Indian benchmarks capitulate as Realty and Metal counters drag

After the recent sharp rally in Indian stock markets, some sense of weakness finally got trickled in as investors showed genuine signs of profit booking a day ahead of February series futures and options contract expiry. The frontline indices failed to extend the gaining momentum and halted the two session gaining streak after getting butchered by close to a percentage points on extremely large volumes. Sanguine sentiments led to initial upmove in local markets despite weakness across Asia but the psychological 5,600 (Nifty) and 18,400 (Sensex) levels proved as stern resistance levels for the markets to hold. The frontline indices could not hold on to those levels for long and witnessed abrupt selling pressure in mid noon trades as investors chose to take hefty profits off the table after the recent sharp upmove in domestic markets which have skyrocketed over 18 percent in 2012, thanks to hefty buying from foreign funds who pumped in over $4.4 billion so far this year. The heavy pounding for the local markets came on a day when Prime Minister's Economic Advisory Council affirmed that Indian economy is expected to grow at 7.1% in FY12, marginally higher than the 6.9% projected by CSO advance estimates, as slight improvement in growth numbers is expected to come from the agriculture and construction sectors. The PMEAC has projected growth to be around 7.5-8% in FY’13 if the global environment turns favorable. The high beta Realty pocket, which skyrocketed in the recent past, got slaughtered in the session by close to seven percent after heavyweights like DLF and HDIL nosedived. The Metal and Banking pockets too were not spared either as they went home with nasty cuts of around four percent. However, information technology counter shrugged the pessimism prevailing across the sectoral space and climbed by around half a percent, thanks to the gains in bellwethers like TCS and Infosys. On the global front, Asian markets which opened largely on a weak note closed mostly in the positive terrain after reports that Chinese manufacturing activity improved from 48.8 in January to 49.7 in February. The European bourses, on the other hand, drifted deeper into red territory after starting on a positive note.

Earlier on the Dalal Street, the benchmark got off to a positive opening as investors shrugged pessimistic sentiments prevailing in Asian markets. However, the frontline indices failed to take advantage of the initial optimism and slipped below the neutral line. After trading in close proximity with the previous closing levels for most part of the session, sudden bouts of profit booking emerged in mid noon trades. The bourses got dragged to the lowest point in the session in late trade and failed to show any kind of recovery till the end. Eventually, the NSE’s 50-share broadly followed index Nifty took a nasty triple digit laceration to close above the crucial 5,500 support level while Bombay Stock Exchange’s Sensitive Index or Sensex got pounded by close to three hundred points and ended below the psychological 18,150 mark. Moreover, the broader markets too got bludgeoned in the session as they capitulated by over three percent, underperforming their larger peers by a fat margin. The markets plummeted on extremely large volumes of over Rs 2.87 lakh core while the turnover for NSE F&O segment remained on the higher side as compared to that on Tuesday at over Rs 1.24 lakh crore. The market breadth was awful as there were 1674 shares on the gaining side against 1301 shares on the losing side while 112 shares remained unchanged.

Finally, the BSE Sensex shaved off 283.36 points or 1.54% to settle at 18,145.25, while the S&P CNX Nifty plunged by 101.80 points or 1.82% to close at 5,505.35.

The BSE Sensex touched a high and a low of 18,523.78 and 18,095.81 respectively. The BSE Mid cap and Small cap indices were down by 3.46% and 3.24% respectively.

The major gainers on the Sensex were TCS up 1.46%, Sun Pharma up 1.24%, ITC up 0.60%, Infosys up 0.53% and ONGC up 0.19%, while, SBI down 7.91%, DLF down 7.69%, Sterlite Industries down 6.62%, Jindal Steel down 4.82% and Hindalco Industries down 4.73% were the major losers on the index.

The only gainer on the BSE sectoral space was IT up 0.45%, while Realty down 6.77%, Consumer Durables (CD) down 4.93%, Metal down 4.29%, Bankex down 3.82% and Power down 3.75% were the top losers on the BSE sectoral space.

Meanwhile, the Finance Minister, Pranab Mukherjee has reaffirmed his government’s commitment to bring in 51% FDI in multi brand retail and has stated that a timeline for the same could be expected in the upcoming budget on March 16. The Minister has further said that his government is committed to the process of reforms is keen to see India on the path of double digit growth. 

India’s GDP growth is expected to come down to 6.9% in this fiscal from its earlier trajectory of 8-9%. As per the FM, the central bank’s anti-inflationary stance has hurt the country’s economic growth. However FM is confident that the slowdown is temporary and India will be back on the path of high growth soon. Mukherjee has stressed that for sustainable growth can be achieved only when it is broad based and is spread across sectors. FM has also emphasized on improving factor productivity through technological innovations and process reengineering, and has said that the country needs to focus on three key areas - education and knowledge creation, creation and strengthening of a competitive environment to support private enterprise, and a greater focus on research and design in enterprises and institutions of higher learning.

Further, the FM said, government had now put in place the New Manufacturing Policy to give a big push to the manufacturing sector with the objective of increasing its share in the GDP to 25% and create 100 million jobs in the next ten years.

Reiterating his government’s commitment to reforms, Mukherjee has stated that India cannot afford to keep its doors shut at a time when it needs foreign investment the most. FM has further stressed that opening up multi-brand retail to foreign investments is very much on the UPA Government's agenda and a consensus to implement the decision is being worked out.

FDI in multi brand retail will enable entry of large retail chains in India and is expected to benefit consumers by helping address inflation concerns through price reductions due to lesser margins effected by retail giants like Walmart. It is also expected to cut agri-waste by improving the supply chain, bringing in distribution efficiencies, coupled with capacity building and induction of modern technology, also farmers will get a better price for their produce as they will be able to sell their produce directly to retailers, thereby reducing margins for middlemen. Investments in cold-storage and warehousing will ease supply-side pressures thereby easing inflation. However allowing 51% FDI in multi brand retail has been a contentious issue between the government and other political parties. The UPA government has been pushing the proposal saying that it will bring in reforms in the country whereas other political parties, including allies of the UPA government have opposed it vehemently stating that allowing major global retailers would lead to unemployment among the un-organised sector and wipe away the small kirana (mom & pop) shops. The proposal had also drawn protests from the Confederation of All India Traders, which accused the government of not holding proper consultations with traders and hawkers and only meeting a few selected groups.

Given the strong opposition the UPA government had to abandon the proposal in November 2011 but has always maintained that it is only a temporary deferment.

The S&P CNX Nifty touched a high and low of 5,629.95 and 5,491.35 respectively.

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 flip side, RCOM 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 on the index.

The European markets were trading in red as France's CAC 40 down 0.38%, Britain’s FTSE 100 down 0.36% and Germany's DAX down by 0.79%.

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.