Indian equities add losses; Realty, TECk and IT drags

Indian equities added losses to continue its weak trade in red in the late afternoon session as investors lacked conviction to pile up fresh positions amid uncertain market conditions. The benchmark gauges failed to show resilience and succumbed to the selling pressure that the equity markets are experiencing across the globe. Traders were seen selling in Realty, TECk and IT sector. The sentiments also got undermined after reports showed Macquarie's Asia hedge fund has exited its short positions in Indian single stock futures in response to a controversial set of proposed tax rules that could lower investment returns. The market may remain volatile this week as traders roll over positions from the near-month April 2012 series to next-month May 2012 series. The April 2012 derivatives contracts expire on Thursday, April 26, 2012.

In the scrip specific development, India's biggest real estate developer DLF was seen trading weak after the Bombay Stock Exchange stated it will replace the company in the benchmark 30-share Index with pharma major Dr Reddy's Laboratories . Pfizer, the Indian unit of global Pfizer, was seen trading in green after Swiss food group Nestle stated that it would buy the US drugmaker's global infant nutrition business for $11.85 billion. ADA Group companies Reliance Power, Reliance Infrastructure, Reliance Communications, Reliance Capital, Reliance Broadcast Network and Reliance Mediaworks were seen trading weak in red.

On the global front, Asian markets were trading in red while the European markets were too trading in red on pessimistic note. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,200 and 17,100 levels respectively. The market breadth on BSE was negative in the ratio of 992:1646 while 112 scrips remained unchanged.

The BSE Sensex is currently trading at 17,150.74 down by 223.10 points or 1.28% after trading as high as 17,444.18 and as low as 17,150.74. There were 4 stocks advancing against 26 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index sank 1.30% while Small cap shed 1.03%.

On the BSE sectoral space, there were no gainers, while Realty down 3.14%, TECk down 2.46%, IT down 2.38%, Power down 2.26% and Capital Goods down 2.14% were the major laggards in the space.

RIL up 0.73%, HDFC up 0.07%, Tata Steel up 0.07% and Wipro up 0.04% were the only gainers on the Sensex, while DLF down 4.28%, Hindalco Industries down 4.24%, Bharti Airtel down 4.06%, Infosys down 3.90% and BHEL down 3.26% were the major losers in the index.

Meanwhile, the Supreme Court’s (SC) decision to allow partial mining in Karnataka has provided some relief to the local iron and steel industry. However, steel company owners are still cautious as the final judgment is still pending. Karnataka produces about 16 MT steel in a year, amounting to more than 20% of the country's total output.

The companies in the state require about 104,000 tonne of iron ore daily to run their units. Last year, the apex court, through its various orders had put a blanket ban on mining in Karnataka on environmental grounds. However, SC later provided some relief to the industry, by allowing sale of 25 MT of iron ore, lying at various mines in the state, through e-auctions. In addition, it also directed state-owned NMDC to sale 1 MT of the raw material per month to the industries in the state, through its two mines - Donimalai and Kumaraswamy.

As a result, iron and steel companies were facing severe shortages of iron ore, which led to a stark reduction in their production. Also the iron ore being supplied was of inferior quality. Hence, companies were not willing to risk their investments on plant and machinery and were keeping their production low.

JSW Steel, the largest producer of the metal alloy in Karnataka with 10 MT capacity, was running its blast furnaces at 60-65% capacity due to poor quality of ore. According to the last available data, company's production in February had gone down by over 24% compared to January levels.

On April 20, the apex court accepted the recommendations of court-appointed Central Empowered Committee (CEC) that suggested allowing mining in Category-A mines - that have more than 50 hectares area - with certain conditions, including Reclamation and Rehabilitation (R&R) plan in place. The final judgment on the issue is yet to be delivered.

The conditions include every individual mine owner giving an undertaking to strictly comply with the provisions of the R&R plan, keeping within the permissible annual production set by CEC and not extending mining into unbroken forest areas. According to an industry official, 5 million tonne of iron ore can get produced, when mining restarts in Karnataka.

The S&P CNX Nifty is currently trading at 5,225.05, lower by 65.80 points or 1.24% after trading as high as 5,310.55 and as low as 5,215.90. There were 6 stocks advancing against 44 declines on the index.

The top gainers on the Nifty were SAIL up 1.08%, RIL up 0.99%, ACC up 0.18%, Wipro up 0.04% and HDFC up 0.04%.

Reliance Communications down 4.46%, Hindalco Industries down 4.12%, DLF down 3.98%, Bharti Airtel down 3.81% and Infosys down 3.73%, were the major losers on the index.

In the Asian space, Shanghai Composite sank 0.76%, Hang Seng plunged 1.84%, Jakarta Composite eased 1.05%, KLSE Composite shed 0.64%, Nikkei 225 fell 0.20%, Straits Times dropped 1.13%, Seoul Composite lost 0.10% and Taiwan Weighted declined 0.35%.

The European markets were trading in red with, France’s CAC 40 plunged 1.48%, Germany’s DAX plummeted 2.11% and Britain’s FTSE 100 sank 1.39%.