Benchmarks witness modest cuts in volatile session of trade

The key equity indices witnessed modest cuts in volatile session of trade on Monday. The markets looked in a jubilant mood in early part of the session but the momentum didn't last by the end of the session. Weak global cues weighed on the sentiment during trade. The People's Bank of China's (PBOC) move to hike benchmark lending and deposit interest rates by 25 basis points over the weekend to tame spiraling inflation spread jitters across world equities on Monday. The China's Shanghai Composite shed close to two percent in trade when most of the Asian peers finished higher. While major European indices were showing cuts of over one percent each, the Dow future was down by 44 points in screen trade. Crude oil hitting its 26-month high of $92 a barrel mark also fuelled worries among investors. On the Dalal Street, the BSE's 30-share Sensex managed to hold its neck above the psychological 20,000-level during the session while the NSE's 50-share Nifty shut shop tad below the crucial 6,000-mark. China's central bank's decision to raise interest rates took its toll on the metal counter during the session which topped the losers list on the BSE sectoral space. Realty, public sector undertaking and power stocks were the other major losers in trade. On the other hand, healthcare, software and consumer durables counters showed some resilience during the session. The broader indices also witnessed choppy session of trade today.

The markets started the session on a flat note this morning but managed to pick-up some pace soon after, mainly on the back of positive cues from most of the regional peers. The markets gyrated in a narrow range with a positive bias in the morning session. The key indices scaled their intraday peaks in mid-morning session as investors resorted to value picking across the board. Meanwhile, the markets started their reverse journey after hitting their day's highs. The markets continued to trim their early gains in the afternoon session. Profit booking remained evident in late-afternoon trades as well. Volatility ruled the roost in the latter half of the session as derivatives traders rolled over their positions from current month contracts to next month's futures and options (F&O) series. The markets turned negative in late session tracking sharp cuts on the European bourses in opening trades. The main indices showed some recovery in last half an hour of trade but the pullback remained short lived and the markets touched their intraday lows before signing off the session around those levels. Total traded turnover for the day stood at Rs 1.18 lakh crore. The market breadth on the BSE was in favour of advances; the gainers outpaced the losers in a ratio of 1461:1399 while 157 shares were unchanged.

Meanwhile, Reliance Anil Dhirubhai Ambani Group (Rel-ADAG) companies which witnessed good traction in Friday's session took some beating from the bears in trade today. RCom topped the losers list with cuts of more than three and a half percent. Reliance Infra lost over two percent and RPower shed two percent in trade.

Index heavyweight, RIL, trimmed around half a percent during the session. On the other hand, Cipla, Tata Power and Bajaj Auto managed to lure investors in trade to top the gainers list.

New kid on the block, Ravi Kumar Distilleries, got warm welcome from investors' community. The company's shares surged 15.05 rupees or 23.15% from its issue price of Rs 65 per shares to close at Rs 80.05.

On the charts: The S&P CNX Nifty failed to cross 6,048-mark during the session, which is a strong resistance for the index in the near future. If the index breaks 5,968-mark next major support will be around 5,938 level. On the flip side, resistance will be around 6,048, 6,080 and 6,242.

Finally, the BSE Sensex declined 44.73 points or 0.22% to settle at 20,028.93 while the S&P CNX Nifty slipped 13.50 points or 0.22% to end at 5998.10.

The BSE Sensex touched a high and a low of 20,190.13 and 20,010.33 respectively. Cipla up 1.47%, Tata Power up 0.81%, Bajaj Auto up 0.64%, Wipro up 0.64% and BHEL up 0.53% were the major gainers on the Sensex.

On the other hand, RCom down 3.56%, Sterlite Inds down 3%, Reliance Infra down 2.11%, Bharti Airtel down 1.98% and Tata Steel down 1.44% were the major laggards on the index.

The BSE Mid-cap index declined 0.17%, while BSE Small-cap index rose 0.21%.

Meanwhile, even as the global crude oil prices continue to hover above the $90 a barrel mark and the oil marketing companies continuing to suffer heavy losses by selling fuels below the cost of production, the government has cleared that it has not yet made any decision on hiking the administered prices of diesel or cooking fuels.

The Empowered Group of Ministers (EGoM) led by the union finance ministry Pranab Mukherjee is expected to meet later this week to clear the prices hike. But Mukherjee himself stated on Saturday that the issue was being constantly monitored and while no decision had been made yet, there was no reason to press the panic button either.

'Prices of petroleum products are constantly under review. However, no decision has been taken on increasing prices of LPG and diesel. A group of ministers is looking into it and everything will have to be factored in before any decision. The Cabinet will take decision at an appropriate time,' Mukherjee said, while inaugurating the new hydrocracker unit and expansion of IOC's Haldia Refinery on Saturday.

