Benchmarks snap two days gaining streak; rate sensitives drag

Wednesday turned out to be a disappointing session of trade for the Indian equity markets, as investors booked profit after previous two sessions of rally in absence of any major positive trigger. The frontline gauges, after a choppy start, remained range bound for most part of the session and drifted to lower levels in the last leg of trade to settle with a cut of about a percent. Though, the bourses tried to keep their head above water but, the psychological 20,000 (Sensex) and 6,050 (Nifty) levels proved as stern resistances as the key indices could not claw beyond those levels, instead drifted lower. Sentiments got dampened on concerns over global growth recovery after World Bank cut its global growth forecast for this year, as austerity measures, high unemployment and low business confidence was dampening economies in developed nations.

The European markets also played spoilsport as they undermined sentiments by opening on a weak note after the outgoing chairman of the Eurogroup of euro-zone finance ministers warned that a strong euro could hurt the region’s economy. Asian markets too ended the session mostly in red with Japanese Nikkei Stock Average retreated from a 32-month high on profit-booking amid earnings concerns. However, investors shrugged off higher-than-expected Japan’s machinery orders. Orders from manufacturers rose 3.9 percent from a month earlier, while those from non-manufacturers rose 6.2 percent.

Back home, interest rate-sensitives fell on Reserve Bank of India (RBI) Governor D Subbarao’s statement that India’s inflation has come off a peak but is still high, weighed on expectations for a rate cut later this month. Also, some nervousness came in due to selling in banking counters as International Monetary Fund said that India’s financial system has been made vulnerable by deterioration in bank assets and a lack of capital as the economy slowed.  Some selling pressure also came in from retail stocks like Provogue India, Shoppers Stop, Trent and V2 Retail as Fitch Group maintained a negative outlook on the Indian retail sector for 2013, saying that slowdown has started hurting retail sector due to waning consumption owing to rising inflation and other macroeconomic factors.

Auto sector too dampened the sentiments by losing about two and a half percent led by over three percent fall in Tata Motors after the company’s global sales in December 2012 declined by 13.88 percent to 98,968 units against 114,920 units sold during the corresponding month in 2011. Meanwhile, Bajaj Auto slipped by two percent after reporting almost 100 basis point (bps) drop in operating margin for the third quarter ended December 2012 as compared to the previous corresponding period. However, losses remain capped on the back of about half a percent gain in Oil & Gas space. Index heavyweight, Reliance Industries, ending higher over a percent, mainly spurred buying in Oil & Gas counter.

The NSE’s 50-share broadly followed index Nifty declined by over fifty points but managed to hold its psychological 6,000 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by about one hundred and seventy points to finish below its psychological 19,800 mark. Moreover, the broader markets too butchered badly and ended the session with a cut of over a percent.

The overall volumes stood at over Rs 1.60 lakh crore, which remained on the lower side as compared to that on Tuesday. The market breadth remained in favor of declines as there were 938 shares on the gaining side against 2,001 shares on the losing side while 128 shares remain unchanged.

Finally, the BSE Sensex lost 169.19 points or 0.85% to settle at 19,817.63, while the S&P CNX Nifty declined by 54.75 points or 0.90% to end at 6,001.85.

The BSE Sensex touched a high and a low of 20,009.36 and 19,783.02, respectively. The BSE Mid-cap index was down by 1.35% and Small-cap index ended lower by 1.24%.

The top gainers on the Sensex were, Reliance up by 1.72%, Dr Reddys Lab up by 1.43%, TCS up by 1.03%, NTPC up by 0.19% and GAIL India up by 0.17%, while, Hindalco down by 4.38%, Maruti Suzuki down by 3.43%, Tata Motors down by 3.24%, Jindal Steel down 3.11% and Mahindra & Mahindra down by 2.95% were the top losers on the index.

The only gainer on the BSE Sectoral space was Oil & Gas up 0.43%, while Auto down 2.40%, Metal down 2.10%, Bankex down 1.66%, Realty down 1.37% and Capital Goods down 1.17% were top losers on the sectoral space.

Meanwhile, the apex auto lobby, Society of Indian Auto Industry (SIAM) has asked the Indian government to stop providing subsidies on diesel and demanded for deregulation of diesel prices. As per the automotive body, instead of providing subsidy on diesel, the government can offer subsidy to farmers by providing credit.

According to SIAM, this move will probably bring down the gap between the prices of petrol and diesel, which might lead to a positive impact on the Indian economy. Further, SIAM reported that industry experts are also expecting a hike in diesel prices in the declaration of Union Budget 2013, which is expected to come soon.

On auto sector outlook, SIAM is not expecting any important improvement in the Indian auto sector in last quarter of current fiscal year as the auto sales declined in last quarter of 2012 as well as last year. Further apex auto lobby added that the next year's sales depend on the action that government will take in coming budget regarding the infrastructure spending.

The S&P CNX Nifty touched a high and a low of 6,055.95 and 5,992.05 respectively.

The top gainers on the Nifty were HCL Tech up by 1.64%, Reliance up by 1.52%, Dr Reddy up by 1.19%, PowerGrid up by 1.04% and TCS up by 0.56%.

The top losers of the index were Hindalco down by 4.26%, Reliance Infra down by 3.91%, JP Associate down by 3.53%, Tata Motors down by 3.44% and Jindal Steel down by 3.19%.

The European markets were trading in red, France’s CAC 40 down by 0.35%, Germany’s DAX down by 0.24% and the United Kingdom’s FTSE 100 down by 0.51%.

Asian markets ended mostly lower on Wednesday as investors were cautious about the crucial economic data from China later this week. Japan’s Nikkei closed with its largest daily decline in eight months, reversing earlier session’s rally, as yen’s slide went into reverse. Meanwhile, Hong Kong market went home with a red mark, erasing some losses after Chief Executive Leung Chun-ying said the government will consider curbing demand from overseas for properties if the needs of locals aren’t met. China’s Shanghai Composite ended negative as a report showed the nation’s foreign direct investment declined for the first full year since 2009 as economic growth slowed and manufacturers relocated to markets with cheaper labor.