Weakness creeps into Dalal Street; benchmark indices slip into red

Begging to differ from global indices, the trend at the Indian equity markets was soft right from the inception trade, however, with increasing anxiety ahead of the release of the IIP data, which is likely to shrink at an annual rate of 0.5 percent in October, market participants are increasing growing skeptical of building position just at the start of the fresh week, which could see another policy rate hike in RBI’s monetary policy review, later on December 16, 2011. This mounting vigilance have dragged the barometer indices substantially lower from their crucial psychological level of 16500 (Sensex) and 4900 (Nifty) respectively. However, the trend of broader indices is no different from frontline one’s, as risk aversion too is being witnessed in small cap and mid cap index, which have surrendered over 0.75%.

Most of the global indices found solace after European policymakers settled on a plan to introduce tougher fiscal rules for the 17-member euro zone countries in their endeavor to avert the onerous debt crisis looming over the European region. However, sentiment in Asian pacific markets also got a lift on the back of encouraging US economic reports including that of US consumer confidence data , which came in above estimates at a six-month high, while the nation’s trade deficit that narrowed in October to the lowest level of the year, reflecting a drop in imports also boosted the investors’ morale.

Overnight at Wall Street, Dow Jones industrial average ended up 186.56 points, or 1.55 percent, at 12,184.26. The Standard & Poor's 500 Index was up 20.84 points, or 1.69 percent, at 1,255.19. Nasdaq Composite Index rose 50.47 points, or 1.94 percent, at 2,646.85. However US future indices showing a downtick on the screen trade, were indicating a negative start for Us markets tonight.

Meanwhile, in an unexpected and dramatic trend reversal, industrial output growth dropped in October to a worst than 28-month low at -5.1%, indicating a severe slowdown in the country’s growth trajectory. However, Industrial output growth in September, which had been provisionally estimated at 1.9%, now stands to be revised to 2%. Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at -6% in October last year. During the April-October period this fiscal, IIP growth stood at 3.5% (YoY).

BSE Sensex is currently trading at 16,213.46, down by 274.78 points or 1.67%. The index has touched a high and low of 16,382.57 and 16,142.32 respectively. 5 stocks were advancing against 25 declining ones on the index.

The broader indices too tailing the trend of frontline indices, lost favor, BSE Mid and Small cap index lost 0.86% and 0.89% respectively.

None of the sectoral indices on BSE were gaining; however, top losing pivotal’s were CG down by 2.58%, Auto down by 2.26%, Oil & Gas down by 2.04%, Power down by 1.80% and Realty down by 1.31%.

Jaiprakash Associate down by 4.67%, M&M down by 3.62%, BHEL down by 3.45%, Bajaj Auto down by 3.36% and Sterlite Industries down by 3.20% were the top losers of 30 share barometer index- Sensex.

On the flip side, Coal India up by 1.10%, Maruti Suzuki up by 1.08%, Hindalco Industries up by 1%, Jindal Steel up by 0.62% and NTPC up by 0.39% were the top gainers on the index.

Meanwhile, the Ministry of Civil Aviation has agreed to the proposal of Department of Industrial Policy and Promotion (DIPP), to allow foreign airlines to buy 26% stake in the India private airlines.  The aviation ministry had earlier proposed to a limit of 24% on the Foreign Direct Investment (FDI) by foreign carriers in the initial draft note prepared by the DIPP.

The ministry had originally raised concerns regarding security and predatory pricing by foreign airlines, affecting domestic market. However, the DIPP had proposed 26% foreign direct investment (FDI) by foreign airlines into the domestic industry on the back of Kingfisher Airlines falling into a severe debt crisis and several others facing resource crunch.

Without giving much detail, senior government official said, the civil aviation ministry has come on board for 26% FDI. Currently, government allows 49% FDI in the domestic aviation services like cargo handling however, carriers are not allowed.

Apart from the finance ministry, home ministry and the planning commission too have supported the draft Cabinet note. The ministry of finance has also supported the proposal, however, with condition that such investments should not violate capital market regulator Security Exchange Board of India’s (SEBI’s) guidelines.

Under the SEBI’s takeover Code, an open offer is triggered once an investor acquires 26% stake in listed firm. The size of the open offer required is 25% that would mean that the investor will have to buy extra equity from public..

The S&P CNX Nifty is currently trading at 4,860.10, down by 6.60 points or 0.14%. The index has touched a high and low of 4,910.25 and 4,841.40 respectively.  There were 17 stocks advancing against 33 declining ones on the index.

The gainers of the Nifty were Reliance Infra up by 1.64%, ONGC up by 1.26%, Gail up by 0.94%, ITC up by 0.84% and Wipro up by 0.83%. On the other hand, ACC down by 2.05%, Tata Power down by 2.00%, Ambuja Cements down by 1.75%, Bajaj Auto down by 1.71% and Hindalco down by 1.44% were the major losers on the index.

All the Asian markets, barring the Chinese one is trading in green, Shanghai Composite was down 10.47 points or 0.45% to 2,304.80 and Hang Seng was up 264.47 points or 1.42% to 18,850.70,

Most of the Asian pacific markets continued to trade with optimism, Jakarta Composite gained 1.09%, Nikkei 225 surged 1.68%, Straits Times added 0.80%, Seoul Composite accumulated 1.15% and Taiwan Weighted rose 0.64%.

However, Shanghai Composite continued to lone loser among the Asian pack, shrugging off 0.45% to trade at 2,304.80.