Post session - Quick review

Bourses reversed trajectory to halt five day’s long gaining streak on the first trading day of the week. Underperforming global peers, bourses after witnessing best weekly gains of CY12, capitulated to hefty profit booking to conclude in the red zone. After sneaking past the 16800 (Sensex) and 5100 (Nifty) levels, bourses retracted sub 16700 and 5050 respective level, in order to conclude in proximity of intra-day’s low level. Jitters were sensed across Dalal Street after global rating agency Standard & Poor's today said India may become the first BRIC country to lose the investment grade rating.

Caution also gripped Dalal Street during the dying hours of trade as investors shifted their focus to a Greek national election on June 17 that could put Athens on a path out of the bloc and precipitate a deeper crisis over the future of the euro, after euphoria over Spain’s $125 billion rescue package, emerged to be short-lived. Additionally, Indian equity markets also had their own issues to worry about, with anxiety ahead of the release of IIP and WPI numbers,  persistently high inflation, a plummeting rupee, alarmingly high fiscal and current account deficit and policy paralysis due to a weak government, made investor’s skeptical about RBI’s stance in its upcoming monetary policy review. However, Industry’s connoisseur have placed bet for 25 bps rate cut. Meanwhile, Indian rupee, in today’s trade also played the malice, enticing substantial weakness to trade past ‘55.80/$’ level.

On the global front, Asian stocks ended in rapture as investors speculated a bailout for Spain’s banks to ease Europe’s debt crisis, while slowing Chinese inflation data also soothed investor’s fears. Meanwhile, adding to last week's recovery rally, European equities remained sanguine over Spanish bank aid deal.

Closer home, stocks from Consumer Durable (CD), Fast Moving Consumer Goods (FMCG) and Power counters, performing well, emerged to be the star performers on BSE sectoral chart. However, even banking shares protracted post RBI’s decision to conduct Open Market Operations by purchasing government securities for an aggregate amount of Rs 12,000 crore for the week. On the flip side, stocks from Capital Goods, Health Care and Realty counters, enticing substantial weakness, emerged as the top laggards. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1430:1270 while 147 scrips remained unchanged. (Provisional)

The BSE Sensex lost 63.89 points or 0.38% and settled at 16,654.98. The index touched a high and a low of 16,893.81 and 16,637.51 respectively. 11 stocks were seen advancing against 19 declining ones on the index (Provisional)

The BSE Mid-cap index lost 0.23% while Small-cap index was up 0.16%. (Provisional)

On the BSE Sectoral front, Consumer Durables up 1.14% and FMCG up 0.31% were the only gainers while Capital Goods down 1.80%, Health Care down 1.35%, Realty down 1.14%, Oil & Gas down 0.74% and Auto down 0.67% were the top losers.

There top gainers on the Sensex were Tata Power up 2.28%, Bajaj Auto up 2.05%, Gail India up 1.46%, HUL up 1.46% and Coal India up 1.33% while, BHEL down 2.67%, Jindal Steel down 2.45%, L&T down 2.19%, Cipla down 2.18% and Tata Motors down 1.55% were the top losers in the index. (Provisional)

Meanwhile, Indian markets are estimated to have lost around Rs 1 lakh crore or about $20 billion worth of investments from the overseas funds and ultra-rich foreign individuals over a period of less than three months on new taxation proposals and the government's recent white paper on Black Money. General Anti-Avoidance Rule (GAAR) remained the buzzword over last three months in the financial circles and though not many knew about the nitty-gritty’s of it, most witnessed how talks surrounding its implementation from April 1, 2012 rattled foreign institutional investors (FII) which in turn triggered a free-fall off sorts in Indian stock markets.

Foreign investors, who mostly invested through P-Notes (participatory notes) in the Indian markets either pared their exposure to the Indian securities or deferred their investments ever since India proposed GAAR, a new tax policy late in March 2012. According Securities and Exchange Board of India’s (SEBI) recent data, around Rs 1,30,012 crore or $25 billion worth of investments in Indian  markets were done using PNs at the end of April 2012, which declined sharply from Rs 1,83,151 crore at the end of February and Rs 1,65,832 crore as on March 31, 2012. The PNs’ share in total FII holding remained at 16.4 percent in February, which plunged to 11.4 percent by April.

The amount of investment through these PNs has dropped further in recent months and hit its rock-bottom levels of just about 10 percent of total FII holdings which a few years ago accounted for nearly 50 percent of all foreign institutional investment (FII) held in India. High Net worth individuals (HNIs) outside of India frequently used PNs to make investment into India’s markets as it did not mandate them to register their details with market regulator SEBI and also saved their time and money, leading to money laundering and tax evasion.

In an attempt to erase the thin line between tax avoidance and tax evasion and to bring both of them under the purview of taxing statute in India, the government in its direct tax code (DTC) proposed to introduce GAAR. GAAR generally empowers the tax authorities to deny the tax benefits of transactions or arrangements which do not have any commercial substance or consideration other than achieving the tax benefit. However, on May 7, 2012, Finance Minister Pranab Mukherjee surrendered to the unrelenting pressure from stakeholders affected by his stringent budget proposals and deferred by one year the adoption of the “General Anti-Avoidance Rules” guidelines designed to curb tax evasion.

India VIX, a gauge for market’s short term expectation of volatility gain 6.60% at 25.02 from its previous close of 23.47 on Friday. (Provisional)

The S&P CNX Nifty lost 21.85 points or 0.43% to settle at 5,046.50. The index touched high and low of 5,124.45 and 5,044.00 respectively. 20 stocks advanced against 30 declining ones on the index. (Provisional)

The top gainers on the Nifty were Bajaj Auto up 2.07%, Tata Power up 1.91%, HUL up 1.53%, Grasim India up 1.45% and Coal India up 1.24%.

On the other hand, HCL Technologies down 3.05%, BHEL down 2.94%, Cipla down 2.59%, L&T down 2.32% and Sesa Goa down 2.31% were the top losers. (Provisional)

The European markets were trading in green, with France's CAC 40 up 1.65%, Germany's DAX up 1.82% and Britain’s FTSE 100 down 0.95%.

Asian markets resumed their northward journey after a day of halt as investors’ fears about struggling Spain eased after Euro zone finance ministers agreed to lend up to $125 billion to shore up Spain’s troubled banks, with Madrid set to report its exact required amount after an independent audit is completed in just over a week. Moreover, better than expected Chinese economic data too supported the sentiments.

Meanwhile, South Korean shares climbed 1.7 percent to close at their highest level in more than four weeks on Monday after euro zone finance ministers agreed on a bailout package to recapitalize debt-stricken Spanish banks. While, Hong Kong and Chinese shares rebounded, up by 2.44% and 1.70% respectively amid a broad rally across Asia as a bailout for Spanish banks and China economic data that was not as bad as feared prompted offshore investors to cover short positions.