Markets make soft start; Sensex breaches 17,600 mark

Indian benchmarks have made a soft opening, tracing mixed global cues. The US stocks fell overnight for first time in five sessions after Federal Reserve Chairman Ben Bernanke disappointed investors who hoped for a strong signal of more stimulus. Back home, the sentiment was dampened by 6.1% economic growth, election results, budget and higher oil prices. BSE’s Sensex and NSE’s Nifty breached their crucial 17, 600 and 5,350 mark due to profit-booking by funds and retail investors amid weak global cues. Besides profit-booking, offloading of positions to raise money to subscribe to ONGC share sale by the Government through the auction route pulled the Sensex down. Most of the sectoral indices were in the red with realty, capital goods, banking and consumer durables stocks leading the fall while, the healthcare and FMCG indices were marginally in green. Moreover, the broader indices too were struggling to get some traction and the market breadth on the BSE was negative; there were 698 shares on the gaining side against 899 shares on the losing side while 72 shares remained unchanged.

The BSE Sensex opened at 17,714.62; about 38 points lower compared to its previous closing of 17,752.68, and has touched a high and a low of 17,717.53 and 17,562.47 respectively.

The index is currently trading at 17,588.29 down by 164.39 points or 0.93%. There were 9 stocks advancing against 21 declines on the index.

The overall market breadth has made a negative start with 39.20% stocks advancing against 56.29% declines. The broader indices too were trading in the red; the BSE Mid cap and Small cap indices were declined by 0.47% and 0.26% respectively.

The only gaining sectoral indices on the BSE were, HC up by 0.52% and FMCG up by 0.13%. While, Realty down by 2.22%, CG down by 1.68%, Bankex down by 1.64%, CD down by 1.33% and Metal down by 1.13% were the top losers on the index.

The top gainers on the Sensex were Sun Pharma up by 1.85%, Tata Power up by 1.52%, Hero MOtoCorp up by 1.06%, Cipla up by 0.82% and ITC was up by 0.48%.

On the flip side, BHEL was down by 3.47%, ICICI Bank was down by 2.55%, DLF was down by 2.36%, Hindalco was down by 1.98% and SBI was down by 1.67% were the top losers on the Sensex.

Meanwhile, India's pace of economic growth slowed to its weakest annual pace in almost 3 years in the October-December quarter at 6.1%, as high interest rates and rising input costs constrained investment and manufacturing. Growth in GDP at factor cost during Q3, 2011-12, at 2004-05 prices, is estimated at 6.1% as compared to the growth rate of 8.3% in Q3, 2010-11. The growth rate is lesser than the widely expected number of around 6.3-6.4%.

The growth in GDP at factor cost during Q3, 2011-12, at 2004-05 prices, is estimated at 2.7% in ‘agriculture, forestry and fishing’ sector, 2.6% in industry and 8.9% in services sector, year-on-year. Growth in mining and quarrying is expected to decline to (-) 3.1% whereas manufacturing is estimated to grow at a dismal 0.4% during Q3, 2011-12 as compared to the same quarter last year. The numbers in manufacturing have come as quite a shocker given the recent IIP numbers. The electricity sector is estimated to grow at 9% during Q3, 2011-12.

The all important gross fixed capital formation (GFCF), an indicator of the level of investment in the economy, is expected to contract to (-) 1.2% at constant prices in Q3. Private final consumption expenditure (PFCE), the driver of growth, is expected to grow by 6.2%. The GDP estimates for the third quarter have come in as a disappointment.

Given these numbers, the estimated growth of 7.1% for FY’12, looks difficult. The growth for the period April- December 2011 has been revised to 6.9% and maintaining the same for the fiscal could also be a challenge given the drop in investments. As per economists, the growth numbers per say may not be a big concern as is the composition of this growth. With investments declining and consumption expenditures on the rise, the economy could face inflationary pressures in coming times.

Further, this could also limit the extent of measures that the Reserve Bank could take to stimulate growth. Growth in FY’13 too looks a little dismal with most believing that a rate of 7% will be achieved only by the second half of the fiscal. For the first half of FY’13, the growth rate is expected to be sub 7% unless the government takes some drastic steps in the upcoming Budget. Meanwhile, the Central Statistical Organization has pegged the GDP growth for 2011-12 at 6.9%, while the Prime Minister's Economic Advisory Council (PMEAC) expects that it would be 7.1%.

With the Indian economy slowing down to almost a rate which is close to the rates it saw post the Lehman Brothers crisis, all eyes are now on the government. Raising of capital expenditure, a decline in fiscal deficit, specific incentives for the infrastructure and a concrete plan for fiscal consolidation are some of the areas that need to be worked on to improve the sentiment of the economy. Economists are also of the opinion that a visionary budget with the government’s commitment to growth and fiscal consolidation in the coming years could help provide the necessary boost to the economy.

The S&P CNX Nifty opened at 5,366.00; about 19 points lower compared to its previous closing of 5,385.20, and has touched a high and a low of 5,372.45 and 5,320.95 respectively.

The index is currently trading at 5,335.25, lower by 49.95 points or 0.93%. There were 14 stocks advancing against 36 declines on the index.

The top gainers of the Nifty were Tata Power up by 1.83%, Sun Pharma up by 1.71%, Hero MotoCorp up by 1.39%, Cipla up by 0.71% and ONGC up by 0.56%.

On the flip side, BHEL down by 3.51%, Axis Bank down by 2.61%, ICICI Bank down by 2.44%, DLF down by 2.43% and Hindalco down by 2.18%, were the major losers on the index.

Most of the Asian equity indices were trading in the red; Shanghai Composite was up 2.84 points or 0.12% to 2,431.33, KLSE Composite was up 5.03 points or 0.32% to 1,574.68, Straits Times was up 3.49 points or 0.12% to 2,997.55, Seoul Composite was up 26.56 points or 1.33% to 2,030.25 and Taiwan Weighted was up by 11.92 points or 0.15% to 8,133.36.

On the flip side, Nikkei 225 was down 18.30 points or 0.19% to 9,704.94, Jakarta Composite was down 13.49 points or 0.34% to 3,971.72 and Hang Seng was down by 105.58 points or 0.49% to 21,574.50.