Markets resume southward journey ahead of RBI policy meet

Indian equity indices, after taking breather in the previous session, resumed their southward journey ending the session with a cut of about 0.40 per cent ahead of Reserve Bank of India’s (RBI) mid-quarter monetary policy review to be announced on December 18. After a cautious start, the frontline gauges tried hard to keep their head above water as some support came from Prime Minister Manmohan Singh’s comment that the steps taken on the economic front were ‘only the beginning of a process’ and there would be no looking back, he said the government was committed to doing everything that is possible to alter the policy environment, accelerate economic growth and make growth socially and regionally more inclusive. 

But, sentiments got clobbered and frontline indices started moving southward after the government lowered the growth projection for the current financial year to 5.7-5.9 per cent from 7.6 per cent estimated earlier, while pitching for supportive monetary and fiscal policies to improve investor confidence. Additionally, investors also dumped local equities after Chief Economic Advisor to the Finance Ministry Raghuram Rajan reported, achieving the full year fiscal deficit target of 5.3 percent of gross domestic product being a difficult task. Sentiments also got dampened after Lok Sabha adjourned again as SP MPs rushed to the well of the House protesting against the SC/ST quota bill.

Selling got intensified as European counters made a sluggish opening and traded in red in the morning session as investors remained concern over US budget talks. Moreover, most of the Asian equity indices succumbed to profit-taking from last week’s rally as investors wound down positions ahead of the holiday season amid worries that Washington won’t avert the fiscal cliff of tax hikes and spending cuts that could hurt the US and global economy.

Back home, market participants were seen squaring off hefty positions from the software and technology counters pounding by over a per cent, led by about 3 per cent fall in Tata Consultancy Services on caution ahead of a scheduled meeting between the management and analysts later in the day amid concerns that the software services provider will deliver a downcast view on the sector. However, losses remain capped as metal space rose by over one and a half percent after data on December 14, 2012, showed that a preliminary version of HSBC’s China manufacturing Purchasing Managers' Index hit a 14-month high in December 2012. The HSBC flash purchasing managers’ index for December rose to 50.9, a 14-month high and the fifth straight monthly gain. Some support also came in from rally in selected multinational companies’ (MNC) stocks. Scrips like, Elantas Beck India, Kennametal India, BOC India, Fairfield Atlas and Timken India rallied on a strong response from investors to Honeywell Automation of India’s offer-for-sale (OFS) issue which oversubscribed 7.4 times.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points but managed to hold its psychological 5,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over seventy points to finish below the psychological 19,250 mark. However, broader markets outperformed benchmarks ending the session with a gain of over half a percent.

The overall volumes stood above Rs 1.42 lakh crore, which remained on the lower side as compared to that on Friday. The market breadth remained in favor of advances as there were 1,540 shares on the gaining side against 1,350 shares on the losing side while 138 shares remain unchanged.

Finally, the BSE Sensex lost 72.83 points or 0.38% to settle at 19,244.42, while the S&P CNX Nifty declined by 21.70 points or 0.37% to end at 5,857.90.

The BSE Sensex touched a high and a low of 19,346.78 and 19,221.87, respectively. The BSE Mid-cap index was up by 0.59% and Small-cap index was up by 0.46%.

The top gainers on the Sensex were, Sterlite Industries up 4.06%, Hindalco Industries up by 3.46%, Jindal Steel up 2.36%, Maruti Suzuki up 1.70% and Tata Power up 1.34%, while, Bharti Airtel down by 3.69%, TCS down by 2.83%, HDFC down by 1.85%, BHEL down by 1.76% and HDFC Bank down by 1.60% were the top losers on the index.

The top gainers on the BSE Sectoral space were, Metal up 1.76%, Auto up 0.67%, Health Care (HC) up 0.43%, Power up 0.38% and PSU up 0.36%, while TECk down 1.32%, IT down by 1.22%, FMCG down 0.52%, Oil & Gas down 0.50% and Capital Goods (CG) down by 0.43% were the top losers in the space.

Meanwhile, the government may put on hold the implementation of the Employees' Provident Fund Organization’s (EPFO) circular that seeks to tighten the norms for initiation of inquiry against employers in provident fund cases  and clubbing of allowances with basic wages for computing the PF contribution.

After the circular was issued by the EPFO on November 30, the trade unions have started their protest with labour ministry, terming it anti-worker. According to the EPFO circular, the inquiry against employers can only be initiated after placing the actionable and verifiable information before the compliance officers. With regard to the time period for initiating inquiry, circular defined that inquiry or investigation should not go beyond seven years.

On protest of trade unions as well as employers, Labour Ministry may soon ask the EPFO to keep the circular in abeyance. The employers are also disappointed with this EPFO's move to deal with splitting of remuneration by them which will reduce their PF contribution obligation.

However, in the favor of worker, the circular defined the meaning of basic wages for the purpose of provident fund deductions, in which all such allowances which are ordinarily, necessarily and consistently paid to the employees, be treated as the basic wages.

The S&P CNX Nifty touched a high and a low of 5,886.05 and 5,850.15 respectively.

The top gainers on the Nifty were Hindalco was up 3.42%, Sesa Goa up 2.85%, Jindal Steel up 1.90%, Cipla up 1.89% and Grasim was up 1.64%.

The top losers on the index were Bharti Airtel down by 3.68%, TCS down by 2.98%, BPCL down by 1.84%, Siemens down by 1.73% and BHEL down by 1.65%.

The European markets were trading in red, France’s CAC 40 down by 0.71%, Germany’s DAX down 0.20% and the United Kingdom’s FTSE 100 down by 0.60%.

Most Asian markets ended down, excluding giant Japan’s index, which closed higher in reaction to yen weakness on LDP parties’ victory with absolute majority in yesterday's general election mixed on Monday. Mainland China continued its positive journey after Friday's strong performance, while Hong Kong market went home with red mark, following other regional markets that slipped lower amid continued worries over U.S. fiscal cliff negotiations.