Broad based selling triggers additional weakness across Dalal Street

Broad based selling has triggered additional weakness across Dalal Street despite absence of catastrophe at the start of the fresh week. Hesitant over the fundamentals of the markets, traders are seen offloading their position ahead of the expiry of March month’s F&O series on Thursday. Distresses by the massive losses in Realty, Bankex and  Power counters, even as rest of the 30 share barometer index of Bombay Stock Exchange (BSE)-Sensex- is trading sub 17200 level, also as rest 10 sectoral indices validate downbeat sentiment. Although, the broader indices, too have incurred losses, but not in the magnitude of the frontline indices, which are currently underperforming the globe.

On the global front, Asian shares were depicting mixed trend even as US stocks showcased resilience as it posted its second negative week so far this year on Friday. Meanwhile, the US future indices were showing an uptick in the screen trade.

Back on the home turf, the National Stock Exchange’s Nifty- after being pounded with a cut of over a percent and half points was trading sub 5200 bastion. In the second line shares, Indiabulls Real Estate, Oberoi Realty and HDIL slipped 2-3% after reports stated that the Maharashtra government plans 160 times hike in stamp duty for leave and licence properties. Meanwhile, sugar stocks like Shree Renuka Sugars and Bajaj Hindusthan gained over 1.5% as EGoM headed by Finance Minister will meet today to decide on allowing additional export up to 1 million tones of sugar in the 2011-2012 marketing year. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1428:871, while 98 shares remained unchanged.

The BSE Sensex is currently trading at 17,108.78, down by 252.96 points or 1.46%. The index has touched a high and a low of 17,377.59 and 17,092.00 respectively.  There were only 2 stocks advancing against 28 declining one’s on the index.

The broader indices too were trading in the red; the BSE Mid cap and Small cap indices declined 0.71% and 0.54% respectively.

The major losing sectoral indices on the BSE were, FMCG down by 1.97%, Bankex down by 1.87%, Power down by 1.75%, Oil & Gas down by 1.57% and TECK down by 1.40%, while there were no gainers on the index.

The few gainers on the Sensex were Jindal Steel up by 1.43% and Wipro up by 0.18%.

On the flip side, ICICI Bank down by 3.09%, Tata Power down by 3.06%, NTPC down by 2.30%, TCS down by 2.04% and Bharti Airtel down by 1.98% were the top losers on the Sensex.

Meanwhile, it is unlikely that diesel prices will be deregulated in the near future but petrol prices may be hiked. As per Oil Minister, S Jaipal Reddy, petrol prices have seen a recent discontinuation of deregulation and need to be relooked into, however prices of diesel will require more forethought and consultations as it involves more than just numbers.

Even though petrol prices have been deregulated, any hike in them is made by the oil companies after consulting the government. Given the recent assembly elections, the UPA government had not allowed the oil companies to hike petrol prices in tandem with its international prices. This led to the companies suffering losses to the tune of Rs 4,500-crore.

Recently, Indian Oil has been pressing the government to fully compensate it for the losses or it will have no option to pass on this burden to the consumers. If this happens, the still fragile inflation numbers could witness a further upswing. At present, the government compensates oil firms for losses only on diesel, domestic LPG and kerosene.

The government’s rising fiscal deficit is making it difficult for it to sustain fuel subsidies. Moreover it is eroding the government’s credibility in the national as well as international markets. The recent budget has made the government’s commitment clear on the food security bill and the food minister has stated that it could be implemented by the end of the calendar year. Given this huge rise in its expenditure, the government will find it difficult to sustain its subsidy bill unless it cuts down somewhere else.

A hike in diesel price is receiving considerable push from economic quarters, followed by support for deregulating LPG. However given the UPAs difficult allies, it may not be an easy task. This fact has only been strengthened by the recent roll back in the hike of rail fares.

The S&P CNX is currently trading at 5,196.85, lower by 81.35 points or 1.54%. The index has touched a high and a low of 5,274.95 and 5,196.70 respectively.  There were only 4 stocks advancing against 46 declines on the index.

The top gainers of the Nifty were JP Associate up by 1.64%, Jindal Steel up by 1.35%, Kotak Bank up by 1.06% and Maruti Suzuki up by 0.27%. On the flip side, Axis Bank down by 3.40%, IDFC down by 3.33%, ICICI Bank down by 3.18%, Bharti Airtel down by 2.77% and Tata Power down by 2.66%, were the major losers on the index.

Asian markets were trading on a mixed note; Shanghai Composite gained 0.10%, Hang Seng inched up by 0.02%, KLSE Composite held up by 0.05% and Nikkei 225 added 0.25%.

On the flip side, Jakarta Composite declined 0.38%, Straits Times slid 0.35%, Seoul Composite plunged 0.65% and Taiwan Weighted surrendered 1.29%.