He also praised the publically controlled OMCs saying they were doing a commendable job by keeping fuel prices in reach of the marginal section of society. "Even at this moment, when I am speaking to you, oil marketing companies are subsidising diesel at Rs. 5.41 per litre, kerosene at Rs. 16.88 per litre and LPG cylinders at Rs. 272.19 each,"  Mukherjee said explaining the losses being suffered by the fuel retailers.

Oil and gas minister Murli Deora also said at the same function that a decision on the fuel prices will be made soon, but added that government will draw a balance between interests of common people and financial health of OMCs. "Our government is committed to the twin objectives of protecting the interest of the common man, particularly the vulnerable sections of the society as also to protect the financial health of the public sector OMCs," he said.

Metal down 1.24%, Realty down 0.82%, Public Sector Undertaking (PSU) down 0.51%, Power down 0.35% and Fast Moving Consumer Goods (FMCG) down 0.30% were the main losers in the BSE sectoral space.

On the other hand, Healthcare (HC) up 0.61%, Information Technology (IT) up 0.25% and Consumer Durables (CD) up 0.23% were the only gainers in the BSE sectoral space.

Industry body ASSOCHAM has said that as tight liquidity scenario, rising demand for credit and high inflation will cause interest rates to inch up in 2011 even as the Indian economy grows at a rapid pace. There is already some upside bias in rates in wake of very tight liquidity scenario currently prevailing in the system and the upward bias is likely to continue remaining there in the system in next calendar year as well.

Overall liquidity has remained in the deficit mode in Indian banking system since mid-September with average daily injection increasing significantly in following months. In order to alleviate frictional liquidity pressure, the RBI has taken a host of measures, but things remain tight for now. Although the deficit mode in the LAF window has been consistent with the tightening of policy stance by the central bank, even the RBI has accepted that too much negative liquidity was impacting banks. Economists feel that if the scenario continues in 2011, banks will have to hike rates.

The industry body feels that even as the central bank has considerably tightened its monetary policy over the current fiscal so far, inflationary pressures continue to put pressure on the Reserve Bank of India (RBI). Most analysts expect that the RBI will hike policy rates in the forthcoming quarterly review in January after having taken a pause in the December review.

'The days ahead are extremely dicey...The options with RBI are limited as the growth is not likely to be sacrificed for inflation. Hence there is every likelihood of policy rates to inch up in the next monitory policy,' Assocham said, adding that if market rates increase significantly over the 2011, it can impact the overall level of investment in the country.

The ASSOCHAM also cautioned that rapid economic growth in the country has greatly increased the demand for skilled labor and while approximately 10 to 15 million jobs are expected to be created in India by next year, at least 75% of these new jobs will require vocational training. The industry body said that if the crunch of skilled labour force is not tackled properly, it can affect India's growth trajectory.

The S&P CNX Nifty touched a high and a low of 6,045.75 and 5,991.10, respectively.

Ambuja Cement up 2.20%, Cipla up 2.01%, Sun Pharma up 1.07%, Sesa Goa up 1.04% and Bajaj Auto up 0.87% were the major gainers on the Nifty.

On the other hand, SAIL down 4.14%, RCom down 3.52%, Sterlite Inds down 3.35%, Reliance Infra down 2.59% and Reliance Power down 2.06% were the major losers on the index.

Asian equity indices finished the day's trade mostly in the positive terrain on Monday shrugging off China's interest rate hike announced over the weekend. People's Bank of China raised rates by 25 basis points on Saturday, the second rate rise in just over two months, as part of a series of measures designed to combat inflation which hit a 28-month high of 5.1 percent in November. Nikkei and Straits Times remained the major gainers in the region. However, Chinese stocks fell about two percent after being up most part of the day's trade on the back of interest rate hike, while Hang Seng remained closed on account of a public holiday.

Jakarta Composite rose 13.74 points or 0.38% to 3,625.27, KLSE Composite was up 0.14 points or 0.01% to 1,511.72, Nikkei 225 surged 76.80 points or 0.75% to 10,355.99, Straits Times increased 15.56 points or 0.49% to 3,159.36 and Taiwan Weighted jumped 31.21 points or 0.35% to 8,892.31.

On the flip side, Shanghai Composite declined 53.76 points or 1.90% to 2,781.40 and Seoul Composite shed 7.41 points or 0.37% to 2,022.19.

European markets were trading in a mixed range on Monday. France's CAC 40 declined 1.02%, Germany's DAX lost 1.15%, while Britain's FTSE 100 added 0.21%.

 

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