Benchmarks drift further; ADAG stocks butchered

Indian equity indices drifted lower and are trading on a weak note hovering around the lowest point of the day in absence of buying among investors on back of weak sentiments. China's manufacturing sector contracted for a third consecutive month in September, suggesting that the world's second-largest economy is not immune to global headwinds, while factory inflation quickened. Market participants were seen piling up the positions in Consumer Durable sector while selling was witnessed in Metal, Auto and PSU sector. Stocks like Rama Paper, Banas Finance, Hindoostan Mills, JSL Industries, Sharp trading, Esaar India, Aroma Enterprises and PFL Infotech hit new high while stocks like Dishman Pharma, Reliance Power, Reliance Communications, KingFisher Airlines, Great Offshore, Tanla Solutions, Vishal Retail, Indowind Energy, IndiaBulls Power, Nitesh Estate, DB Realty and Brooks Laboratories hit new low. Fame India is trading in green; the company's rights issue has set stage for battle between Inox and Anil Ambani. Inox is holding 50.27% and Reliance Capital holds 35.39%.

In other scrip specific development, TTK Prestige is trading in green on reports that the company is set to buy the ailing Indian unit of Italian firm Bialetti. Koutons Retail India is in green on securing its bankers' approval for a corporate debt restructuring package. Shares of ADA Group companies like Reliance Power, Reliance Mediaworks, Reliance Infrastructure, Reliance Communications, Reliance Capital and Reliance Broadcast Network were down 4% to 12% on reports that the Central Bureau of Investigation is examining the role of Anil Ambani in a multi-billion dollar telecoms scandal. On the global front, Asian markets were trading in mix while the European markets were trading in red. Growing signs of a slowdown in China have prompted concerns that the country that has been the motor of global growth in recent years will not be able to provide as much of a counterweight to faltering US and European growth. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 4,950 and 16,500 levels, respectively. The market breadth on the BSE was negative in the ratio of 984:1638 while, 116 scrips remained unchanged.

The BSE Sensex is currently trading at 16,446.24 down by 251.83 points or 1.51% after trading as high as 16,745.16 and as low as 16,426.55. There were 1 stock advancing against 29 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index dropped 0.67% while Small cap was down by 0.71%.

On the BSE sectoral space, Consumer Durables up 0.61% was the only gainer while Metal down 2.22%, Auto down 1.87%, PSU down 1.86%, Power down 1.86% and Realty down 1.85% were the major losers in the space.

Bharti Airtel up 1.87% was the only gainers on the Sensex, while Coal India down 4.69%, Hero MotoCorp down 4.01%, Wipro down 3.26%, Jindal Steel down 3.11% and Tata Motors down 3.08% were the major losers on the index.

Meanwhile, the Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan on September 29 said that the government is likely to miss the fiscal deficit target of 4.6% for the current fiscal as growth is expected to moderate.

The PMEAC Chairman said 'In the current year, the budgeted fiscal deficit is 4.6% (of GDP). It is going to be difficult to achieve this. All the numbers do not gel well,' however by adding further he said 'But I think it should be one of efforts to ensure that fiscal deficit is in the lines of what was estimated.”

Earlier, the economic growth was estimated at 8.2% for 2011-12. PMEAC Chairman said despite a stronger agricultural growth than what was estimated earlier, the economy is expected to grow about 8% during the current fiscal as there are serious concerns. 'Therefore, taking all these factors into account, I believe the growth rate of the economy can be close to 8% per annum,' he added. However, Rangarajan believe that the India can grow by 9% given the saving and investment rates.

Identifying Inflation, balance of payment and fiscal consolidation as the short-term constrain to growth, Rangarajan said 'I believe there are short-term concerns and medium-term constraints which will come in the way of achieving 9% growth'.

Backing Reserve Bank of India’s monetary policy stance on inflation, he said 'In fact today the non-food manufacturing index exceeds 7.5 per cent. Therefore, we should be using monetary policy to tame inflationary expectations.' By adding further he said 'We should use monetary policy in way that demand preference is brought down'.

In last 18 months, the RBI has increased its short term lending and deposit rates by 12 times to control inflation. However, the headline inflation measured by the Wholesale Price Index (WPI) has been hovering around two digit mark.

On the Current Account Deficit (CAD), PMEAC Chairman said 'I don't think that by taking both imports and exports of goods and services taken together we might exceed 2.5% of GDP of the CAD this year.' So far, financing of CAD has not been a problem. The approach paper of 12th Five-Year Plan and our own calculation indicates that we will have CAD of 2.5% of GDP'.

PMEAC Chairman said at present, there is no problem in financing CAD of 2.5%. By adding further he said, 'So long we continue to maintain a healthy growth rate and so long as fiscal deficit continue to remain at reasonable control, there should be no problem in attracting capital flow'.

However, he said that the capital flows by very nature are very volatile. It is influenced by both domestic and international factors. It is also affected by push factor and as well pull factor. So, therefore, we need to moderate our dependence on the financing of CAD through capital flows.

On the borrowing he said 'I think the effort of the government will be to retain the fiscal deficit at the budgeted level and I do not expect the borrowing programme of the government of India as of now to exceed what was originally estimated'.

The S&P CNX Nifty is currently trading at 4,936.35, lower by 79.10 points or 1.58% after trading as high as 5,025.55 and as low as 4,929.80. There were 6 stocks advancing against 44 declines on the index.

The top gainers on the Nifty were SesaGoa up 4.55%, Ranbaxy up 2.79%, Bharti Airtel up 2.34%, Ambuja Cement up 0.65% and ACC up 0.11%.

Reliance Capital down 12.14%, Reliance Infra down 8.27%, Reliance Communications down 7.73%, Reliance Power down 4.82% and SAIL down 4.47% were the major losers on the index.

Asian markets traded on a mixed note, Jakarta Composite was down 0.18%, Shanghai Composite declined 0.26%, Hang Seng plunged 2.32%, KLSE Composite eased 0.02%, Nikkei 225 inched down 0.01% and Straits Times sank 1.73%. On the contrary, Seoul Composite gained 0.02% and Taiwan Weighted garnered 0.60%.

The European markets were trading in red with, France’s CAC 40 declined 0.89%, Germany's DAX plunged 2.07% and Britain’s FTSE 100 descended 1.15%.