Post session - Quick review

Indian equity markets witnessed complete carnage in today’s session as profit booking conquered the frenetic momentum of the bourses over the past three straight sessions. Benchmark indices after getting a modest start went on a losing spree as market men locked gains post the recent uptick of the bourses, which took them near their seven month’s high in the previous trading session.However, choppiness remained the trait for the day as traders squared off positions ahead of February series F&O expiry due to lack of supportive cues from global peers.

On the global front, Asian pacific stocks ended mostly higher on expectations that the People's Bank of China will undertake further monetary easing in order to try to stimulate growth. Meanwhile, preliminary reading of HSBC's China manufacturing index rose from 48.8 in January to 49.7 in February. But the number was still below the 50-level that signifies expansion, suggesting that the Chinese central bank may loosen credit, a move typically welcomed by markets. However, optimism seen in the regional counter parts was offset by pessimism over Europe's debt crisis. Investors were seem to be in fringe as relief over Greece's latest bailout has turned to doubts that the debt-stricken country can keep to its austerity programme.

Meanwhile, European shares edged lower for a second day after the region’s services and manufacturing output unexpectedly shrank. A gauge of euro-area services and manufacturing output dropped to 49.7, London-based Markit Economics said, below the 50.5 forecast by economists in a Bloomberg survey.Back home, on the macro front, C. Rangarajan, chairman of the Economic Advisory Council, said that inflation should come down to 6.5 per cent by the end of the current financial year., While, Prime Minister's Economic Advisory Council has forecasted Indian economy to grow at 7.1 percent in FY12, higher than estimated 6.9 percent growth early this month.

Back on Dalal Street, high beta metal and realty stocks mainly led the decline today. However, the rate sensitive banking index on the Bombay Stock Exchange (BSE) coupled with stocks from Capital goods counters too tottered under intense selling pressure.

Sterlite Industries, a Vedanta Group company, which occupied the third position on Sensex’s losers list declining by over 5%, mainly yanked the metal gauge lower over 7%. The stock tanked after yesterday's reports that the Sesa Goa may be merged with the company as a part of restructuring. In the metal space, Jindal Steel, Tata Steel and Hindalco too were down in the range of 0.7-2.5%. Meanwhile, the decline of blue chip stocks like DLF, DB realty and  Unitech led to the downfall of realty index.

Shares of State Bank of India, plummeted over 8% to Rs 2,254.95 on reports that the public lender will provide a Rs 1,200 crore bailout package for debt laden Kingfisher Airlines, dragged the banking gauge over 3%. SBI currently has an exposure of Rs 1400 crore to Kingfisher Airlines. Among other banking stocks, private sector lenders ICICI Bank (-2.3%) and Axis Bank (-2.2%) traded lower. However, Kingfisher stocks which traded with small gains in the noon deals too succumbed to the selling pressure. Other airline stocks - Jet (-2%) and SpiceJet (-3.9%) declined after strong gains yesterday.

On the flip side, Energy stocks outperformed the broader markets in early deals, with the oil & gas index rising 1% on the BSE. BPCL and ONGC gained sufficient traction, while Reliance Industries which signed a petrochemicals joint venture with Russia's Sibur to manufacture Butyl rubber, too traded in green before succumbing to the selling pressure. However, IT stocks did a commendable job as the index, bucking the trend and emerged as the sole gainer  on the BSE sectoral chart. TCS stocks which striked a 52 week high, took the credit of the index gain. However, following the similar trend, were stocks of Infosys, Wipro and HCL technology.

Thus, halting three day’s winning streak- the Bombay Stock Exchange's Sensex-winded up the trade close to 18100 level, with a loss of over 200 points. Similarly, the widely followed 50 share index of National Stock Exchnage- Nifty-too tanked over 100 points to settled sub 5600 level. The braoder indices too were clobbered out of shape and went home with loss of over 3%. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 768:2206 while 109 scrips remained unchanged. (Provisional)

The BSE Sensex lost 284.72 points or 1.54% and settled at 18,143.89. The index touched a high and a low of 18,523.78 and 18,095.81 respectively. 5 stocks advanced against 25 declining ones on the index (Provisional)

The BSE Mid-cap index lost 3.54% while Small-cap index was down by 3.30%. (Provisional)

On the BSE Sectoral front, IT up 0.41% was the sole gainer while Realty down 6.65%, Consumer Durables down 5.12%, Metal down 4.38%, Bankex down 3.89% and Power down 3.73% were the top losers.

The top gainers on the Sensex were TCS up 1.15%, ITC up 0.97%, Sun Pharma up 0.88%, Infosys up 0.30% and ONGC up 0.10%.

