Indian equity markets hit the rough patch; benchmarks dip to intra-day’s low

Benchmark equity indices relinquishing all the early gains have slipped into negative terrain, in sync with regional counterparts. However, it is the expectation of gloomy opening of European markets, which is weighing down on the Indian markets. European stocks look set to reverse a three-day tentative recovery rally after Standard & Poor's cut its credit rating on Spain by two notches, reviving worries over the debt-stricken country. S&P, citing expectations Spain's finances will deteriorate even more than previously thought due to the recession and the country's ailing banking sector, downgraded Spain to BBB-plus with a negative outlook, saying the situation could deteriorate further unless strong measures were taken at a European level.

Meanwhile, back on the home turf, dragged by the stocks from Realty, Oil & Gas and Public Sector Undertaking (PSU) counters, the barometer 30 share index- Sensex-is currently wandering below the 17150 bastion. Similarly, 50 share barometer index-Nifty- is also stagnant around its previous closing level. Nevertheless, stocks from Consumer Durable, Information Technology and Bankex are still holding their neck in green. Resilience also seems to be the name of the game for broader indices as both Midcap and Smallcap index are holding their fort in green.

Collapse of realty major-DLF-is mainly weighing on Realty pivotal, which in turn is heaving the markets lower. The company is reportedly in talks to sell its Mumbai land and is seeking a valuation of Rs 3000 crore for the 6.8 hectare property. However, the stocks of the company have been under the weather ever since the reports of it being excluded from 30 share index-Sensex-surfaced. DLF's removal from the index, which will come into effect from June 11, points to a wider problem of declining profitability among Indian real estate companies struggling with high debt, slow sales and sluggish growth. However, overall market breadth has reversed side to trade in the favor of declines which have piped advances in the ratio of 1423:1111, while 122 shares remained unchanged.

The BSE Sensex is currently trading lower by 3.78 points or 0.02% at 17,126.89. The index has touched a high and low of 17,242.15 and 17,125.65 respectively.   There were 19 stocks advancing against 11 declining ones on the index.

The broader indices continued to hold in green; the BSE Mid cap and Small cap indices were up by 0.24% and 0.06% respectively.

Realty down by 1.39%, Oil & Gas down by 0.50%, PSU down by 0.39%, Metal up 0.37% and Fast Moving Consumer Goods (FMCG) down by 0.23% were top losers on the index. On the other hand, the top gaining sectoral indices on the BSE were, CD up by 0.60%, Information Technology up by 0.47%, Bankex up by 0.38%, Auto up by 0.28% and Power up by 0.25%.

The top losers on the Sensex were DLF down by 2.01%, Coal India down by 1.75%, Bharti Airtel down by 1.49%, SBI down by 1.42% and Tata Steel down by 1.09%.

On the flip side, ICICI Bank up by 1.69%, M&M up by 1.57%, Hindalco Industries up by 0.95%, TCS up by 0.64% and Cipla up by 0.57% were the top gainers of the index.

Meanwhile, as per the Met Department, in all probability India will see a normal monsoon this year. In its first official forecast for the 2012 monsoon season, the Met has forecasted that this year between June and September rains will be around 99% of the Long Period Average (LPA).  However, there is a 24% probability of rains being below normal, while the chances of the country experiencing an above normal rainfall are 17%.

A monsoon is considered normal when rains are 96-104% of the LPA. The LPA is the average annual rainfall across the country in 50 years starting from 1941. It is estimated at 89 centimetres.

However there is also a chance that the El Nino could affect rainfall during the second half of the season. El Nino, an abnormal warming of waters in the equatorial tropical Pacific, is linked with poor rains or a drought-like situation in southeast Asia and Australia. In 2009, the El Nino weather pattern turned monsoon rains erratic, leading to the worst drought in nearly four decades.

Monsoon rains play a crucial role in India's farm output as 60% of the country's agricultural area depends on rainfall for irrigation. Agriculture accounts for about 15% of India’s GDP. A normal monsoon leads to the chances of a bumper crop and helps in controlling food inflation. India has of late been struggling with stubbornly high prices of food. Food inflation rose close to double digits in March from 6.07% in February and deflation in the previous month.

India is also the world’s second largest producer of rice, wheat and sugar and a bumper crop will lead to greater exports of these. It will also put some money in the hands of farmers and will help generate demand in the economy. The rural areas are today seen as major demand centres. Also when there is an increase in the incomes of people especially of the rural areas it leads to an increase in demand for gold and silver. Infact about 60-70% of gold demand comes from rural areas and a good harvest is expected to boost the appetite for the bullion.

A good monsoon also leads to a greater demand for seeds and fertilizers, benefitting companies producing these. Hence a good monsoon is not only important for agriculture but also for the economy at large.

The S&P CNX Nifty is currently trading at 5,188.95, lower by 0.05 points. The index has touched a high and low of 5,223.05 and 5,187.50 respectively. There were 26 stocks advancing against 24 declining ones on the index.

DLF down by 2.28%, Ranbaxy down by 1.90%, Coal India down by 1.74%, SBI down by 1.60% and ACC down by 1.40% were the top losers on Nifty 50 index. On the flip side, Siemens up by 2.32%, M&M up by 1.85%, ICICI Bank up by 1.78%, Axis Bank up by 1.65% and Asian Paints up by 1.13% were the top gainers of the index.

Asian market were trading mixed; Hang Seng slid 0.30%, Straits Times declined 0.01%, Shanghai Composite lost 0.24%, Jakarta Composite surrendered by 0.39%, Nikkei 225 was beaten down by 0.43%, KLSE Composite shed 0.57% and Taiwan Weighted cooled off by 0.54%.

However, Seoul Composite up by 0.58% was the sole gainer amongst the Asian pack.