Accentuated selling pressure drags bourses in red; broader indices exhibit mixed trend

Indian markets continued to drop for the third day on Friday. The market after opening flat turned negative amidst highly volatile trade, weighed down by banks and financial stocks. Index heavyweights Reliance and L&T too contributed to the fall. Local bourses showcasing diverse trading pattern,  edged lower first day of March F&O series, despite positive global cues as concerns that rising oil prices could deal a further blow to the fragile euro zone economy, ate into investor’s risk appetite. Asian shares were generally higher on Friday, tracking gains on Wall Street. US stocks rose on Thursday after data showed the U.S. labor market remained on the mend, but the market stalled as it approached highs not seen since before the 2008 collapse of Lehman Brothers.

Back home, stocks from Bankex, CG and Realty counters were the weak spell in the trade, however, stocks from Consumer Durable, Information Technology TECk space limited the loss of the bourses. 30 share index of BSE-Sensex- declining over 50 points was trading sub 18000 level, while barometer index of NSE-Nifty-trading lower over 25 points was trading sub 5500 level. The broader indices exhibited mixed trend. The overall market breadth on BSE was in the favour of declines which thrashed advances in the ratio of 1127:1070, while 104 shares remained unchanged.

The BSE Sensex is currently trading at 17,986.64, down by 91.86 points or 0.51%. The index has touched a high and a low of 18,198.15 and 17,972.26 respectively.   There were 16 stocks advancing against just 14 declining one’s on the index.

The broader indices were exhibiting mixed trend; the BSE Mid cap index was down by 0.09% and Small cap index up by 0.14%.

The top gaining sectoral indices on the BSE were, CD up by 1.89%, IT up by 1.03%, TECk up by 0.99%, Metal up by 0.85% and FMCG up by 0.67%. While, Bankex down by 1.71%, CG down by 1.48%, Realty down by 1.21%, Oil & Gas down by 0.63% and Auto down by 0.13% were the only losers on the index.

The top gainers on the Sensex were Sterlite Industries up by 5.00%, Hindalco up by 1.57%, Bharti Airtel up by 1.23%, TCS up by 1.21% and NTPC up by 1.14%.

On the flip side, HDFC down by 4.53%, ICICI Bank down by 2.10%, L&T down by 1.84%, SBI down by 1.43% and DLF down by 1.09% were the top losers on the Sensex.

Meanwhile, in view of a sharp drop in output from RIL's eastern offshore KG-D6 block, an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is likely to meet today on February 24 to consider changes in the natural gas allocation policy. The panel, which is meeting for the first time in more than 18 months, is also likely to consider the Saumitra Chaudhuri report that has recommended reserving or preferential allotment of domestically produced natural gas only to fertiliser and power plants.

Issues that are expected to come up for discussion in the EGoM are the requirement of 13.22 mmcmd of gas for urea plant beyond 15.7 mmcmd, which has already been allocated from KG-D6, the requirement of 31.81 mmcmd gas for 14 power plants with a total capacity of 7,219.5 MW (that are to be commissioned in the Eleventh Five-Year Plan period ending March 31), the quantum of marketing margin charged by RIL on sale of KG-D6 and the Oil Ministry's decision to ask the Petroleum & Natural Gas Regulatory Board (PNGRB) to regulate the marketing margins. 

The power ministry’s proposal to ask RIL to sign an agreement to supply 2.16 mmcmd of gas to NTPC may also figure in the EGoM meeting. RIL had not signed the pact for supply of 2.74 mmcmd of gas out of the 4.46 mmcmd allocated to five power projects. Gas output from KG-D6 has fallen to about 35 million cubic meters per day after touching a peak of 60 mmcmd in March 2010, prompting the ministry to suggest changes in the allocation policy.

Further suggestions made by the oil ministry on fuel/gas allocations are also likely to be discussed by the Ministerial panel. The oil ministry has proposed to halt gas supplies to power producers that do not sell electricity at regulated tariffs. It has also recommended cancellation of gas allocation to those merchant power plants in Andhra Pradesh that currently sell electricity above the tariff determined by the regulator. The ministry has also proposed allocating gas to only urea fertiliser plants in the future. On the other hand, it has suggested stopping fuel supply to phosphates and potassium fertiliser producers.

The Association of Oil and Gas Operators (AOGO), whose members also includes BP plc of UK, Cairn, BG Group and BHP Billiton, has written to Pulok Chatterji, Principal Secretary to the Prime Minister, saying the recommendation contradicts the contractual commitments of the Government made in the Production Sharing Contracts (PSC) and New Exploration Licensing Policy (NELP)' for market discovery of price of gas. Once gas is reserved for certain sectors, they are not likely to quote optimal price for gas and instead would under price the scarce fuel. Pre-allocation of gas, AOGO said, 'distorts demand supply equation and eliminates the possibility of discovering free market price of gas.'

'Discovery of free market price of gas is a fundamental feature of PSC signed under NELP... there has been a huge escalation in costs for developing oil and gas fields over the last few years. An incorrectly specified domestic gas price will retard domestic gas development,' it added. Reliance Industries has also opposed pre-allocation of the scarce fuel saying it distorts demand-supply equation and eliminates possibility of discovering free market price of gas. 

The S&P CNX Nifty is currently trading at 5,451.35, lower by 31.95 points or 0.58%. The index has touched a high and a low of 5,521.40 and 5,450.00 respectively.  There were 26 stocks advancing against 24 declining one’s on the index.

The top gainers of the Nifty were Sterlite Industries up by 4.65%, PowerGrid Corporation of India 1.64%, Sesa Goa up by 1.52%, BPCL up by 1.28% and Hindalco up by 1.23%.

On the flip side, HDFC down by 4.53%, IDFC down by 3.38%, kotak bank down by 2.72%, ICICI Bank down by 2.35% and L&T down by 2.18%, were the major losers on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite gained 0.32%, Nikkei 225 amassed gains of 0.29%, Straits Times was up by 0.11%, Seoul Composite added 0.44% and Taiwan Weighted was up by 0.05%.

On the flip side, Hang Seng declined 0.10%, Jakarta Composite plunged 1.94% and KLSE Composite descended 0.13%.