Sensex trades in red after new Rail minister rolls back fare hike

After touching the day’s highs in mid morning trades, Indian stock markets have drifted to the day’s lows in Thursday afternoon trades within minutes after the newly re-instated Railway minister Mukul Roy rolled back most fare hikes proposed by the earlier minister. However, the markets have not shown any knee-jerk reaction to the development as it was largely on the expected lines after the sacking of former rail minister Dinesh Trivedi. But the move has reignited worries amongst the market participants over the decision making power of the ruling Congress as they fear any decision by the government relating to hike in prices of petroleum products is likely to meet with similar fortune. The benchmark equity indices continued to trade in a tight range but below the previous closing levels as sentiments remained dismal amid a series of negative cues. The scam ridden UPA government is caught in another scandal related to allotment of coal blocks as a report by Comptroller & Auditor General opined that the government extended undue benefits, totaling a mind-boggling Rs 10.67 lakh crore, to commercial entities by giving them 155 coal acreages without auction between 2004 and 2009. Meanwhile, RBI rendered a big jolt to gold loan companies like Manappuram Finance and Muthoot Finance by restricting loans by gold finance firms to 60% of the value of gold jewellery pledged as collateral. Currently gold loan companies are said to be lending as much as 75% of the gold value. Meanwhile the rupee has fallen sharply to two month lows while bond yields have gone up, undermining sentiments. On the BSE sectoral space, profit booking was largely evident in the high beta Realty index which plunged over a percent after rallying over three and half a percent in the previous session while Oil & Gas counter too sank close to a percent. Besides, Indian bourses failed to get any significant triggers from global peers as Asian equity indices traded on a mixed note. The encouraging economic report from world’s third largest economy which showed Japan registered an unexpected trade surplus of 32.9 billion yen in February, the first surplus in five months, against a forecast for a 120 billion yen deficit, was offset by reports of fifth consecutive decline in Chinese manufacturing activity in March. While the European futures indicated that the markets would extend their declining streak for the fourth straight session, tracking weak cues from Asia.

Moreover, the broader markets traded on weak note with moderate cuts of under half a percent in tandem with their larger peers. The bourses eased on good volumes of over Rs 0.60 lakh crore while market breadth on BSE was in favor of declines in the ratio of 1512:1079 while 108 scrips remained unchanged.

The BSE Sensex is currently trading at 17,570.05 down by 31.66 points or 0.18% after trading as high as 17,687.01 and as low as 17,509.42. There were 14 stocks advancing against 16 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index slipped 0.47% and Small cap shed 0.24%.

On the BSE sectoral space, PSU up by 0.66%, FMCG up 0.65%, Auto up 0.13% were the only gainers, while Realty down 1.09%, Oil & Gas down 0.81%, Metal down 0.61%, Power down 0.60% and Capital Goods down 0.45% were the major losers in the space.

Coal India up 3.25%, Tata Powers up 1.10%, Hero Moto up 1.07%, HDFC Bank up 0.91% and ONGC up 0.85%, were the major gainers on the Sensex, while Jindal Steel down 5.78%, RIL down 1.81%, Maruti Suzuki down 1.03%, Cipla down 1% and Bharti Airtel down 0.90% were the major losers in the index.

Meanwhile, Indian industry body, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has called for a hike in import duty on all steel products to 10%. Taking cognizance of the recently raised import duty on non alloy flat steel products (from 5% to 7.5%), it has stated that this does not include the alloy steel category and hence fails to address the issue holistically.

Domestic steel producers have been facing stiff competition from Chinese imports which have grown by 120% from October 2011 to February 2012 (as compared to the same period previous year). China is the world’s largest producer of steel and has an excess capacity of 135 million tonnes (mt). This is almost twice the annual of steel production of India which stands at 70 mt.

Moreover, it exports a large quantity of boron-treated hot-rolled coils, sheets and plates that conform to the alloy steel category and hence has been left out in the budget. Additionally, China also offers an export incentive at 9% of export value to its manufacturers. Hence, as per ASSOCHAM, it is necessary that the government address the issue in a holistic manner and raise the import duty on all steel products by at least 10%.

China is the world's largest steel exporter, forming about 50 mt, or about 20% of the global steel trade. In addition, China exports almost 70% of the quantity to its neighboring countries across east, south and central Asia and Australia.

The S&P CNX Nifty is currently trading at 5,333.45, lower by 31.50 points or 0.59% after trading as high as 5,385.95 and as low as 5,329.05. There were 14 stocks advancing against 36 declines on the index.

The top gainers on the Nifty were Coal India up 3.16%, Hero Moto up 0.97%, ONGC up 0.63%, HDFC Bank up 0.62%, Sun Pharma up 0.59%.

Jindal Steel down 6.26%, IDFC 3.99%, JP Associates down 2.19%, Kotak Bank down 2.06%, HCL Tech down 1.92% were the major losers on the index.

In the Asian space, Hang Seng gained 0.21%, Jakarta Composite rose 0.12%, KLSE Composite added 0.16%, Nikkei 225 advanced 0.40% and Taiwan Weighted surged 0.98%.

On the other hand, Shanghai Composite eased 0.18%, Straits Times dropped 0.33% and Seoul Composite shed 0.05%.