On the flip side, SBI down 8.11%, DLF down 6.84%, Sterlite Industries down 6.46%, Hindalco Industries down 5.11% and Jindal Steel down 4.90% were the top losers in the index. (Provisional)

Meanwhile, Indian economy is expected to grow at 7.1% in FY’12, marginally higher than the 6.9% projected by Central Statistical Organisation’s (CSO) advance estimates, as per the Prime Minister's Economic Advisory Council (PMEAC). Further, growth in FY’13 has been projected to be around 7.5-8% if the global environment turns favourable. PMEAC, Chairman, C Rangarajan, while releasing the document ‘Review of the Economy 2011-12’, has stated that the slight improvement in growth numbers is expected to come from the agriculture and construction sectors, which are expected to perform better as compared to advance estimates.

As per PMEAC, growth in agriculture is expected to be 3% backed by strong growth in horticulture and the animal husbandry sectors. The construction sector, backed by better growth in cement, will see an expansion of 6.2%. Manufacturing is expected to grow at a disappointing rate of 3.9% whereas growth in services will be strong at 9.4%, and the electricity sector has done well.

Gross fixed capital formation (GFCF) as a proportion of GDP is expected to slip to 29.3% registering a decline of almost 4% points over the last four years. However, an improvement of 1.5 to 2.0 percentage points of GDP can be expected in 2012-13. This is expected to happen due to improvement in domestic demand on the back of stabilizing inflation.  The weaker currency is also likely to improve the prospects for net export demand.

Headline inflation is projected to be around 6.5% at the end of March 2012, due to the effective use of monetary policy by the RBI. However, adjustments made to the selling prices of sensitive refined petroleum products to cover costs and reduce the huge burden of subsidy being borne by Government and the oil companies, will be passed on to 2012-13 and will express itself on headline inflation. Inflationary pressures will continue to ease through 2012-13 and will remain around 5-6% for the year.

Further, the Balance of Payments situation remains tight due to larger than expected Current Account Deficit (CAD) and lower than expected net capital inflows. Though there has been some recovery in the CAD during January and February 2012, thanks to the appreciating rupee, the BoP position remains stretched and CAD is expected to be at 3.6% of the GDP in FY’12. The CAD for the year 2012-13 will be 3%, however PMEAC has recommended that it will be judicious to try and limit the CAD, over the medium term, to between 2-2.5% of GDP.

Also, on the capital account side, the report has recommended that capital inflows, especially those in the form of equity, must be encouraged and improved domestic conditions for investment and growth are the basic pre-requisites, along with fundamental macroeconomic stability, i.e. prices, exchange rate and fiscal balances. The fiscal deficit is expected to go beyond the budgeted 4.6% of GDP, primarily due to much higher than budgeted subsidies - especially that on refined petroleum products.

Rangarajan has expressed his concerns about the growing fiscal deficit and has said that the government must strive to contain it as a large subsidy bill directly reduces the resources that are available for development expenditure. While expanding the borrowing needs of Government it also squeezes investible resources and undercuts productive investment by the private sector. He has also recommended that the government incontestably demonstrate that it is on the path of fiscal consolidation and thus reinforce the final pillar of macroeconomic stability.

The PMEAC Chairman is also of the view that the government, in FY’13, should express itself most powerfully in the infrastructure sector - in power, roads, railways, ocean ports and air ports, in rural and urban infrastructure. This is because the inadequacy of infrastructure availability continues to act as a constraint for the expansion of economic activity across the country. Also it is likely that the targets set for 2011-12 in power and roads may be achieved. Hence, the government must set ambitious targets for 2012-13 for both capacity creation in key infrastructure areas and operational performance, especially in the coal sector, such that a fillip is provided to the improvement of economic activity in 2012-13, which is also the first year of the Twelfth Plan.

India VIX, a gauge for market’s short term expectation of volatility gained 2.09% at 26.80 from its previous close of 26.25 on Tuesday. (Provisional)

The S&P CNX Nifty lost 104.40 points or 1.86% to settle at 5,502.75. The index touched high and low of 5,629.95 and 5,491.35 respectively. 7 stocks advanced against 43 declining ones on the index. (Provisional)

The top gainers on the Nifty were Sun Pharma up 1.10%, ITC up 0.77%, TCS up 0.74%, ONGC up 0.31% and Infosys up 0.23%.

On the other hand, Reliance Communications down 9.51%, SBI down 8.13%, DLF down 6.97%, Sterlite Industries down 6.47% and Axis Bank down 6.18% were the top losers. (Provisional)

The European markets were trading in red, with France's CAC 40 down 0.38%, Germany's DAX down 0.74% and Britain’s FTSE 100 down 0.25%.

Asian stock markets snapped Wednesday’s trading session on a mixed note with the Chinese markets surging around a percent after reports showed that China manufacturing activity improved from 48.8 in January to 49.7 in February. However, the number was still below the 50-level that signifies expansion, indicating that the Chinese central bank will have to employ policy measures to spur growth. The benchmark in Japan too went home with gains of around a percent led by energy shares after international crude oil prices rallied near their nine month high levels while the depreciation in yen spurred buying interests in export oriented stocks.

On the other hand, the equity index in Singapore overlooked the optimism in other Asian markets and snapped the three day gaining streak by plunging around a percent as the weaker than expected earnings from commodities firm Wilmar International stoked worries over receding margins.