Indian equities trade on a sluggish note; Auto, Realty drag

Indian equity markets are trading on a choppy note with moderate cuts in Monday afternoon trades as investors squared off hefty positions from the rate sensitive counters. The frontline indices even slipped below the psychological 4,600 (Nifty) and 15,400 (Sensex) levels in early noon trades for a brief period but are trading above those crucial levels. Sentiments remained optimistic at the start of trade after reports that the government took a bold step to allow foreign individual investors, pension funds and trusts to directly invest in Indian equities. However, the optimism soon petered out disappointing monthly sales numbers from major Automobile companies dampened investors morale, pounding the BSE’s Auto index by close to two percent. Also the defensive-FMCG pocket plunged by around a percent after a survey conducted by ASSOCHAM opined that the increase in cost burden might be shifted to the consumers which will dampen sales by about 10-15%. The depreciating rupee and increasing input costs are putting additional pressure on margins of FMCG companies which is likely to compel the FMCG companies to hike prices of their products in 2012. Meanwhile, investors also overlooked reports that showed that despite uncertainty looming over global economic outlook, India registered a 36 percent increase in foreign direct investment (FDI) inflow during the January-October period of 2011. On the global front, majority of Asian markets remained closed for extended New Year holiday while the markets that were open exhibited pessimistic trends. Back home, on the BSE sectoral space, the Oil & Gas index remained the top gainer in the space with around half a percent gains followed by the Consumer Durables pocket which traded similar gains. On the flipside, the rate sensitive Auto and high beta Realty packs remained the top laggards with close to two percent losses.

Moreover, the broader markets too traded with a negative note with moderate cuts of around half a percent, performing in tandem with their larger peers. The bourses slipped on weaker volumes of Rs 0.39 lakh crore as this is the second session of new F&O series. The market breadth on BSE was in favor of declines in the ratio of 1239:1092 while 109 scrips remained unchanged.

The BSE Sensex is currently trading at 15,400.42 down by 54.50 points or 0.35% after trading as high as 15,541.95 and as low as 15,358.02. There were 24 stocks advancing against 6 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index slipped 0.56% and Small cap eased 0.13%.

On the BSE sectoral space, Oil & Gas up 0.53%, Consumer Durables up 0.43%, IT up 0.38%, TECk up 0.30% and PSU up 0.01% were the major gainers while Auto down 1.93%, Realty down 1.77%, FMCG down 1.01%, Power down 1% and Bankex down 0.74% were the major losers in the space.

Coal India up 3.09%, Maruti Suzuki up 1.96%, TCS up 1.27%, Cipla up 1.05% and ONGC up 0.91% were the major gainers on the Sensex, while Bajaj Auto down 8.19%, Hero Moto down 4.47%, DLF down 3.61%, Hindalco down 3.41% and BHEL down 1.78% were the major losers in the index.

Meanwhile, items like biscuits, coffee, tea, toiletries and personal care are likely to get costlier from the next financial year, which would in turn not only pinch the pockets of common man but also adversely impact the sales of fast moving consumer goods (FMCG) companies. According to a survey conducted by Associated Chambers of Commerce and Industry of India (ASSOCHAM), prices of regular items like biscuits, coffee, tea, toiletries and personal care could be by hiked about 10 percent or more by the first quarter of the next financial year.

ASSOCHAM, one of the apex trade associations of India, opined that the depreciating rupee and increasing input costs are putting additional pressure on margins of FMCG companies. This is likely to compel the FMCG companies to hike prices of their products in 2012, which in turn would dampen sales during the year by about 10-15 percent including the semi-urban and rural market as the increase in cost burden might be shifted to the consumers.

Volume growth of FMCG segment is expected to slow in 2012 owing to reasons like unrelenting rise in commodity and raw-material prices, fluctuation in currency, feeble industrial growth and uncertain global economic environment coupled with an overall moderating consumer sentiment. The government notification on revised norms for packaging of FMCG products, which would come into effect from July 1, 2012, would also force the companies to hike prices of their products.

The government notification has prescribed standard quantities in which certain specified commodities under 19 categories would have to be packed for sale, distribution or delivery. These categories include coffee, tea, baby food, weaning food, biscuits, bread, uncanned packages of butter and margarine, cereals and pulses, edible oils, milk powder, non-soapy detergent powder, powdered rice, flour, atta, salt, soaps, aerated soft-drinks, non-alcoholic beverages, mineral water and drinking water, cement in bags and paint varnish.

The S&P CNX Nifty is currently trading at 4,595.40, lower by 28.90 points or 0.62% after trading as high as 4,645.95 and as low as 4,588.05. There were 16 stocks advancing against 34 declines on the index.

The top gainers on the Nifty were Coal India up 3.23%, Maruti up 1.97%, TCS up 1.24%, HCL Tech up 1.04% and ONGC up 1.03%.

Bajaj Auto down 9.32%, Sesa Goa down 5.17%, Hero Moto down 4.57%, Hindaclo down 3.80% and DLF down 3.66% were the major losers on the index.

Asian markets traded on a sluggish note; Jakarta Composite slipped 0.35% and Taiwan Weighted plunged 1.69%.

On the flipside Seoul Composite was flat with 0.03% gains.

Stock markets in China, Hong Kong, Japan and Singapore remained closed for extended New Year holiday.