RBI Dy governor’s comments drag Sensex to day’s lows in noon trades

Stock markets in India traded in the negative territory in Friday afternoon trades with the benchmark equity indices retreating on largely across the board profit booking after the recent sharp rally of around four percent in last two days. After the somber opening, the frontline gauges lacked conviction to open fresh positions and chose to take profits off the table, dragging the key indices to day’s lows. For time being, the key indices are trying to hold on to important psychological 5,000 (Nifty) and 16,550 (Sensex) levels, however sentiments remain pessimistic amid disappointing domestic as well as global developments. Indian bourses commenced the session on a weak note in tandem with their regional peers as market participants remained influenced by the disappointing overnight cues from US markets after Federal Reserve Chairman Ben Bernanke dimmed hopes for more stimulus measures while Fitch downgraded Spain’s credit rating. However, the downside in markets remained capped after reports showed that Chinese central bank unexpectedly slashed benchmark lending and deposit rates by 25 basis points in its bid to prop up flagging growth rate while giving banks additional flexibility to set competitive lending and deposit rates. The European markets too got off to a sedate start as all major equity indices traded with notable losses.

 Back home, largely across the board selling was evident as investors hopes of monetary easing by RBI in its forthcoming mid-quarter policy review on 18 June were doused to some extent by comments of one of Reserve Bank of India Deputy Governor that interest rates in India were not too high to adversely impact economic growth. Meanwhile, sentiments also got undermined after money market woes resurfaced as Indian rupee snapped the four session appreciating streak and weakened against the US dollar. On the BSE sectoral space, the IT counter witnessed hefty selling pressure as it plunged over a percent and remained the top laggard. While the rate sensitive Banking sector too traded with notable losses of over a percent after RBI deputy governor’s comments. Though largely across the board selling was evident, investors showed buying interest in some Capital Goods and Realty shares which traded with marginal gains.

Moreover, the broader markets continued to trade on a weak note but the Small cap index bucked the negative trend and showed a slightly positive tick. The bourses fell on good volumes of over Rs 0.6 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1259:1092 while 107 scrips remained unchanged.

The BSE Sensex is currently trading at 16,547.31 down by 101.74 points or 0.61% after trading as high as 16,625.71 and as low as 16,530.81. There were 9 stocks advancing against 21 declines on the index.

The broader indices were trading on a sluggish note; the BSE Mid cap index fell 0.26% and Small cap index rose 0.08%.

On the BSE sectoral space, Capital Goods up 0.34% and Realty up 0.03% were the only gainers, while IT down 1.26%, Bankex down 1.04%, Consumer Durables down 1%, TECk down 0.91% and Auto down 0.90% were the major laggards in the space.

Sterlite up 2.88%, HUL up 1.28%, GAIL up 0.92%, L&T up 0.59% and Bharti Airtel up 0.28% were the major gainers on the Sensex, while ONGC down 2.23%, Infosys down 2.08%, ICICI Bank down 1.86%, Maruti Suzuki down 1.71% and Bajaj Auto down 1.30% were the major losers in the index.

Meanwhile, the pace of growth in Asia’s third largest Indian economy is predicted to moderate to 6.7 percent in 2012, after expanding by 7.1 percent in 2011 according to a UN report released by the United Nations Department of Social and Economic Affairs (DESA). The UN has not only downgraded India’s economic growth rate from its earlier forecasts but also warned that simmering financial turbulence in the European region would remain the biggest threat to global economy recovery this year.

The UN’s DESA had earlier in January pegged India's economic growth rate at 7.7 percent for 2012 and 7.9 percent in 2013 however, it has slashed is expectations after recent series of economic reports indicated that the nation’s growth has slowed sharply because of local as well as global headwinds. Following a marked slowdown in 2011, the UN opined in its World Economic Situation and Prospects mid-year update that global economic situation continues to be challenging and cautioned that global growth would remain tepid through 2012.

According to the UN report, after registering a growth rate of 2.7 percent in 2011, the global economy is likely to expand by 2.5 percent in 2012 and the growth rate is expected to quicken to 3.1 percent in 2013. The economy of China, India's northern neighbor and the larger one of the two 'engines' fueling global growth, is forecasted to moderate to 8.3 percent in 2012 from 9.2 percent in 2011.

Deteriorating demand in developed nations and a cooling Chinese economy remain a major cause of concern for economic growth in most emerging nations, which would also be expanding at a pace below their potential. South Asia’s economic growth is predicted to slow to 5.6 percent in 2012, from 6.1 percent in 2011 as the region continues to face significant regional and global headwinds.

The S&P CNX Nifty is currently trading at 5,016.65, lower by 33 points or 0.65% after trading as high as 5,044.25 and as low as 5,010.20. There were 11 stocks advancing against 39 declines on the index.

The top gainers on the Nifty were R Infra up 3.57%, Sterlite up 2.83%, Sesa Goa up 1.73%, GAIL up 1.28% and Siemens up 1.28%.

ONGC down 2.66%, Cairn down 2.54%, Infosys down 2.09%, ICICI Bank down 1.86% and Asian Paints down 1.73% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.58%, Hang Seng sank 0.86%, Jakarta Composite dropped 0.45%, KLSE Composite fell 0.40%, Nikkei 225 got pounded 2.09%, Straits Times Index shed 0.70%, KOSPI Composite Index slipped 0.67% and Taiwan Weighted plunged 1.14%.

The European markets got off to a negative start as France’s CAC 40 dropped 0.89%, Germany’s DAX declined 0.99% and the United Kingdom’s FTSE 100 fell 0.56%.