Indian equities continue to sulk in noon trades; drift to day’s lows

February series F&O expiry session is turning out to be yet another disappointing session for the Indian benchmark equity indices which have declined over half a percent on extremely large volumes. The frontline indices have drifted near the psychological 5,450 (Nifty) and 18,000 (Sensex) levels in the afternoon session after a positive opening. Investors took to hefty across the board position squaring after the recent strong rally in domestic stock markets, lacking any significant upside triggers. Sentiments across the globe remained gloomy as worries over financial meltdown in Euro-zone persisted while global economic growth woes too prevented markets from moving higher. Meanwhile the recent sharp spurt in international crude oil prices has set alarm bells ringing, stoking nervousness not only among market participants but also the policy makers. The rally in oil prices would certainly have spiraling effect on the Indian economy as the nation imports more than 70% of the commodity for domestic requirements, thus re-fuelling the inflationary concerns. Investors are booking hefty profits in the rate sensitive counters like Realty, Banking and Auto while the Metal and Capital Goods pockets too are witnessing serious pounding. However, the defensive FMCG sector gained some ground thanks to buying in bellwethers like HUL and ITC. While gains in index heavyweight Reliance industries too has prevented the frontline indices from drifting below crucial levels. On the global front, Asian markets are trading largely on a pessimistic note however while European stock futures are indicating a soft opening for the markets there amid worries over the corporate earnings.

Moreover, the selling pressure in broader markets appeared far more profound as the indices traded with over one and half a percent cuts, underperforming their larger peers for the third straight session. The bourses drifted on extremely large volumes of over Rs 1 lakh crore on the F&O expiry day while market breadth on BSE was dominantly in favor of declines in the ratio of 1844:741 while 95 scrips remained unchanged.

The BSE Sensex is currently trading at 18,031.67 down by 113.58 points or 0.63% after trading as high as 18,209.56 and as low as 18,021.22. There were 7 stocks advancing against 23 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index plunged 1.50% and Small cap plummeted 1.68%.

On the BSE sectoral space, FMCG up 0.56% and Oil & Gas up 0.25% were the only gainers while Realty down 3.58%, Metal down 2.10%, Capital Goods down 1.56%, Consumer Durables down 1.25% and Auto 1.21% were the major losers in the space.

HUL up 1.55%, SBI up 0.85%, RIL up 0.52%, ITC up 0.31% and Wipro up 0.11% were the major gainers on the Sensex, while Sterlite down 5.75%, DLF down 3.22%, Bharti Airtel down 2.59%, Hindalco down 2.56% and Tata Power down 2.43% were the major losers in the index.

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 is currently trading at 5,466.50, lower by 38.85 points or 0.71% after trading as high as 5,519.55 and as low as 5,466.50. There were 13 stocks advancing against 37 declines on the index.

The top gainers on the Nifty were BPCL up 4.19%, Power Grid up 2.77%, Seas Goa up 1.67%, HUL up 1.65% and Siemens up 1.06%.

JP Associates down 5.87%, Sterlite down 5.40%, R Infra down 3.81%, R Com down 3.73% and DLF down 3.15% were the major losers on the index.

In the Asian space, Hang Seng sank 0.74%, Jakarta Composite shed 0.73%, KLSE Composite dropped 0.13%, Straits Times plunged 0.90%, Seoul Composite plummeted 1.03% and Taiwan Weighted slumped 0.80%.

On the flipside only Shanghai Composite gained 0.15% and Nikkei 225 gained 0.44%.