Indian stock markets consolidate in Thursday noon trades

Lethargic Indian equity indices are trading without any fervor in the Thursday afternoon trades as cautious investors remained on the sidelines, lacking any significant upside triggers to take the markets higher. The aimless benchmarks appear exhausted as they are gradually crawling only sideways in a tight band around the psychological 5,350 (Nifty) and 17,700 (Sensex) levels. The upside for markets has been limited by profit booking in stocks from the metal counters, which rallied sharply in the previous session. In addition, index heavyweight Reliance Industries too has plunged around a percent putting pressure on the benchmark indices. Investors are squaring off hefty positions from Hindalco ahead of its third quarterly result announcement while bellwethers stocks like ONGC and Bharti Airtel continue to bear the brunt of selling pressure post their disappointing earnings announcement in the previous session. IT sector stocks too are under mild selling pressure after industry body NASSCOM opined that exports from India's information technology sector are set to grow more slowly for the year ending March 31, 2013. Meanwhile, global rating agency Fitch has affirmed that India is facing cyclical slowdown rather than a structural downturn. Fitch stated that this may further ease inflation, which appears to have passed its peak and thereby giving room to RBI to move to a more accommodative monetary policy, after recent increases in policy rates. On the global front, Asian markets have recovered a great deal from the intraday lows tracking the European stock futures, which are indicating a positive opening for the markets there.

Moreover, the broader markets traded on firm note with over half a percent gains and comprehensively outperformed their larger peers. The bourses fell on good volumes of over Rs 0.50 lakh crore while market breadth on BSE was in favor of advances in the ratio of 1551:1002 while 129 scrips remained unchanged.

The BSE Sensex is currently trading at 17,661.95 down by 45.37 points or 0.26% after trading as high as 17,691.36 and as low as 17,609.43. There were 14 stocks advancing against 16 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.70% and Small cap rose 0.78%.

On the BSE sectoral space, Realty up 2.17%, Auto up 1.09%, Consumer Durables up 0.89%, Power up 0.78% and Bankex up 0.51% were the major gainers while Oil & Gas down 0.82%m Metal down 0.55%, Capital Goods down 0.37%, TECk down 0.27% and IT down 0.20% were the major losers in the space.

Tata Motors up 1.99%, Bajaj Auto up 1.91%, NTPC up 1.89%, Hero Moto up 1.73% and HDFC Bank up 1.57% were the major gainers on the Sensex, while Hindalco down 5.81%, ONGC down 2.33%, L&T down 1.32%, Bharti Airtel down 1.27% and Sun Pharma down 1.07% were the only losers in the index.

Meanwhile, declining economic growth rate will contain inflationary pressure and prompt the Reserve Bank of India (RBI) to cut interest rate, as per the rating agency-Fitch. The rating agency said that the slower growth rate of the Indian economy in 2011-2012 is cyclical and not structural and it maintains that India has the potential to grow at a rate of 7.5-8.5% in the future.

The rating agency in its report stated that the slowdown probably reflects the Indian authorities' efforts to correct an overheating economy and could in fact ease inflationary pressures giving the central bank some room to lower interest rates. Further the recent increase in India's PMI data reveal that the slow growth in the manufacturing sector has probably bottomed out and India can expect a recovery in the sector.

These findings have come close to the recent release of Central Statistics Office’s (CSO) advance estimates of national income, which showed a slow growth rate of 6.9% for 2011-2012. The slowdown has been on account of the lower growth in manufacturing and agriculture sectors, which are estimated to grow at 3.9% and 2.5% respectively.

Fitch has further observed that India's economic growth has been one of its stand-out features and remains a key support for its 'BBB-' rating with Stable outlook. The country's potential growth rate is well above the 'BBB' category median. From 2006 to 2010, its actual growth rate was more than 2 times the 'BBB' median. It said that India's ratings would benefit from structural fiscal reform leading to improvement in the fiscal deficit, improvement in the investment climate and a sharp, sustained fall in inflation.

The Indian economy grew at 8.4% in 2010-2011 and the government in its mid-year economic review had pegged the growth at around 7.5%. The latest estimate is sharply lower than the 9% growth projection for 2011-12 made by the government in its pre-Budget survey in February last year. However, the economy is now expected to grow at a much lower pace of 6.9% and has been grappling with high levels of inflation prompting the RBI to hike interest rates by 350 basis points between March 2010 and October 2011. 

The S&P CNX Nifty is currently trading at 5,356.50, lower by 11.65 points or 0.22% after trading as high as 5,365.70 and as low as 5,338.90. There were 29 stocks advancing against 21 declines on the index.

The top gainers on the Nifty were Cairn up 3.02%, R Power up 2.85%, R Com up 2.10%, Tata Motors up 1.96% and Siemens up 1.86%.

Hindalco down 5.91%, ONGC down 2.52%, IDFC down 1.84%, Bharti Airtel down 1.34% and Sun Pharma down 1.32% were the major losers on the index.

In the Asian space, Shanghai Composite fell 0.12%, Hang Seng eased 0.30%, Jakarta Composite declined 0.64% and Nikkei 225 eased 0.15%.

On the flipside, Straits Times rose 0.01%, Seoul Composite climbed 0.54% and Taiwan Weighted advanced 0.52%.