Sensex caves in as Infosys guidance, Euro-zone woes stoke risk aversion

Last trading session of the second week of the financial year 2012-13 turned out to be a daunting one for stock markets in India, which not only went on to erase all the good work done in the previous session but also halted the two week gaining streak with large cuts of around two percent.

The frontline equity indices went through a volatile session amid a slew of local as well as global headwinds and settled around the psychological 5,200 (Nifty) and 17,100 (Sensex) levels after suffering around one and half a percent cuts on large volumes.

The markets which resiliently weathered the shocking start of the fourth quarter earnings season post the discouraging earnings and guidance by index bellwether Infosys in the morning session, flattened out completely in early noon trades. The key gauges could not capitalize further on the momentum since sentiments in the local markets got influenced by the pessimistic cues that the European markets were exhibiting.

The frontline gauges suffered deep kneejerk sell-off in the mid noon trades as investors took to risk aversion amid reports that Spanish government bond yields tested the psychologically important 6% mark on the back of data showing Spanish banks borrowed heavily from the European Central Bank in March, refueling concerns over the country's finances.

On the domestic front, government data showed although exports beat the government's target, India's trade deficit shot up more than 50% in the 2011-12 fiscal year and is seen at $185 billion, higher than a revised estimate, mainly on account of higher crude import bill.

The software and technology counters suffered brutal assault in the session amid expectations that the upcoming results season, which got kicked off by technology giant Infosys’ gloomy guidance, may not bring the much-needed cheer to the IT sector amid uncertainty in the business environment for Indian outsourcing companies. The rate sensitive Bankex and Realty counters, which gained some ground on RBI rate cut hopes, too plunged around a percent on profit booking.

However, stocks from the Aviation sector skyrocketed on reports that the issue of allowing foreign airlines to buy up to 49% in Indian carriers will come up before the Cabinet at its next meeting. Besides, NMDC surged higher on reports that Supreme Court deferred a decision on whether to lift its iron ore mining ban in Karnataka to April 20, leaving state-run NMDC as the only company able to mine there.

On the global front, cues from Asia remained supportive as markets in the region settled in the positive terrain despite reports that Chinese economy grew at its weakest pace in nearly three years in the first quarter, with the annual rate of expansion slowing more than expected to 8.1 percent from 8.9 percent in the previous quarter. Reports from South Korea and Japan indicated that North Korea's rocket launch failed, raising investors' appetite for riskier asset like equities. The European markets after starting the session on a week note, slipped deeper in the red terrain amid growing concerns over European debt crisis.

Back home, the NSE’s 50-share broadly followed index Nifty, plummeted by around one and half a percent to settle a touch above the psychological 5,200 support level while Bombay Stock Exchange’s Sensitive Index - Sensex abandoned about two hundred and forty points to finish just below the crucial 17,100 mark. Moreover, the broader markets which showed resilience for most part of the session settled on a weak note with over half a percent cut but outperformed their larger peers.

The markets surged on large volumes of over Rs 1.70 lakh crore while the turnover for NSE F&O segment remained on the lower side as compared to that on Thursday at over Rs 1.35 lakh crore. The market breadth turned pessimistic by the end as there were 1,236 shares on the gaining side against 1,565 shares on the losing side while 135 shares remained unchanged.

Finally, the BSE Sensex shaved off 238.11 points or 1.37% to settle at 17,094.51, while the S&P CNX Nifty plunged by 69.40 points or 1.32% to close at 5,207.45.

The BSE Sensex touched a high and a low of 17,398.22 and 17,027.30 respectively. The BSE Mid cap and Small cap index were down by 0.72% and 0.63% respectively.

The top gainers on the Sensex were Sun Pharma up by 2.54%, Coal India up by 1.52%, Hero MotoCorp up by 1.52%, Tata Motors up by 1.33%, and RIL up by 1.12% while Infosys down by 12.61%, TCS down by 5.47%, Wipro down by 4.10%, Hindalco Industries down by 2.58%, and Jindal Steel down by 2.43% were the major losers on the index.

The top gainers on the BSE sectoral space was Health Care (HC) up by 1.03%, FMCG up by 0.59%, Oil &Gas up by 0.61% and Auto up by 0.45%, while IT down by 8.76%, TECk down by 6.90%, Realty down 0.93%, Bankex 0.80% and Capital Goods (CG) down by 0.55% were the top losers on the BSE sectoral space.

Meanwhile, power generation has expanded by 6% in the month of March. The increase has come despite 25 thermal power stations are operating with coal stock of less than four days.

As per Central Electricity Authority data, power generation in March increased by 6.39% to 2,550 million units as against the programmed 2,397 million units. Thermal power generation alone witnessed a rise of 6.7% at 2,211 million units against the programmed 2,072 million units. On the other hand, the fuel stock position at the thermal power stations remained strained with less than four days of reserves at 25 plants and less than seven days stock at 30 power stations.

As per the government officials coal stock is not the only reason effecting power supply. There are many more factors contributing to the increase in power, coal supply being one of them. Moreover it isn’t that power companies do not have coal. The lesser supply is affecting the utilization capacity of the plant however is not shutting it down.

The Power Ministry has set a target of generating 9,20,000 million units of electricity this year, of which over 1,50,000 million units is expected to come from the private sector alone. It has plans to add over 7,60,000 million units of coal-based power during 2012-13. The government would add over 1,22,000 million units of hydel power during 2012-13, of which nearly 60,000 million units would come from the northern part of the country. It would also import over 5,000 million units of hydro power from Bhutan to bridge the shortfall.

The S&P CNX Nifty touched a high and low of 5,306.75 and 5,185.40 respectively.

The top gainers on the Nifty were Dr Reddy up by 2.39%, Sun Pharma up by 2.30%, Kotak Bank up by 2.24%, Grasim up by 2.16% and Coal India up by 1.68%.

On the flip side, Infosys down by 12.75%, TCS down by 5.76%, Wipro down by 4.25%, HCL Tech down by 3.53%, and Jindal Steel down by 3.49% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 0.97%, Britain’s FTSE 100 down 0.45%, while Germany's DAX was down by 0.65%.

Stocks across the Asia-pacific region rallied on last trading day of the week following overnight firm trend in US market on optimism from the Euro zone as Lower Italian bond yields eased some concerns about the region. Moreover, the investors’ sentiment also got boost from the news that North Korea confirmed the failure of its controversial rocket launch. However, the gains remained capped by weaker than expected Chinese economic data. The annual rate of China's gross domestic product expansion eased to 8.1 percent in the first quarter from 8.9 percent in the previous quarter, data showed, below 8.3 percent forecast and the weakest pace in nearly three years.

Meanwhile, South Korea shares snapped a three-day losing streak and the benchmark index regained the psychologically important 2,000-point level as investors brushed off weaker-than-expected Chinese growth figures as concerns about North Korea’s rocket launch got eased after the failure of rocket launch. Moreover, Taiwan stocks ended up 1.64 percent at a near two-week high after the government revealed its plan to levy a capital gains tax on shares and futures trading, removing uncertainty that had spooked investors’ sentiment.