Benchmarks drifts lower; trade continues on weak note

Indian equity indices drifted lower and were trading weak in a pessimistic note hovering around the lowest point of the day in absence of buying as investors were reluctant to pick stocks amid ongoing domestic and global crisis. Market participant were seen selling in IT, TECK and Capital Goods sector. Stocks like 3M India, STARCOM, Residency Projects, Essar India and Hindoostan Mills hit new high while stocks like Reliance Power, RCOM, MTNL, MRO Tech, Dishman Pharma, Cambridge Solutions, GTL Infra, Great Offshore, TV18 Broadcast, Allied Digital, Onmobile Global, DEN Networks, MBL Infra, Career Point and Punjab & Sind Bank hit new low. Shares of three state-run oil marketing companies HPCL, BPCL and IOC were trading firm as crude oil prices sank after a fresh plunge in global stock markets. Shares in Indian education solutions provider Educomp Solutions is trading weak after reports of an income-tax department (IT) probe at its offices. Yesterday there were reports that income-tax officials had searched the company's premises in New Delhi and Gurgaon. Stock from Information Technology pack like Wipro, TCS, Infosys, Tech Mahindra, HCL Technologies, Mahindra Satyam and Mphasis were trading under pressure on concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. AGAG’s Reliance Infra was trading under pressure. The company had challenged an order passed by the State Information Commission bringing the company under the ambit of the Right to Information Act in the Bombay High Court, arguing that it is a private company and not a public authority. Mukesh Ambani-led Reliance Industries was also under pressure and after losing its position as the country's most valued company to state-run Coal India, it today slipped below another PSU major, ONGC in the market valuation charts. Hindustan Copper was trading firm in green after finance minister reported that, government will sell 10% stake in the company. On the global front, Asian markets were trading in red while the European markets too were trading in red on pessimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 4,900 and 16,100 levels, respectively. The market breadth on the BSE was negative in the ratio of 517:2235 while, 80 scrips remained unchanged.

Moreover, heavy activity was seen in counters of SpiceJet, Indiabulls Real Estate, GTL and Den Networks with good volumes due to fund based activity as of yesterday. GS Investment Partners (Mauritius) I sold 2,480,701 shares of SpiceJet. Macquarie Bank bought 2,328,884 shares of Indiabulls Real Estate. Genuine Stock Brokers bought and sold 559,091 shares of GTL. Venkateswara Capital Management bought 700,000 shares of Den Networks. Also, JB Chemicals and Pharmaceuticals though was under pressure but attracted huge volume as its board approved a special interim dividend of Rs 40 per share after it decided to sell its over-the-counter business in Russia. The company will spend Rs 394 crore, including tax for paying the dividend.

The BSE Sensex is currently trading at 16,029.08 down by 440.71 points or 2.68% after trading as high as 16,287.72 and as low as 16,009.66. There were 4 stocks advancing against 26 declines on the index.

The broader indices were trading on a bleak note; the BSE Mid cap index slipped 2.45% while Small cap shed 2.83% respectively.

On the BSE sectoral space, there were no gainers while IT down 5.73%, TECK down 4.73%, Capital Goods down 4.27%, Consumer Durables down 3.24% and Bankex down 2.73% were the major losers on the index.

Hero MotoCorp up 1.26%, Coal India up 0.54%, ONGC up 0.45% and M&M up 0.13% were the only gainers on the Sensex, while Infosys down by 7.50%, Tata Motors down 6.13%, Hindalco down 5.74%, Sterlite down 4.82% and L&T down 4.70% were the major losers on the index.

Meanwhile, the Reserve Bank of India’s Technical Advisory Committee (TAC) on Monetary Policy chaired by the Governor D Subbarao has the opinion that government’s fiscal situation has put burden of controlling inflation on the RBI’s Monetary Policy. The government is targeting to restrict fiscal deficit to 4.6% of GDP in 2011-12 from 4.7% achieved in last fiscal year.

'Most members felt that there could be a slippage in the fiscal deficit budgeted in the Union Budget 2011-12. They (members) were concerned that the fiscal situation had placed the entire burden of inflation management on monetary policy,' the RBI said in minutes of TAC on Monetary Policy meeting. The RBI’s TAC on Monetary Policy meeting, was held in the backdrop of first quarter review of the monetary policy announced in July.

On the issue of the global situation, the TAC had expressed concern over the debt crisis in Europe and United states. “Members also expressed concerns over rising incipient inflationary pressures in advanced economies, even as the emerging market economies (EMEs) were still battling with high inflation” the RBI minute said.

As per the TAC, inflation remained to be a major concern. The inflation rate continued to be stubbornly high. Inflation expectations were high and wages were rising. This could worsen the vicious wage-prices spiral, which to some extent was already evident, the minute said.

Given the present global scenario and slowdown in the investment and economic growth rate, TAC members has the view that the RBI should maintain balance between controlling inflation and formulating monetary policy.

On the issue of the monetary policy measure, four TAC members has suggested a pause in the hike for 26 July quarterly policy review, whereas two members were recommended to increase its policy rates by 25 basis points to give a signal to the market about its continuing anti-inflationary stance. And one member suggested increasing CRR by 25 basis points. However, RBI increased its short term leading and borrowing rates by 50 basis points in first quarter monetary policy review.  The RBI’s TAC has no voting rights and it has purely advisory role. The final decision on increase/decrease rates are taken by the RBI Governor.

The S&P CNX Nifty is currently trading at 4,807.10, lower by 137.05 points or 2.77% after trading as high as 4,893.60 and as low as 4,804.10. There were 6 stocks advancing against 44 declines on the index.

The top gainers of the Nifty were Hero MotoCorp up 1.24%, IDFC up 0.56%, ONGC up by 0.54%, BPCL up 0.54%, and M&M up 0.35%.

Infosys down 7.41%, Tata Motors down 6.17%, Hindalco down 5.99%, Axis Bank down 5.90% and L&T down 4.94% were the major losers on the index.

Asian markets traded on a somber note, Shanghai Composite plunged 0.98%, Hang Seng sank 3.08%, Jakarta Composite slumped 4.65%, KLSE Composite shaved off 1.29% Nikkei 225 plummeted 2.51%, Straits Times sulked 3.20%, Seoul Composite nosedived by 6.22% and Taiwan Weighted receded 3.57%.

The European markets were too trading in red with, France’s CAC 40 eased 2.30%, Germany's DAX shed 3.73% and London’s FTSE slipped 2.08%.