Benchmarks continue its weak trade

Indian equity indices are trading in red on a weak note as euro-zone debt worries resurfaced due to which investors are reluctant to buy at current levels. Market participants were seen piling up positions in Consumer Durables while selling was witnessed in Capital Goods, Bankex and Metal sectors. Stocks like Alfa Laval, Eicher Motors, Eros International, VST Industries, Residency Projects, Esaar India, KKCL and Aanjaneya Lifecare hit new high while stocks like Emami Paper, Rupa & Company, SRS, Welspun Global, Refex Refrigerants and Brooks Laboratories hit new low. Munjal Auto Industries is trading firm in green on reports that the company's board will consider stock-split proposal on September 24, 2011.

In other scrip specific development, Alfa Laval (India) surged ahead of its board meeting to consider delisting of its shares from the Bombay Stock Exchange and National Stock Exchange. Jet Airways is in green after the company increased its fuel surcharge by Rs 200 from Saturday, September 17, 2011. DQ Entertainment was trading higher on signing two multi-million dollar licensing deals. Wockhardt is currently trading in green on reports that the Competition Commission of India (CCI) has approved the proposed acquisition of the nutrition business of the company by global dairy major Danone. Kavveri Telecom Products surged after the company’s subsidiary signed a pact with a cellular operator for providing wireless solutions. Mercator Lines is trading in green on reports that the company is eyeing Indonesia mine buy and overseas IPO for coal unit. SRF is firm on reports that the company has got carbon credits worth Rs 305 crore.

On the global front, Asian markets were trading in red while the European markets were too trading in red on pessimistic note. European Union finance ministers' meeting in Poland over the weekend broke no new ground in dealing the euro-zone debt crisis. However, investors awaited a decision on whether Greece will receive a payment to help avoid a default. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,050 and 16,800 levels, respectively. The market breadth on the BSE was negative in the ratio of 1217:1381 while, 134 scrips remained unchanged.

The BSE Sensex is currently trading at 16,749.88 down by 183.95 points or 1.09% after trading as high as 16,865.93 and as low as 16,731.48. There were 4 stocks advancing against 26 declines on the index.

The broader indices were too trading on a weak note; the BSE Mid cap index was down 0.14% while Small cap slipped 0.01%.

On the BSE sectoral space, Consumer Durable up 0.35% was the only gainer while Capital Goods down 1.63%, Bankex down 1.26%, Metal down 0.96%, Oil & Gas down 0.93% and Health Care down 0.90% were the major losers on the index.

JP Associates up 0.87%, Wipro up 0.65%, Tata Power up 0.41% and M&M up 0.14% were the only gainer on the Sensex, while Sterlite Industries down by 2.82%, Cipla down 2.49%, L&T down 2.34%, Sun Pharma down 2.16% and ICICI Bank down 2.15% were the major losers on the index.

Meanwhile, an inter-ministerial committee chaired by planning commission member Saumitra Chaudhuri, has recommended to remove custom duty on imported Liquefied Natural Gas (LNG) instead of providing high subsides. The panel has demanded for slicing customs duty on imported LNG to zero, instead of cross-subsidizing the high-priced imported fuel by making domestic natural gas users pay more. However, the Department of Revenue, which is also a part of the inter-ministerial committee, has opposed the suggestion.

The panel has proposed that the import duty on LNG should be aligned with that of crude oil, on which, the government has already reduced the custom duty to zero from 5% in June. The panel also suggested that government should treat LNG/natural gas as a declared good, so that they have a common concessional rate of VAT. It is reported that ‘the Department of Revenue (which was also part of the committee) has not agreed to the proposal for aligning import duty on LNG with that of crude. On the issue of declared good status in regard of VAT, the Department of Revenue did not wish to record a view.’

The panel, which in its draft report a few months back had suggested averaging out the price of costlier imported LNG with cheaper domestic gas, did a complete vice versa in its final report by saying the proposal was not feasible. The averaging out of prices or pooling would have made users of cheaper domestic natural gas paying twice the amount that they pay now, so that the imported LNG could be sold at an equal rate.  ‘The committee does not recommend a pooling mechanism for natural gas at the overall level, nor does it recommend price pooling on a sectoral basis,’ report noted.

The panel in its August 25 report had said that the preferential allotment of domestic gas should be done to the priority fertilizer and power sectors only and other consumers like steel plants should be allocated imported LNG. Presently, domestic gas is currently priced at $4.2-5.5 per million British thermal units (mmBtu), whereas the fuel imported through ships in its liquid form is priced at $10-14 per mmBtu.  

‘These (non-priority) users operate in a market environment where their output prices are market-driven, with no regulatory burden, and hence, they should be able to pass on the higher costs of gas feedstock,’ the report said.

The government owned, major gas distribution firm GAIL India and Petronet LNG, which is also part of the panel, have been lobbying hard for pooling of gas prices as LNG, which is presently imported under long term contract from Qatar will cost upward of $12 mmBtu from 2014, whereas supplies under a new contract with Australia were priced at $14.5 per mmBtu. ‘The recommendation put forth here does not envisage any form of pooling at the all-India level, cutting across industries,’ the report noted.

The S&P CNX Nifty is currently trading at 5,028.55, lower by 55.70 points or 1.10% after trading as high as 5,068.40 and as low as 5,024.95. There were 14 stocks advancing against 35 declines on the index while 1 stock remained unchanged.

The top gainers of the Nifty were JP Associates up 2.12%, GAIL up by 2.02%, ACC up 1.14%, HCL Tech up 1.02%, and Wipro up 0.89%.

Reliance Infra down 3.84%, Sterlite down 3.00%, ICICI Bank down 2.66%, Cipla down 2.64% and Axis Bank down 2.59% were the major losers on the index.

Asian markets traded on a pessimistic note, Shanghai Composite declined 1.79%, Hang Seng plunged 2.76%, Jakarta Composite sank 2.49%, KLSE Composite shaved off 1.24%, Straits Times slumped 1.18%, Seoul Composite slipped 1.04% and Taiwan Weighted plummeted 1.27%. The stock markets in Japan remained closed in observance of public holiday.

The European markets were too trading in red with, France’s CAC 40 plummeted 2.75%, Germany's DAX got pounded 2.47% and Britain’s FTSE 100 plunged 1.95%.