Benchmarks widen losses; Nifty slips below 6050 mark

Indian equities added losses to continue weak trade hovering near the lowest point of the day in the late afternoon session on account of selling in frontline counters and weak cues from global counterparts. The sentiments were on pessimistic note from the early trade after Federal Reserve stepped back on its stimulus announcing a $10bn cut to its $75 billion-a-month bond-buying programme, known as quantitative easing (QE). Traders were seen piling positions in Consumer Durables stocks while selling was witnessed in Realty, Metal and Bankex sector stocks. Hectic activity was witnessed in fertilizer stocks after Group of Ministers approved the proposal to hike fixed cost of Urea by Rs 350 per tonne. In scrip specific development, Ranbaxy Laboratories was trading in red on reports that India’s drug regulator has ordered the company to furnish a comprehensive explanation for the violation of manufacturing practices at its Toansa plant, discovered by the US Food & Drug Administration. The market may remain volatile today as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. January 2014 series to next month i.e. February 2014 series. The near month January 2014 derivatives contract expires today i.e. January 30, 2014.

On the global front, the Asian markets barring KLSE Composite were trading in red, while the European markets were too trading on pessimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 6,050 and 20,400 levels respectively. The market breadth on BSE was negative in the ratio of 643:1724 while 128 scrips remained unchanged.

The BSE Sensex is currently trading at 20384.54, down by 262.76 points or 1.27%, after trading in a range of 20,501.92 and 20,376.18. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were too trading in red; the BSE Mid cap index was down by 1.35%, while Small cap index was down 1.57%.

The top losing indices on BSE were Realty down by 3.45%, Metal down by 2.84%, Bankex down by 2.62%, FMCG down by 1.55% and Capital Goods down by 1.20%. On the flip side, Consumer Durable up by 1.46% was the sole gainer.

The top gainers on the Sensex were Bharti Airtel up by 2.44%, Gail India up by 1.67%, M&M up by 0.50%, Tata Motors up by 0.10% and Sun Pharma up by 0.07%. On the flip side, SSLT down by 5.19%, Tata Steel down by 3.69%, ICICI Bank down by 3.06% Hindalco Industries down by 3.00% and SBI down by 2.55%.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) is expected to consider Food Ministry’s proposal soon to give a cash subsidy of Rs 2,000 per tonne to the beleaguered sugar industry for export of four million tonnes of raw sugar for a period of two years. Total subsidy outgo has been pegged at Rs 800 crore that will be adjusted from the Sugar Development Fund (SDF). India, world's second biggest sugar producer but largest consumer, only makes white sugar for domestic consumption and does not manufacture raw sugar. Meanwhile, raw sugar segment presents a lot of exports opportunities for the country. The government had already given subsidy of Rs 1,450 per tonne in 2007-08 to export six million tonnes of sugar and the current incentive is being worked on the procedure.

However, there are differences of opinion among the various ministries on the quantum of cash subsidy as Agriculture Minister Sharad Pawar is in favour of a reasonable subsidy not less than Rs 3,500 per tonne in order to provide major boost to the exports of raw sugar. Furthermore, the industry body Indian Sugar Mills Association (ISMA) has also suggested same incentive of Rs 3,500 per tonne on raw sugar export in view of weak global prices.

It could be a difficult task for India to export raw sugar as global prices are ruling much lower as against the domestic production cost of Rs 26,500 per tonne. Further, domestic sugar mills are facing cash crunch as sugar prices have come down below the cost of production in view of surplus supplies. Meanwhile, the government has been taking measures to improve cash flow of sugar mills. Recently, it has announced interest subsidy on bank loans to mills for paying cane farmers.

The CNX Nifty is currently trading at 6,040.40, down by 79.85 points or 1.30% after trading in a range of 6,072.95 and 6,038.55. There were 8 stocks advancing against 42 declining on the index.

The top gainers of the Nifty were Bharti Airtel up by 2.38%, Gail up by 1.73%, Lupin up by 1.00%, M&M up by 0.52% and Power Grid up 0.16%. On the flip side, Bank of Baroda down by 5.19%, SSLT down by 5.06%, JP Associates down by 3.91%, DLF down by 3.72% and Tata Steel down by 3.70% were the major losers on the index.

The Asian equity indices were trading in red barring KLSE Composite which was up by 0.83% while, Jakarta Composite down by 0.45%, Shanghai Composite down by 0.82%, Nikkei 225 down by 2.45%, Straits Times down by 0.01% and Hang Seng down by 0.48%.

Taiwan stock exchange was closed on account of ‘Lunar New Year's Eve’ holiday while South Korea market was closed due to ‘Seollal Holiday’.

The European markets were trading in red; France’s CAC 40 was down 0.25%, Germany’s DAX lost 0.34% and UK’s FTSE 100 dropped 0.33%.