Markets slip into negative territory after GDP seen growing at just 5% in 2013

After a negative start with a subsequent bout of recovery, Indian equity markets have again slipped into negative territory in the late morning session as Central Statistical Office (CSO) slashed the country's Gross Domestic Product (GDP) growth estimate.India's GDP is estimated to grow at an annual 5% in the 2012/13 fiscal year against 6.2% for 2011-12. In currency market, Indian rupee slipped marginally against dollar on the back of increasing dollar demand from oil importers and strengthening of the US currency against euro. On sectoral front, IT, auto and realty sectors were trading firm, while consumer durable, metal and power sectors were trading in red. Meanwhile, state-run power utility NTPC extended earlier losses ahead of its share sale, scheduled later in the day. In global markets, Asian markets were trading mostly lower on Thursday, with investors seeking clues from European Central Bank President Mario Draghi on growth prospects for the euro zone economy at a policy meeting later in the day. Back home, the market breadth favoring negative trend; there were 1100 shares on the gaining side against 1214 shares on the losing side while 136 shares remained unchanged.

The BSE Sensex is currently trading at 19636.61 down by 3.11 points or 0.02% after trading in a range of 19702.56 and 19574.73. There were 11 stocks advancing against 18 declines on the index and one remained unchanged.

The broader indices too were trading in red; the BSE Mid cap index was down by 0.01% and Small cap index was down by 0.14%.

The top gaining sectoral indices on the BSE were, IT up by 0.57%, Auto up by 0.21%, Realty up by 0.17%, TECk up by 0.15% and Healthcare up by 0.07%, while Consumer Durables down by 1.54%, Metal down by 0.68%, Capital Goods down by 0.60%, Power down 0.49% and PSU down by 0.35% were the top losers on the index.

The top gainers on the Sensex were HDFC up by 1.50%, Tata Motors up by 0.93%, TCS up by 0.66% Infosys up by 0.52%, and Hindustan Unilever up by 0.46%.

On the flip side, Sterlite Industries down by 2.97%, NTPC down by 2.86%, Cipla down by 1.88%, Bharti Airtel down by 1.62%, and Hero MotoCorp down by 1.39% were the top losers on the Sensex.

Meanwhile, the International Monetary Fund (IMF) has said that Indian economy may post a more-than-expected fall in its economic growth to 5.4 percent in 2012-13, but it should pick up to six percent in the next financial year. While, releasing its annual country report, IMF said that ‘In 2011-12, India's growth rate was 6.5 percent. That figure is expected to drop to 5.4 percent in 2012-13. Despite the poor outlook for the global economy, this is a far larger drop than might be expected’.

As per the IMF report, India's economic growth has slowed down due to structural, cyclical, supply side and global factors, while the inflation remains at elevated levels. Elaborating the reasons for the economic slowdown, IMF said that the use of countercyclical fiscal or monetary policy is inappropriate for India. Further it added that the government has already moved to lower fuel subsidies, which disproportionately benefits richer people. In the prevailing economic slowdown, falling infrastructure and corporate investment are now sweeping to exports and private consumption, it added.

Cautioning about the financial sector, IMF report stated that the number of non-performing loans has risen recently and due to the current economic slowdown this trend will continue for some time. Further, to push this sector towards growth in the long run, it recommended the need of financial reforms like lowering government-mandated purchases by banks of government debt and corporate bond market. 

Regarding the 12th five year plan (2012-17), IMF said that reforms taken in plan to facilitate investment especially in infrastructure together with lower costs to do business, are key to restoring high growth. However, IMF praised the recently taken measures by the government and said that in recent months, the authorities have taken steps to reverse the slowdown, which have led to improved market sentiment.

The S&P CNX Nifty is currently trading at 5,958.65 down by 0.55 points or 0.01% after trading in a range of 5,978.50 and 5,936.45. There were 21 stocks advancing against 29 declines on the index.

The top gainers of the Nifty were Power Grid up by 2.15%, JP Associate up by 2.12%, HDFC up by 1.51%, IDFC up by 1.35% and Tata Motors up by 1.05%.

On the flip side, Sesa Goa down by 2.65%, NTPC down by 2.54%, Bank of Baroda down by 2.12%, Ambuja Cement down by 1.99% and Reliance Infra down by 1.95%were the major losers on the index.

Most of the Asian equity indices were trading in the red; Shanghai Composite declined 0.70%, Hang Seng dropped 0.22%, Nikkei 225 tumbled 0.92%, Straits Times contracted 0.50%, KOSPI Composite was down by 0.05% and KLSE Composite declined 0.05%.

On the flip side, Jakarta Composite rose by 0.06%.

Taiwan Weighted is shut for the trade today.