Jitters on macro-economic concerns at Dalal Street; rupee depreciation aids IT stocks

Losses at Dalal Street have magnified on continued selling by foreign funds and retail investors in the absence of any positive catalyst. Fall of Index heavyweights, such TCS and Reliance Industries, is broadly weighing on the markets. Nevertheless, the slippage of leading two-wheeler manufacturer- Hero MotoCorp- by over 5%, is also pushing bears to the defensive.

Disappointing Auto sales figures for the month of April, has mainly doomed Auto index. However, the banking index has also been hit hard by RBI's directive to set aside more capital to meet BASEL III requirements. The banks’ as per the RBI new directive, have to maintain core Tier I capital of at least 7 percent of their risk weighted assets on an ongoing basis. On the flip side, however, sugar stocks have sweeten on export limit scrap. Beneficiaries of which are Balrampur Chini Mills, Bajaj Hindusthan and Shree Renuka Sugars.

However, trend seems to be a little diverse for global indices, as after the overnight losses of US markets, which was on the back of weak report on private jobs growth and poor economic reports from Europe, regional counterparts are showing slender signs of recovery, with markets in Indonesia, Singapore and Malaysia turning in green. Asian shares, too, however, were floating in red in early deals on Thursday after disappointing data from both sides of the Atlantic rekindled concerns about the strength of the global economic recovery.

Back on the home turf, macro-economic worries are mainly sapping risk appetite of Indian investors, which are already fluxed about concerns of foreign selling on the back of a controversial set of proposed tax GAAR rules, the clarity of which will provided on May 7,2012. Meanwhile, the Indian currency, which hitting a four month low for second consecutive session, has also cascaded negative impact in the mind of finicky investors. However, the deprecation of rupee, comes as a silver lining for Information Technology stocks, which derive lion share of revenues from exports.

The benchmark 30-share BSE Sensex, plunging for second consecutive session, is currently holding above the 17150 mark. Similarly, 50-share Nifty too declining over 50 points is oscillating below the 5200 bastion. The broader indices too have enticed additional weakness. The overall market breadth on BSE, much obviously is in the favour of declines which have thumped advances in the ratio of 1287:737, while 82 shares remained unchanged.

The BSE Sensex, plunging by 146.96 points or 0.85%, is currently trading at 17,154.95. The index has touched a high and low of 17,271.77 and 17,148.66 respectively.  There were 6 stocks advancing against 24 declines on the index.

The broader indices too enticed additional weakness; the BSE Mid cap and small cap indices declined 0.77% and 0.56% respectively.

Auto down by 2.25%, Bankex down by 1.54%, Realty down by 1.37%, Metal down by 0.97% and Public Sector Undertaking down by 0.97% were the top losers on the index. On the flip side, Information Technology up by 0.11% was the only gainer on the index.

The top gainers on the Sensex were HUL up by 1.41%, Cipla up by 1.18%, Wipro up by 1.11%, BHEL up by 0.36% and Sterlite Industries up by 0.29%.

On the flip side, Hero MotoCorp down by 5.54%, Bajaj Auto down by 3.87%, ICICI Bank down by 2.40%, Coal India and Tata Steel down by 1.98% were the top losers on the Sensex.

Meanwhile, the government has freed the exports of sugar and scrapped the minimum export price of onion. It has also decided to set up an expert panel to formulate a policy to handle surplus foodgrains in view of storage crunch. Sugar and onions are items that are considered to be ‘sensitive’ because of their effects on household inflation and have been watched and regulated closely by the government.

However of late there have been complaints from sugar mills and farmers’ alike saying that the regulation is proving harmful to their business. India is the largest consumer and the second largest producer of sugar in the world. The sugar industry is completely controlled by the government, right from the level of production to distribution. The food ministry allocates the quantity of sugar to be sold in the open market every month.

Exports of the sweetener are also controlled by the government keeping in view the domestic demand.  However, off late the mills have been demanding that sugar exports be allowed as cane arrears have been piling. With the present move, mill owners will be able to clear cane arrears of over Rs 10,000 crore to farmers. Also millers will now be also able to export sugar freely under the open general licence. ‘We will review it once sugar exports reach a particular level,’ Food Minister KV Thomas said.

The scrapping of the minimum export price (MEP) of onion is also expected to help farmers make Indian onions more competitive in the international market. India is the second largest producer of onions in the world but has been facing stiff competition from China and Pakistan. Hence farmers have been demanding that the MEP be scrapped to help them make onions more competitive.

Apprehending that storage crunch would damage foodgrain during monsoon season, it was also decided to set up a panel, headed by Rangarajan, to recommend ways to handle surplus foodgrains stock lying in the central pool. The committee, comprising officials from Agriculture, Commerce, Food and Finance Ministries, has been asked to submit its recommendation in a shortest span as possible. The country is estimated to have produced a record 103.41 million tonnes of rice and 90.23 million tonnes of wheat in the 2011-12 crop year (July-June). 

The S&P CNX Nifty is currently trading at 5,193.75, lower by 45.50 points or 0.87%. The index has touched a high and low of 5,217.30 and 5,189.45 respectively.  There were 11 stocks advancing against 39 declines on the index.

The top gainers of the Nifty were HUL up by 1.47%, Wipro up by 1.34%, Cipla up by 1.08%, Sesa Goa up by 0.58% and Sterlite Industries up by 0.43%. On the flip side, Hero MotoCorp down by 6.06%, Bajaj Auto down by 3.46%, Axis Bank down by 2.98%, ICICI Bank down by 2.60% and Jaiprakash Associates down by 2.37% were the major losers on the index.

All the Asian equity indices were trading in the red; Shanghai Composite declined 0.38%, Hang Seng slipped 0.47%, KOSPI Composite shed 0.37% and Taiwan Weighted lost 0.26%.  On the flip side, Jakarta Composite added 0.05%, KLSE Composite gained 0.04%, Straits Times rose 0.01%.

Stock markets in Japan remained closed on Thursday on account of Constitution Memorial Day and would re-open directly on Monday.