Sensex dives first time in last four sessions; Realty, Metal counters drag

Stock markets in India staged an unenthusiastic performance on the last trading session of the first week of FY 2012-13 as the frontline equity gauges shed over half a percent after amassing over three percentage points in the last three sessions.

The benchmark gauges, which gyrated in a narrow range on tepid volumes, drifted lower for the first time in last four trading sessions and settled around the psychological 17,500 (Sensex) and 5,300 (Nifty) levels as investors took to largely across the board profit booking.

Sentiments in the session got undermined not only by the dismal cues from global markets but also from disappointing domestic economic indicators. Investors’ mood got dampened by HSBC services PMI reading, which showed that expansion in Indian services sector slowed to a five month low levels in March as optimism about the business outlook in the coming year faded to its weakest level since 2009.

The HSBC India Composite Index which covers both the manufacturing and service sectors fell from February’s 57.8 to a four-month low of 53.6 in March. Meanwhile, bond yields have steadied a day after spiking after traders dumped bonds to make way for the heaviest weekly debt supply totaling $3.54 billion in the holiday-shortened week.

The high beta Realty index plunged over a percent after investors squared off hefty positions from the counter amid reports that the cabinet will soon consider a bill that seeks to establish the regulator for the real estate sector. The proposed regulator would make registration compulsory for property agents as well as for residential projects over 1,000 square metres or 12 dwelling units in an effort to improve transparency and accountability in the sector.

The Metal and Banking pockets too suffered severe pounding and plunged about a percent. On the other hand, the Power sector remained top gainer with around half a percent gains in an otherwise weak market after the government issued a presidential decree to force Coal India to guarantee long-term fuel supply to private power firms.

On the global front, sentiments got undermined by the supportive cues from global markets. Asian equities retracted as market participants chose to take some profits off the table after the notable rise in last two sessions. Equity indices globally got pounded after US Federal Reserve minutes showed that the central bankers remained reluctant to the idea of employing more stimulus measures to spur the economy unless the US economic expansion falters or prices rise at a rate slower than its 2 percent target.

While the European markets after getting off to a weak start plummeted by around one and half a percent after reports showed that the European services sector contracted for the sixth time in seven months in March, raising the likelihood that the economy has fallen back into technical recession.

Back home, the NSE’s 50-share broadly followed index Nifty, declined by over half a percent to settle above the psychological 5,300 support level while Bombay Stock Exchange’s Sensitive Index - Sensex shed a hundred and eleven points to finish just below the crucial 17,500 mark. Moreover, the broader markets showed resilience as they refused to succumb to the selling pressure and closed on a flat note. The Small Cap index from the broader space gained about half a percent in the session and outperformed all its larger peers.

The markets declined on tepid volumes of over Rs 0.94 lakh crore while the turnover for NSE F&O segment too remained on the lower side as compared to that on Tuesday at over Rs 0.69 lakh crore, since these are the initial days of a new F&O series. The market breadth turned positive by the end as there were 1,446 shares on the gaining side against 1,344 shares on the losing side while 126 shares remained unchanged.

Finally, the BSE Sensex lost 111.40 points or 0.63% to settle at 17,486.02, while the S&P CNX Nifty declined by 35.60 points or 0.66% to close at 5,322.90.

The BSE Sensex touched a high and a low of 17,553.26 and 17,436.60 respectively. The BSE Mid cap index down by 0.03% and Small cap index was up by 0.40%.

The top gainers on the Sensex were BHEL up 3.54%, Hindalco up 0.99%, Maruti Suzuki up 0.75%, ONGC up 0.29% and NTPC up 0.24%, while Jindal Steel down 3.15%, GAIL India down 2.80%, Bharti Airtel down by 1.99%, Sterlite Industries down by 1.99% and ICICI Bank down by 1.88% were the major losers on the index.

The only gainers on the BSE sectoral space were Power up 0.42% and Consumer Durables (CD) up 0.27%, while Realty down 1.35%, Metal down 1.02%, Bankex down 0.75%, Oil & Gas down 0.60% and Auto down 0.45% were the top losers on the BSE sectoral space.

Meanwhile, Indian services sector has slowed down notably in the month of March, as per the HSBC Services Business Activity Index. Growth of new business which had so far fuelled activity levels is also significantly down. It may be noted that this is the second consecutive month in which services have reported a slowdown. Similarly, posting 53.6, the HSBC India Composite Index - which covers both the manufacturing and service sectors - fell from February’s 57.8 to a four-month low.

The seasonally adjusted HSBC Services Business Activity Index posted 52.3 in March significantly down from 56.5 in February, the lowest in 5 months. Though the number remains above the 50 level, that divides growth from contraction, the rate of expansion is definitely coming down. In fact it is the lowest in the past five months. The dampening has been attributed to the lack luster budget which had no major economic reforms to boost growth.

Input prices have also gone up sharply for the services sector. It is expected that this could lead to a price rise in the coming months. As per Leif Eskesen, an economist at HSBC, since sequential inflation remains above the historical average, the Reserve Bank of India (RBI) will have to approach the rate easing cycle cautiously.

The RBI has kept the repo rate, at a three-year high of 8.5% since December to close down on inflation, but has cut banks' cash reserve requirements by 75 basis points to ease tight liquidity. Despite evidence that a slew of rate hikes since late 2010 is hurting growth in Asia's third-largest economy, the RBI has said that its hands are tied in the absence of credible fiscal consolidation.

On a more positive note, there has been a marginal increase in employment in the service sector. Also Indian service companies were optimistic that activity will rise over the next year. Expected gains in new business due to the high quality of services provided and anticipated improvements in markets conditions are expected to support growth.

The S&P CNX Nifty touched a high and low of 5,338.40 and 5,305.30 respectively.

The top gainers on the Nifty were BHEL up 3.60%, Ranbaxy up 3.33%, Dr Reddy up 1.42%, Cairn up 0.91% and Hindalco Industries up 0.87%. On the flip side, Jindal Steel down by 3.44%, GAIL down 3.38%, JP Associates down 2.37%, Cipla down 2.01% and Bharti Airtel down 1.99% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 1.47%, Britain’s FTSE 100 down 1.08%, while Germany's DAX was down by 1.64%.

All Asian equity indices ended day’s trade in the negative terrain on Wednesday after the minutes from US Federal Reserve’s March meeting reduced expectations of further stimulus measures to spur growth, leaving investors looking for more clues to the global economic outlook. Japanese Nikkei share average shed 2.3 percent on Wednesday in its worst performance in five months, after stop-losses were triggered on index futures, raising concern that Tokyo’s sharp equities rally so far this year could be grinding to a halt. While, Seoul shares dropped 1.5 percent after posting an eight-month closing high in the previous session, tracking declines in global peers.

Meanwhile, markets in mainland China and Hong Kong remained closed on Wednesday on account of Qingming Festival while the Taiwanese markets were shut owing to Tomb Sweeping Day holiday.