Indian equities trim losses; trade continues in red in late afternoon session

Indian equities trimmed its losses but continued to trade in red in the late afternoon session after hitting a lowest level in 4-1/2 weeks. The benchmarks are showing absolutely no signs of recovery, lacking any significant upside triggers. Also, wary investors were seen booking profits ahead of results of crucial assembly elections in Uttar Pradesh and four other states. Traders were seen piling up positions in FMCG sector while selling was witnessed in Metal, Realty and Bankex sector. Jindal Steel, Hindalco, Tata Steel, SAIL, Sesa Goa and Sterlite from Metal pack were seen trading in red pulling the markets down. DLF from Realty counter was seen trading with cut of around more than three and half percent drifting markets lower. ICICI Bank, SBI, PNB, Axis Bank, HDFC Bank and Kotak Bank from Banking counters were seen trading in red pushing markets down. Industry heavyweight RIL was seen trading in red exerting pressure on the market. However, ITC and HUL from FMCG sector were seen trading in green giving the much needed support. On the global front, Asian markets were trading in red barring KLSE Composite while the European markets were trading in red on pessimistic note. European Union leaders have cleared the release of long-awaited second bailout package for debt-ridden Greece. This is to enable Greece avoid a default on paying back euro 14.5-billion debts due on March 20, 2012. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,300 and 17,500 levels respectively. The market breadth on BSE was in favor of declines in the ratio of 913:1776 while 102 scrips remained unchanged.

The BSE Sensex is currently trading at 17,414.46 down by 222.53 points or 1.26% after trading as high as 17,598.42 and as low as 17,338.80. There were 6 stocks advancing against 24 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index plunged 1.10% while Small cap declined 0.68%.

On the BSE sectoral space FMCG up 0.23% was the sole gainer, while Metal down 2.68%, Realty down 2.24%, Bankex down 2.15%, Capital Goods down 2.07% and PSU down 1.53% were the major losers in the space.

Tata Motors up 1.40%, ITC up 1.05%, Bharti Airtel up 0.96%, Wipro up 0.70% and ONGC up 0.59% were the major gainers on the Sensex, while Jindal Steel down 4.46%, Hindalco Industries down 4.36%, GAIL India down 3.74%, DLF down 3.59% and BHEL down 3.16% were the major losers in the index.

Meanwhile, HSBC India Composite Index - which covers both the manufacturing and service sectors - fell from January’s nine-month high of 59.6 to 57.8 due to a fall in both the manufacturing as well as the services sector. On a more positive note, the expansion of overall new work intakes accelerated slightly to reach an eleven-month high marking a rise in business activity for the Indian private sector.

The seasonally adjusted HSBC Services Business Activity Index fell to 56.5 in February from 58.0 in January (the 50.0 no-change threshold separates growth from contraction).Even though it has fallen month-on-month, the sector has been growing continuously for the past 4 months. Service companies are also optimistic of work increasing over the next year and confidence levels are at an eight month high, as per the latest survey.

New business received by Indian service providers in Feb 2012 has increased markedly although the rate of growth has remained unchanged from the previous survey period. The rise in business has been attributed to the acquisition of new clients. Higher new work intakes, supported by marketing initiatives and the good quality of services provided, alongside ongoing improvements in market conditions are expected to boost activity in the coming year.

Manufacturing production growth has also come down though it is still marked. Manufacturers reported a marginal strengthening in new order growth. February data has however signaled that employment in the manufacturing sector has fallen slightly in February. Increase in input prices have eased slightly and have risen at the weakest rate in four months. However, the rate of cost inflation has remained marked and above the long-run trend. Manufacturers have also reported a marginal strengthening in new order growth.

Service providers have also registered slower increases in input prices. Overall charge inflation has also eased, with a faster rise in manufacturers’ output prices offset by a slower increase in charges in the service sector.

Leif Eskesen, Chief Economist for India & ASEAN at HSBC has cautioned that the Reserve Bank India will have to approach the easing cycle cautiously as inflation is likely to hover above the comfort zone. Prices of oil are likely to impact the timing as well as speed of rate cuts by the apex bank.

The S&P CNX Nifty is currently trading at 5,293.15, lower by 66.25 points or 1.24% after trading as high as 5,344.50 and as low as 5,271.45. There were 12 stocks advancing against 38 declines on the index.

The top gainers on the Nifty were Reliance Infrastructure up 7.54%, Reliance Power up 4.50%, Reliance Communications up 1.84%, IDFC up 1.50% and Tata Motors up 1.44%.

JP Associates down 4.63%, Jindal Steel down 4.47%, Hindalco Industries down 4.33%, GAIL India down 3.93% and DLF down 3.52% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.64%, Hang Seng plunged 1.38%, Jakarta Composite sank 0.84%, Nikkei 225 slumped 0.80%, Straits Times eased 0.12%, Seoul Composite shrank 0.91% and Taiwan Weighted plummeted 1.35%. On the other hand only KLSE Composite gained 0.25%.

The European markets were trading in red with, France’s CAC 40 descended 0.46%, Germany’s DAX dropped 0.71% while Britain’s FTSE 100 shed 0.29%.