Rate sensitives weigh down Sensex; Tata Motors nosedives 10%

Stock markets in India continued to languish in the negative terrain in Wednesday afternoon trades with the benchmark equity indices shedding about half a percentage points, largely dragged by rate sensitive stocks. Though the frontline equity indices managed to regain some lost ground after touching the session’s lows in early morning trades, they still continue to trade on a choppy note in a narrow range. The psychological 4,950 (Nifty) and 16,350 (Sensex) levels are turning out to be important support levels for the key gauges as investors remained cautious ahead of tomorrow’s May series futures and options expiry session and fourth quarter GDP data. On the BSE sectoral front, investors were seen squaring off hefty positions from the rate sensitive Automobile counter which got battered by over three percent, being the top laggard in the space. Bellwether Tata Motors remained the main culprit as it got brutally slaughtered by around ten percent post announcing disappointing quarterly earnings. Other rate sensitive pockets like Bankex and Realty too got pounded by over a percent. Though largely across the board selling was evident, investors showed some buying interest in the IT and defensive FMCG sectors which provided some support to the benchmarks. Sentiments were undermined by the discouraging cues from money markets where the beleaguered rupee extended its streak of depreciation and looked set to breach the historical lows hit recently amid increased end of month demand for the greenback from oil importers. Apart from the global reasons, the rupee was also being weighed down by deep concerns about India's fiscal and economic challenges, and doubts about slowing policy reforms. The frontline gauges also traded on a weak note following the pessimistic European market opening. The markets in Europe traded with significant losses of around a percent as the major cause of concern remained growing debt restructuring challenges in Europe while the third downgrade of Spain's credit rating in less than a month by Egan-Jones Ratings also prompted investors to take profits off the table. Moreover, the Asian markets too exhibited somber trends after reports from China indicated that the government would not employ stimulus measures on the scale of its 2008 stimulus plan to achieve a high growth.

Moreover, the broader markets continued to trade on a negative note with moderate cuts of around half a percent and performed in tandem with their larger peers. The bourses fell on good volumes of over Rs 0.8 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1401:1007 while 118 scrips remained unchanged.

The BSE Sensex is currently trading at 16,367.35 down by 71.23 points or 0.43% after trading as high as 16,391.90 and as low as 16,299.53. There were 11 stocks advancing against 19 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index declined 0.49% and Small cap index dropped 0.38%.

On the BSE sectoral space, IT up 0.88%, TECk up 0.69% and FMCG up 0.18% were the only gainers, while Auto down 3.37%, Consumer Durables down 1.46%, Bankex down 1.29%, Realty down 1.10% and Capital Goods down 1.09% were the major laggards in the space.

Tata Power up 1.45%, Sun Pharma up 1.26%, Wipro up 1.26%, Maruti up 1.04% and Infosys up 0.96% were the major gainers on the Sensex, while Tata Motors down 9.82%, BHEL down 2.02%, DLF down 1.81%, SBI down 1.63% and Sterlite down 1.44% were the major losers in the index.

Meanwhile, India should reduce the exports of primary commodities to China and instead look at exporting manufactured items to the neighboring nation, urged the industry body ASSOCHAM. It is of the opinion that exports of primary commodities like ores and minerals are the basic wealth of a country and exports of these natural resources erodes the country’s wealth and leaves very little to value add on its own.

It has further observed that China is the largest importer of primary products of the country and these forms 45% of India’s total exports to the neighboring nation. Even though there is a slackening in global demand, imports of these commodities will not reduce as China, in such situation, would like to build reserves of these critical raw materials.

As a counter strategy ASSOCHAM had suggested that India should look at increasing export of manufactured products to the country. These can include products like engineering, chemicals and petroleum. This will not only prevent erosion of our natural resources but will also bridge the widening trade gap between India and China. The industry has also recommended that the export duty on iron ore be raised.

Out of India’s total exports to China in FY 12, engineering goods accounted for about 22% while Petroleum products comprised about 13-14%. Trade deficit between the two countries was $33 billion during April-January 2011-12.

The S&P CNX Nifty is currently trading at 4,962.50, lower by 27.60 points or 0.55% after trading as high as 4,970.85 and as low as 4,945.70. There were 16 stocks advancing against 34 declines on the index.

The top gainers on the Nifty were Tata Power up 1.50%, Ambuja up 1.40%, Sun Pharma up 1.28%, Wipro up 1.15% and ITC up 1.13%.

Tata Motors down 9.95%, IDFC down 2.97%, R Infra down 2.76%, BPCL down 2.60% and Axis Bank down 2.25% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.37%, Hang Seng plummeted 1.92%, Jakarta Composite eased 0.04%, Nikkei 225 dropped 0.28%, Straits Times Index fell 0.24%, KOSPI Composite Index shed 0.27% and Taiwan Weighted plunged 1.10%.

On the other hand only KLSE Composite advanced 0.42%.

The European markets got off to a negative start as France’s CAC 40 plunged 1.36%, Germany’s DAX sank 0.69% and United Kingdom’s FTSE shed 0.92%.