Benchmarks edge lower; rate hike fears loom large

Benchmarks edged lower in late morning session on back of selling pressure witnessed in rate-sensitive shares amid looming fear of another hike in repo rates by the Reserve Bank of India to contain inflation and support rupee. Meanwhile, Rupee lost some ground today owing to month-end dollar demand from importers. The partially convertible rupee was trading at 62.53 per dollar against the Friday’s close of 62.28 on the Interbank Foreign Exchange. 

Sentiments got dampened after Fitch Ratings has cut its growth forecast for India in 2013-14 to 4.8%, from its earlier estimate of 5.7% made in June and 7% in September. Further, the agency also slashed India's growth rate projection for FY’ 15 to 5.8% from the June’s forecast of 6.5%, against its projection of 7.5% in September, 2012.Investors are also cautiously waiting for the government’s second half market borrowing schedule later today.  Bank treasurers and fund managers expect government to stick to its gross borrowing target of Rs 5.79 lakh crore. 

Global cues too remained choppy with the US markets ending lower in last session on the looming uncertainty about the time of Fed’s tapering. Moreover, the Asian markets were trading mixed at this point of time as investors remained wary ahead of readings on manufacturing across Europe, which are due, later on Monday. However, Chinese markets were trading with traction after flash HSBC Purchasing Managers’ Index (PMI) of the country climbed to 51.2 in September, from August’s 50.1, with 10 out of 11 sub-indices up in the month. Back home, traders were buying, IT, Consumer Durables and Teck while selling were seen in Bankex, Realty and PSU on the BSE. BSE Sensex and NSE Nifty were comfortably trading near their psychological 5,950 and 20,000 levels respectively.

The market breadth on BSE remains negative with advances to declines in the ratio of 771:812.The BSE Sensex is currently trading at 20032.30, down by 231.41 points or 1.14% after trading in a range of 20199.81 and 20012.14. There were 8 stocks advancing against 22 declines on the index. The broader indices were trading in red; the BSE Mid cap index was down by 0.57% and Small cap index lost 0.01%.

The few gaining sectoral indices on the BSE were, IT up by 1.38%, Consumer Durables up by 1.02% and Teck up by 0.78% while Bankex down by 3.52%, Realty down by 2.20%, PSU down by 1.45%, Capital Goods down by 1.27% and Oil & Gas down by 1.18%  were  losers on the sectoral index.

The top gainers on the Sensex were Wipro up by 1.54%, Sesa Goa up by 1.49%, Infosys up by 1.32%, Hero MotoCorp up by 1.16%, and TCS up by 0.86%. On the flip side, SBI was down by 3.72%, ICICI Bank was down by 3.68%, HDFC was down by 3.21%, HDFC Bank was down by 3.10% and  Bharti Airtel was down by 2.86% were the top losers on the Sensex.

Meanwhile, in a move to help gas-starved power plants, power ministry has moved a draft note to Cabinet to seek approval for pooling imported liquefied natural gas (LNG) with the fuel available from the KG-D6 block after meeting the requirements of fertiliser units. At present, 7,800 MW of gas-based power generation is stuck due to scarcity of natural gas. Under the gas-pooling mechanism, around 3,000 MW capacity power plants will get gas in the financial year 2014-15 and the electricity produced from these plants will be sold at a tariff of Rs 7 per unit. Meanwhile, the remaining 4,800 MW capacity plants will be able to get natural gas in FY 2015-16.

The proposed electricity tariff by power ministry was derived after pooling the prices of imported and domestic gas and deducting government subsidy. Earlier, in June, the government had approved the pricing of all domestically produced gas at an average of international hub rates and cost of imported LNG. Such averaging pricing will raise the effective gas price to $11.43 per million British thermal unit (mmBtu) from $4.2 per mmBtu, leading to cost of electricity generation of Rs 10.47 per unit. Meanwhile, the ministry had already stated that consumers cannot absorb such a high cost of electricity and so the government should subsidise any cost over and above Rs 7 per unit. The power ministry proposal will be finalised once the government agrees to provide the subsidy.

India’s total installed power generation capacity is 225,793 MW, of which 18,714 MW or nearly 8 percent, is gas-based. At present, power plants in the country get just 17.25 million standard cubic metres per day of gas from domestic fields as against an allocation of 71.29 mmscmd on account of declining gas supplies from Reliance Industries' eastern offshore KG-D6 fields. The Gas production at the Reliance KG-D6 field fell 53 percent to 49.2 billion cubic feet in the April-June quarter from a year earlier mainly due to geological complexity, natural decline in the fields and higher than envisaged water ingress.

The CNX Nifty is currently trading at 5,941.30 down by 70.80 points or 1.18% after trading in a range of 5,989.40 and 5,930.95. There were 15 stocks advancing against 34 declines while 1 stock remains unchanged on the index.

The top gainers of the Nifty were HCL Tech up by 2.83%, Ranbaxy up by 2.19%, Sesa Goa up by 1.69%, Infosys up by 1.40% and Hero MotoCorp up by 1.33%.On the flip side, Bank of Baroda down by 5.17%, PNB down by 4.25%, DLF down by 4.09%, SBI down by 3.85% and ICICI Bank down by 3.75%  were the major losers on the index.

The Asian equity indices were trading mixed; Shanghai Composite strengthened 17.32 points or 0.79% to 2,209.17, Seoul Composite added 2.75 points or 0.14% to 2,008.33 and Taiwan Weighted was up by 78.32 points or 0.95% to 8,287.50.

On the flip side, Jakarta Composite declined 45.60 points or 0.99% to 4,538.23, KLSE Composite shed 5.08 points or 0.28% to 1,796.75 and Straits Times was down by 23.52 points or 0.73% to 3,214.01.