stimulate the economy.

The European Central Bank will meet on Thursday. A Reuters poll of economists showed policymakers are expected to cut interest rates.

The S&P 500 ended at an all-time high on Monday as growth-oriented stocks, including energy and technology shares, drove the index's sixth rise in the past seven sessions.

A positive finish to April would deliver a sixth straight month of gains. That would be the longest winning streak since September 2009, when the S&P 500 rallied for seven straight months. The broad market index is up 1.6 per cent for the month.

"Short interest is rising, but the market continues to move higher. If the S&P were to break over 1,600, we could see a monster short squeeze," said Jim Brown, editor of options analytics firm optioninvestor.com, in a note late on Monday.

Pfizer shares weighed on the Dow industrials after the drug maker posted lower-than-expected quarterly earnings and revenue, and trimmed its full-year profit outlook. Its stock fell 3.3 per cent to $29.42.

US retailer Best Buy retreated from its ill-fated European expansion by selling its stake in a joint venture to Carphone Warehouse Group for less than half what it paid five years ago. Best Buy shares jumped 8 per cent to $26.14.

Shares of security software maker Symantec Corp dropped 10 per cent in a span of a few seconds before trading was halted. Equity traders called the move another single-stock "flash crash," in reference to the May 2010 selloff when the Dow fall more than 600 points in a matter of minutes. Symantec was down 1.2 per cent at $24.30 at midday.