Markets start on cautious note; IT space plummets 2.50%

A day after a remarkable recovery witnessed triggered by announcement of GAAR (General Anti-Avoidance Rules) deferral by a year, domestic benchmarks have stalled their up-move and are trading cautiously as investors opted to remain on the sideline as they concentrating on the IIP numbers scheduled later in the week to gauge the growth of economy. However, global cues remained supportive as the US markets ended mixed overnight while, most of the Asian peers were trading in the positive terrain at this point of time. Back home, profit-booking by participants at improved levels led to a fall in stock prices but firming trend on the other Asian bourses following overnight gains at the US market capped the losses. Meanwhile, shares of IT companies slipped after the marginal downward revision by Cognizant in its revenue guidance for 2012 is likely to stoke fresh worries in the minds of investors about the near-term prospects of IT outsourcing. However, the broader indices were outperforming benchmarks. The market breadth on the BSE was positive; there were 938 shares on the gaining side against 488 shares on the losing side while 60 shares remained unchanged.

The BSE Sensex opened at 16,915.71; about 3 points higher compared to its previous closing of 16,912.71, and has touched a high and a low of 16,918.31 and 16,829.58 respectively.

The index is currently trading at 16,852.96, down by 59.75 points or 0.35%. There were 13 stocks advancing against 17 declines on the index.

The overall market breadth has made a positive start with 63.12% stocks advancing against 32.84% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose 0.45% each.

The top gaining sectoral indices on the BSE were, PSU up by 1.17%, FMCG up by 0.67%, Realty up by 0.53%, CD up by 0.42% and HC up by 0.30%. While, IT down by 2.43%, TECk down by 1.83%, CG down by 0.83%, Bankex down by 0.39% and Power down by 0.23% were the top losers on the index.

The top gainers on the Sensex were GAIL up by 3.20%, DLF up by 1.26%, Coal India up by 1.23%, HDFC up by 0.99% and ITC up by 0.93%.

On the flip side, TCS was down by 3.58%, Infosys was down by 2.04%, BHEL was down by 1.98%, Wipro was down by 1.98% and L&T was down by 1.10% were the top losers on the Sensex.

Meanwhile, The Central Electricity Authority (CEA) has requested the PMO to intervene on the issue of fuel supply agreement (FSA) as several power companies have refused to sign the pact with CIL (Coal India). Companies are of the opinion that FSAs are pro-coal companies and monopolistic in nature. The CEA’s request has come in ahead of its meeting with power firms, which have not signed the FSAs.

Last month, CIL had been issued a Presidential Directive forcing it to sign FSAs with power companies at 80% commitment levels or pay penalties. Coal India on its part came up with an FSA which put negligible penalty on coal companies in case the commitment was not met.

Infact the rate of compensation to be paid to power companies for the failed quantity was only 0.01%, which, in the power companies’ view, was too little penalty for non-fulfillment of obligations. Plus the penalty that it would be applicable after three years, made it even more toothless.

Moreover the power companies want that the provision for sampling of coal at both loading and unloading ends and through third party agency should be done and incase the quality of the coal is not upto, the mark the purchaser should not be liable to make any payment including rail transportation. Companies are of the opinion that the supply of imported coal should be based on mutual consultations preferably in line with supply of imported coal being made by Minerals and Metals Trading Corp or State Trading Corporation.

Of the 48 FSAs, those were to be signed for power plants that were commissioned till December 2011, less than a dozen have been inked until now. Country's largest power producer NTPC has refused to sign the FSA as the company wants the useful heat value (UHV) formula for coal instead of the new gross calorific value (GCV) formula proposed by CIL, the country's largest supplier. Indian coal is classified on the basis of UHV into seven grades from A-G. UHV is based on ash and moisture contents for non-coking coals in line with the government's directive. These grades are wide, while under the GCV method; the bands would be narrower, closely resembling their quality.

The S&P CNX Nifty opened at 5,114.70; flat compared to its previous closing of 5,114.15, and has touched a high and a low of 5,119.95 and 5,091.10 respectively.

The index is currently trading at 5,094.35, up by 19.80 points or 0.39%. There were 20 stocks advancing against 30 declines on the index.

The top gainers of the Nifty were GAIL up by 3.07%, Bank of Baroda up by 1.69%, DLF up by 1.21%, Coal India up by 1.14% and Maruti Suzuki up by 1.06%.

On the flip side, TCS down by 3.65%, HCL Tech down by 2.59%, Wipro down by 2.56%, Infosys down by 2.30% and BHEL down by 2.07%, were the major losers on the index.

Most of the Asian equity indices were trading in the green; Jakarta Composite was up 1.25 points or 0.03% to 4,160.12, KLSE Composite was up 2.75 points or 0.17% to 1,587.62, Nikkei 225 was up 62.77 points or 0.69% to 9,181.91, Straits Times was up 11.27 points or 0.39% to 2,936.22, KOSPI Composite was up 8.62 points or 0.44% to 1,965.06 and Taiwan Weighted was up by 7.93 points or 0.11% to 7,546.01.

On the flip side, Shanghai Composite was down 16.05 points or 0.65% to 2,435.90 and Hang Seng was down by 10.70 points or 0.05% to 20,525.95.