BSE Sensex falls 0.5%,NSE Nifty by 0.71%,banks hit,defensives gain

Global market uncertainty also weighs after a bailout plan for Cyprus fell into disarray,although hopes of a last-minute deal kept losses in Asian shares limited.

Banks extend falls with ICICI Bank down 1.9 percent and State Bank of India falling 2.8 percent.

Broader losses are capped as defensives shares gain. Hindustan Unilever gains 2.6 percent,while Cipla is up 2 percent.

Highlights

* SGX Nifty futures on the Singapore Exchange fall 0.2 percent,while the MSCI-Asia Pacific index excluding Japan gains 0.08 percent.

* Asian shares extended losses on Wednesday and investors gave the euro a wide berth after a bailout deal for Cyprus was thrown into disarray.

* Traders keenly eyeing news flow after the biggest ally in Prime Minister Manmohan Singh’s coalition abruptly withdrew its support on Tuesday.

* Also on watch,India’s cabinet may discuss lifting some curbs on its tightly regulated sugar sector,months after the prime minister’s economic adviser recommended easing restrictions to help stabilise output.

* However,BSE Sensex will hit a record high this year on looser monetary policy and fiscal reforms,but concerns over a widening budget deficit could limit the upside,a Reuters poll predicted.

GLOBAL MARKETS ROUNDUP

* Asian shares extended losses on Wednesday and investors gave the euro a wide berth after a bailout deal for Cyprus was thrown into disarray.

* The euro was pinned near four-month lows against the U.S. dollar in Asia on Wednesday after Cyprus’ rejection of bailout terms seemed to threaten default or even expulsion from the euro zone.

* Brent crude oil fell 2 percent to a three-month low under $108 a barrel on Tuesday as uncertainty over a bailout for Cyprus raised concern about the euro zone debt crisis and its impact on energy demand.

* US Treasuries prices climbed on Tuesday as a plan in Cyprus to tax bank accounts to help pay for a bailout unravelled,creating uncertainty about the island country’s financial future and reviving fears about the stability of the euro zone. LOCAL MARKETS PREVIOUS CLOSE

* BSE index 19,008.10 (-1.48 pct)

* NSE index 5,745.95 (-1.53 pct)

* Rupee 54.37/38 per dollar (54.1650/1750)

* 10-year bond yield 7.90 pct (7.88 pct)

* 5-year OIS rate 7.19 pct (7.14 pct)

* 1-year OIS rate 7.54 pct (7.50 pct)

* Call money 7.60/7.70 pct (7.70/7.85 pct)

FACTORS TO WATCH

* India will conduct its monthly debt auction limit for foreign investors a day after markets were hit by the central bank’s cautious statement on monetary policy and after a key ally withdrew from the ruling coalition. Results of the auction are due around 1200 GMT.

* Money supply data to be published by the RBI later during the day. OVERNIGHT NEWS

* Indian stocks will hit a record high this year on looser monetary policy and fiscal reforms,but concerns over a widening budget deficit could limit the upside,a Reuters poll predicted.

* The Reserve Bank of India will buy up to 100 billion rupees ($1.84 billion) of government bonds through an open market operation (OMO) on March 22,it said in a release on Tuesday.

* India’s total food subsidy is seen at 1.3 trillion rupees ($23.98 billion) to cover expenditure for its Food Security Bill which aims to expand cheap food provision for the poor,Food Minister K.V. Thomas said on Tuesday.

MAJOR DEALS/ACQUISITIONS

* IDBI’s new bonds,maturing in January 2019,were launched at a price talk of 315 bps over US Treasuries. The final guidance was later tightened to 305 bps over US Treasuries for the deal. (IFR)

USD/INR NDFs

LIQUIDITY

* The RBI said on Tuesday it accepted all 44 bids for 1.20 trillion rupees at its one-day repo auction,through which it injects cash into the banking system. It also accepted both bids received for 650 million rupees at its reverse repo auction,through which it absorbs cash from the system.

* Indian banks’ refinancing with RBI rises to 235.20 billion rupees.

* Indian banks’ cash balances with RBI fall to 2.80 trillion rupees.