Selling intensifies across street; Nifty below 5,650 mark

Indian equities added losses to continue its weak trade hovering near lowest point of the day in the late afternoon session on back of selling in frontline counters and taking cues from European counterparts. Investors have started eyeing Reserve Bank of India's (RBI) Second Quarter Review of Monetary Policy - 2012-13 which is scheduled on October 30, 2012, and will provide further direction to the market. Traders were seen piling some position in Auto sector while selling was witnessed in Consumer Durables, Health Care and Oil & Gas sector. In the scrip specific development, Kingfisher Airlines was locked in upper circuit limit as employees agreed to resume work. Mahindra & Mahindra was trading firm in a weak market after foreign broking firm UBS upgraded the company to buy from neutral citing a strong outlook for profit margins despite falling tractor sales, as well as increased demand for utility vehicles. Public sector lender Punjab National Bank plunged after its net profit fell by 11.6% year-on-year to Rs 1,065 crore in the July-September quarter of current financial year 2012-13 due to higher non-performing assets. CESC dropped as investors questioned about valuations and reason to buy stake in business process outsourcing company Firstsource Solutions.

On the global front, Asian markets were trading in red, while the European markets were trading on pessimistic note. Investors are hoping that more central bank action may follow after the latest economic weakness and better than expected earnings results from corporations. Besides, UK pulled out of double-dip recession in the quarter to September on higher spending linked to Olympics and Paralympics events. Separately, the IMF approved another €1.5 billion disbursement for Portugal and Sweden’s central bank decided to hold the benchmark repo rate at 1.25%. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,650 and 18,600 levels respectively. The market breadth on BSE was negative in the ratio of 894:1738 while 122 scrips remain unchanged.

The BSE Sensex, after trading in the range of 18,729.53 - 18,583.29, is currently trading at 18,589.66, down by 168.97 points or 0.90%. There were only 7 stocks advancing against 23 declines on the index.

The broader indices too are reeling under pressure; the BSE Mid cap index and Small cap indices were trading lower by 0.82% and 0.76% respectively.

Consumer Durables (CD) down by 3.19%, Health Care (HC) down by 1.40%, Oil & Gas were down by 1.25%, PSU down by 1.18% and Fast Moving Consumer Goods (FMCG) down by 1.15% were the top losing sectors on the BSE. While, Auto up by 0.23% was the lone gainer.

The gainers on the Sensex were M&M up by 1.78%, Hero MotoCorp up 0.97% HUL up by 0.34%, NTPC up by 0.32% and BHEL up by 0.31%. On the other hand, top laggards included, Cipla down by 2.11%, Dr Reddy’s Lab down by 1.95%, RIL down by 1.94%, ITC down by 1.83% and Bharti Airtel down by 1.69%.

Meanwhile, in an attempt to trigger the domestic manufacturing of electronic goods, the Union Cabinet of India has approved the National Policy on Electronics 2012. The directive has come with an aim to optimize the gap between domestic demand and supply in electronics goods, which has been envisaged to rise early to $300 billion by 2020, triggering huge import demand which might even exceed oil imports.

The centre targets to develop an eco-system for a globally competitive Electronic System and Design and Manufacturing (ESDM) sector in India by garnering about $100 billion of investment. The government also anticipates that the new policy would generate fresh employment for about two million people.

The policy would also provide preferential market access to domestically manufactured electronic products and setting up of semiconductor wafer fabrication facilities. The domestic availability of electronic components as raw material is estimated to increase to more than 60% of the requirements by 2020 from current requirement of 20-25%. While in 2008-09, the domestic production was about $20 billion.

In absence of a government initiative, it was estimated that at the current rate of growth, domestic production can cater to a demand of $100 billion by 2020 as against demand of $400 billion. The rest would have to be met by imports. It also targets to increase exports of ESDM to $80 billion by 2020 from $5.5 billion at present.

The policy has been structured aiming to provide preference to indigenous electronic goods and has called for involvement of private sector universities and institutions for scaling up capacities. The government has also planned to set up specialized Institute for semi-conductor chip design.

The S&P CNX Nifty, after trading in the range of 5,697.20 - 5,643.75, is currently trading at 5,643.95, down by 61.35 points or 1.08%. There were 10 stocks advancing against 40 declines on the index.

The top gainers of the Nifty were M&M up by 1.59%, Hero MotoCorp up by 1.19%, NTPC up by 0.71%, Ambuja Cement up by 0.63%, and BHEL up by 0.19%. On the flip side, PNB down by 6.30%, JP Associates down by 4.77%, Cipla down by 2.40%, Reliance Infrastructure down by 2.20% and Reliance Industries down by 2.15% were the major losers on the index.

All the Asian equity indices were trading in the red; Shanghai Composite plunged by 1.68%, Hang Seng declined by 1.21%, Nikkei 225 slumped by 1.35%, Kospi Composite fell by 1.72% and Taiwan Weighted plummeted by 1.76%.

Indonesian Jakarta Composite, Malaysia’s KLSE Composite and Singapore’s Straits Times remain closed on account of public holiday.

The European markets were trading in red with, France’s CAC 40 lost 0.44%, Germany’s DAX descended 0.50% and the United Kingdom’s FTSE 100 dropped 0.56%.