Sensex negotiates small gains; post budget sell-off gets arrested

After deposing over three and half a percentage points in last three sessions, Indian stock markets finally showed signs of consolidation on Tuesday as the benchmark equity indices halted the three session southward journey and negotiated a positive close with around a quarter percent gains. The markets showed some signs of recovery in mid morning trades after the brutal butchery in previous trading sessions owing to the disappointing federal budget, however, the psychological 5,300 (Nifty) and 17,400 (Sensex) levels proved to be stern resistance levels for the frontline indices as they failed to break those crucial points and dipped into the negative terrain. However, the key gauges found strong supports around the crucial 5,250 (Nifty) and 17,200 (Sensex) levels on the downside and rebounded from those levels. Market participants were seen piling up positions largely across the board as they hunted for undervalued but fundamentally strong bargains after the recent sell-off. On the BSE sectoral space, the Consumer Durables counter outperformed all its peers in the space with around 2.5% gains. Investors also showed buying interest in the rate sanative Realty and Bankex counters which prevented the benchmarks from drifting into the red terrain while, market men continued to build positions in the defensive sectors too like FMCG and Healthcare sectors. Though, the Auto index remained the only chink in the armor and settled with 1.50% losses and capped the upside for the frontline indices. Auto stocks got bumped in the session with heavyweights like Tata Motors getting slaughtered by over 4% in amid worries about lower sales following a string of price hike announcements intended to factor in the higher excise taxes proposal in the 2012/13 Union Budget. Meanwhile, index heavyweight Reliance Industries, the country’s largest company showed some fervor for the first time in five days and climbed by 0.75% while another bellwether Bharat Heavy Electricals, the largest power-equipment maker, too ended with similar gains after a three-day, 12 percent drop.

Besides, Indian bourses failed to get any significant triggers from global peers as most Asian equity indices settled on a weak note with a negative bias despite a fairly positive cues from overnight US markets which rose on the back of upbeat Chicago area manufacturing numbers and better than expected nationwide home builder sentiment. Chinese shares plunged amid concerns over a rebound in domestic inflation after the country raised retail gasoline and diesel prices by 6 and 7 percent respectively, marking the biggest increase in 33 months. While, the European markets too were reeling under hefty selling pressure as investors continued to square off positions after a rally to eight month high levels last week.

Back home, the NSE’s 50-share broadly followed index Nifty, rose by one third of a percent to settle above the psychological 5,250 support level while Bombay Stock Exchange’s Sensitive Index - Sensex- gained forty three points and closed above the psychological 17,300 mark. Moreover, the broader markets settled on a quite note with the small cap index underperforming all its larger peers and ending with trivial loss. The markets dived on large volumes of over Rs 1.58 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Monday at over Rs 1.35 lakh crore. The market breadth remained pessimistic as there were 1335 shares on the gaining side against 1542 shares on the losing side while 122 shares remained unchanged.

Finally, the BSE Sensex gained 42.81 points or 0.25% to settle at 17,316.18, while the S&P CNX Nifty rose by 17.80 points or 0.34% to close at 5,274.85.

The BSE Sensex touched a high and a low of 17,410.13 and 17,211.73 respectively. The BSE Mid cap index up by 0.56% and Small cap index was down by 0.03%.

The major gainers on the Sensex were Sun Pharma up 2.69%, HDFC Bank up by 2.08%, Jindal Steel up by 1.51%, DLF up by 1.37%, Cipla up by 1.30%. While Tata Motors down by 4.21%, Coal India down by 2.31%, Hindalco Industries down by 1.74%, Bajaj Auto down by 1.24% and Bharti Airtel down by 0.71% were the major losers on the index.

The top gainers on the BSE sectoral space were Consumer Goods up by 2.35%, Realty up by 1.44% FMCG up by 1.04%, Health Care up by 1.01% and Bankex up by 0.85%, while Auto down by 1.50%was the only loser on the BSE sectoral space.

Meanwhile, facing increasing queries on how the government plans to control its fiscal deficit, the Finance Minister has hinted at an increase in fuel price soon. He has stated that he will be discussing the issue with various political parties post the budget session (after 30 March), to work out an overall mechanism through which the issue can be resolved.

The oil companies have also been demanding that prices of petrol, diesel, liquefied petroleum gas (LPG) and kerosene be hiked to control the heavy losses they are suffering. Since petrol prices have been deregulated, a hike in them could come in sooner, while hike in prices of other fuels will require political consensus.

Currently oil companies are losing Rs 14.73 a litre on diesel, Rs 30.10 a litre on kerosene and Rs 439.50 per LPG cylinder. They are also losing over Rs 5 a litre on petrol as petrol prices have not moved in tandem with costs. The government has been sanctioning subsidies to the companies to cover the losses. However, this is significantly impacting its expenditure due to the rapid increase in global crude prices.

An increase in fuel prices will help the government cut its subsidy burden and narrow its fiscal deficit. In the current fiscal, the government has provided Rs 65,000 crore in fuel subsidy, which it hopes to trim down to Rs 40,000 crore in 2012-13. It targets to bring down the subsidy bill to below 2% of GDP in FY’13 and its fiscal deficit to 5.1%.

The S&P CNX Nifty touched a high and low of 5,297.35 and 5,233.25 respectively.

The top gainers on the Nifty were JP Associate up 4.05%, PNB up by 3.51%, BPCL up by 2.91%, Sun Pharma up by 2.62%, Jindal Steel up by 1.62%. On the flip side, Tata Motors down by 4.07%, Coal India down by 2.55%, Hindalco down by 2.37%, HCL Tech down by 1.99%, Bajaj Auto down by 1.51% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 was down 1.35%, Britain’s FTSE 100 down 1.13%, while Germany's DAX was down by 1.44%.

Asian markets snapped the day’s trade mostly in the negative terrain on Tuesday led by losses in Hong Kong and Shanghai on underwhelming corporate earnings. Earlier in this month, China announced that it had lowered its economic growth target to 7.5 percent from 8 percent has spooked investors. In another sign of easing growth in the world’s No. 2 economy, new home prices dropped in 45 Chinese cities in February as the government implemented measures to cool property speculation.

Meanwhile, China Shanghai ended down 1.40 percent on Tuesday on worries over a rebound in domestic inflation after the country raised retail gasoline and diesel prices. China raised retail gasoline and diesel prices by 6 and 7 percent from Tuesday, marking the biggest increase in 33 months, a move that will help refiners reduce heavy losses but is unlikely to hit demand in a big way. While, Seoul Composite fell 0.24 percent as investors cashed in recent gains while waiting for clues about what might give the market some new momentum.

Moreover, stock markets in Japan remained closed for the trade on Tuesday for a national holiday on account of Spring Equinox.