Sensex pares some losses post positive European market opening

Profit booking seems to have stopped in the Thursday afternoon trades as the frontline equity indices which appeared to be drifting below important psychological levels have recovered from day’s lows and are trading over the crucial 5,200 and 17,200 levels. The benchmarks are trading with around half a percent loss as sentiments remain bleak across the Asian region as investors pondered over the disappointing employment reports from the US and Euro-zone, which showed far fewer than expected jobs were added in April, intensifying concerns over slowing down global economic recovery. However, domestic sentiments got some support from the European markets which opened on a promising note, reversing the previous day's losses after banks rallied post reassuring quarterly earnings announcement ahead of Spain's first bond auction since its most recent downgrade. On the domestic front, the weakness in rupee persisted for yet another session after it declined to hit fresh four-month low of Rs 53.26 against the American currency as several factors including trade deficit and volatile inflows continued to put pressure on the Indian currency. The rate sensitive counters like Automobile, Banking and Real Estate remained the top laggards in the session as they traded with over a percent cuts each. The weak sales numbers by some Auto majors companies and disappointing quarterly earnings announcement by two-wheeler major Hero Moto dragged the Auto index. While the RBI, in order to strengthen risk management mechanism, has laid out tighter norms for Indian banks under Basel III international accounting standards. The banking index plunged on the back of RBI’s recent Basel III guidelines as it mandates the banks over up-keeping of their total capital adequacy ratio at 9 percent, higher than the minimum recommended requirement of 8 percent. Meanwhile, airline stocks like Kingfisher, Jet Airways and Spice Jet drifted lower in the session after reports that the Parliament is unlikely to take a decision on the 49% foreign direct investment in the ongoing session. Besides, the gains in IT, TECk and the defensive Healthcare counters provided some support to the benchmarks.

Moreover, the broader markets traded on a bleak note with large cuts of around a percent in the afternoon trades, underperforming their larger peers. The bourses declined on weak volumes of over Rs 0.5 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1599:838 while 109 scrips remained unchanged.

The BSE Sensex is currently trading at 17,200.94 down by 100.97 points or 0.58% after trading as high as 17,271.77 and as low as 17,148.66. There were 9 stocks advancing against 21 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index plunged 0.96% and Small cap sank 0.85%.

On the BSE sectoral space, IT up 0.64%, TECk up 0.36% and Healthcare up 0.06% were the major gainers, while Auto down 1.66%, Bankex down 1.36%, Realty down 1.24%, Metal down 1.11% and PSU down 1.05% were the major laggards in the space.

Wipro up 1.62%, HUL up 1.58%, BHEL up 0.92%, HDFC up 0.89% and Infosys up 0.71% were the major gainers on the Sensex, while Hero Moto down 6.98%, ICICI Bank down 2.99%, Coal India down 2.10%, DLF down 2.08% and Tata Steel down 1.98% were the major losers in the index.

Meanwhile, Confederation of Indian Textile Industry (CITI) has raised a red flag over exports of cotton stating that allowing further exports of the fiber could lead to shortage of the commodity in the domestic market. If this happens Indian traders will be forced to buy cotton from abroad at a higher price. This observation is based on the fact that demand for textile items in the domestic market is now recovering which would demand more consumption of cotton in the coming times.

The government has recently decided to allow further exports of cotton in 2011-12 marketing year as production estimates have been revised upwards by the Cotton Advisory Board (CAB) and the Agriculture Ministry.

The government has banned further exports of cotton on Mach 5 fearing domestic shortages. However the ban received a lot of criticism from all quarters. Hence the ban was first partially lifted wherein exports of already registered orders was allowed. Subsequently the government has lifted the ban completely and new registrations are expected to start soon.

However CITI is of the opinion that the textile is already under pressure due to rising raw-material prices and high interest rates which have hit silk, spinning, handloom and powerloom units hard. Infact majority of textiles mills in the country have already registered huge losses and they are finding it difficult to repay loans.

Therefore, CITI has requested the government and the Reserve Bank to restructure loans to help the cash-starved textiles units to tide over the crisis. Earlier this month, the CAB had revised production estimates upwards to 347 lakh bales from 345 lakh bales for the current season. It had also revised domestic consumption estimates downwards to about 250 lakh bales from 260 lakh bales earlier. The Agriculture Ministry too had revised upwards cotton output to 352 lakh bales from 340.8 lakh bales.

The S&P CNX Nifty is currently trading at 5,213.40, lower by 25.75 points or 0.49% after trading as high as 5,217.30 and as low as 5,189.45. There were 18 stocks advancing against 32 declines on the index.

The top gainers on the Nifty were Wipro up 1.82%, HUL up 1.74%, ACC up 1.64%, Ranbaxy up 1.42% and HDFC Bank up 1.25%.

Hero Moto down 6.77%, Axis Bank down 2.84%, IDFC down 2.81%, ICICI Bank down 2.50% and Coal India down 2.26% were the major losers on the index.

In the Asian space, Hang Seng declined 0.66%, Jakarta Composite fell 0.11%, KLSE Composite lost 0.01%, KOSPI Composite dropped 0.20% and Taiwan Weighted shed 0.23%.

On the flipside Shanghai Composite gained 0.07% and Straits Times Index rose 0.10%.

The European markets got off to a positive start as France’s CAC 40 climbed 0.62%, Germany’s DAX rose 0.60% and Britain’s FTSE 100 gained 0.48%.