Benchmarks trim losses on emergence of lower level buying

Benchmark equity indices have trimmed some of their losses on emergence of lower level buying in select fundamentally strong blue chip stocks, Reliance Industries and diversified conglomerate ITC. However, slew of negative reports continue to keep the sentiment downbeat for Indian equity markets, essentially Rating agency Standard and Poor's (S&P)’s warning of potential downgrade in India's credit rating and secondly the depreciation of Indian currency past psychological ‘53/$’ mark. However, even bleak global set-up has sapped appetite for risky appetite of investor’s. Nevertheless, amidst sluggish global set-up, some signs of recovery are apparent in Indian equity markets, with 30 share barometer index trading above the 18650 mark and 50 share index oscillating above the 5650 crucial mark.

On the global front, after the downtrend of Asian counterparts, European markets too have got to a pessimistic start, with equities losing ground for the third consecutive session, pegged back by concerns over the euro zone and the prospects of weak corporate earnings. Worries over the euro zone debt crisis - and the struggles of countries like Greece and Spain - were underscored by the International Monetary Fund (IMF) on Wednesday, which called on European policymakers to act with urgency.

Back home, although selling pressure is evident across the board, nevertheless, FMCG stocks have managed to showcased resilience. However, stocks from Realty, Power and Capital Goods counters have emerged as the top laggards among the 12 losing sectoral indices on BSE. Meanwhile, Auto stocks too witnessed profit booking after industry-body, SIAM, too reasoning ‘high interest rates and slowing economic growth’, lowered forecast of Car sales in India to 1-3% from 9-11% earlier. Further, industry body has slashed its motorcycle sales growth for the year to 5-7 percent from 11-13%, and commercial vehicle sales growth to 3-5%, from 6-8%. The overall market breadth on BSE is in the favour of declines which have thumped advances in the ratio of 1682:878, while 143 shares remained unchanged.

The BSE Sensex, offloading 109.52 points or 0.58%, is currently trading at 18683.84. The index, so far has touched a high and low 18740.63 and 18645.16. There were 7 stocks advancing against 23 declines on the index.

The broader indices too witnessed added pressure; the BSE Mid and Small cap indices were trading lower by 0.96% and 1.04% respectively.

The only gainer on the BSE sectoral space was, FMCG up by 0.02%, while, Realty down by 3.48%, Power down by 1.71%, CG down by 1.31%, Bankex down by 1.10% and PSU down by 1.08% were top losers on the sectoral space.

The top gainers on the Sensex were Tata Steel up by 0.72%, Hero MotoCorp up by 0.48%, RIL up by 0.27%, Sun Pharma up by 0.26% and Bajaj Auto up by 0.21%. On the other hand, BHEL down by 2..22%, Gail India down by 1.80%, NTPC down by 1.71%, SBI down by 1.63% and ONGC down by 1.53% were top losers on the Sensex. 

Meanwhile, in what can be said as an extension to the reform measures, the government has said that it will not wait for the Budget, due in February, to address the issues concerning retrospective amendment to Income Tax laws. Finance Minister P Chidambaram stated that ‘once we take a view on Shome Committee report, I see no reason why we should wait for the Budget session. We should move whatever changes have to be brought about in Parliament as early as possible.’

The Committee, headed by tax expert Parthasarathi Shome, had last week submitted its report on retrospective tax amendment to the Finance Minister and has opined that ideally taxes should not be levied retrospectively and if indeed the government does choose to impose them retrospectively, it should not claim either interest or penalty.

The panel’s recommendation has not only provided relief to the domestic investors but has also given major reprieve to foreign institutional investors (FIIs) and private equity (PE) investors. The panel has recommended that in cases where FIIs and PE investors have a less than controlling stake through indirect investment, they should not be hit by the indirect transfer rule. Above all it has recommendation that the government should use its constitutional powers to amend tax laws retrospectively only in the rarest of rare cases.

Finance Minister has said that ‘resolution of the tax disputes, both pending and anticipated, is good for the country, good for the economy and investments. So we must find ways to resolve the issue.’

 The S&P CNX Nifty is currently trading at 5,667.30, down by 37.30 points or 0.65% after trading in a range of 5,686.50 and 5,658.05. There were 11 stocks advancing against 39 declines on the index.

The top gainers of the Nifty were HCL Tech up by 1.79%, JP Associates up by 1.29%, Hero MotoCorp up by 0.69%, Tata Steel up by 0.59% and Punjab National Bank was up by 0.55%. While, DLF down by 3.88%, Siemens down by 3.49%, IDFC down by 2.40%, BHEL down by 2.38% and Reliance Infra down by 2.20%, were top losers on the index

Most of the Asian equity indices were trading in the red; Straits Times declined 0.98%, Kospi Composite plunged 1.00%, Nikkei 225 plummeted 1.98%, Jakarta Composite skid 0.25%, Hang Seng slid 0.24% and KLSE Composite edged lower by 0.20% while Shanghai Composite up by 0.08% was the lone gainer. Taiwan Weighted remained closed for trading on account of National Day.

European markets have started on a somber note; with CAC 40 declining by 0.15%, DAX plunging 0.78% and FTSE 100 losing 0.54%.