Benchmarks end a volatile day of trade on an absolutely quiet note

Indian stock markets have ended a lackluster day of trade on an absolutely quiet note lacking any major cues. It remained a day of consolidation for the frontline indices which traded in a narrow range amid high volatility a day after plunging around two percent points on the back of dreadful December inflation numbers. The NSE's 50-share broadly followed index, Nifty settled on an absolutely flat note, to close around the psychological 5,700 support level while the Bombay Stock Exchange's Sensitive Index Sensex gained twenty one points to end tad below the crucial 19,000 mark. Profit booking intensified in the broader markets as sluggish European peers failed to lift sentiments and the broader indices remained underperformers compared to their larger peers today. The BSE's midcap and smallcap indices ended the day with cuts of well over a percent point. The high beta Real Estate pack got clobbered by 2.37% in today's trade, being the biggest laggard in the BSE sectoral space, with DLF and HDIL plunging by 3.19% and 3.41% respectively. The ADAG pack tumbled today on sustained selling following the market regulator SEBI passing a consent order with regard to its probe into possible violation of securities market norms by R Infra and RNRL. L&T remained the other heavyweight stock that went home with losses of over 2% as the company's operating margin declined to 10.8% in Q3 December 2010 from 12.4% in Q3 December 2009. The metal counter too remained under immense pressure with majors like Sterlite Industries and SAIL plunging 3.80% and 2.60% respectively. On the flipside, technology and software stocks saw huge buying interests today as the recently beaten down Infosys surged over 2%. Tata Steel too soared 1.74% ahead of its third quarter results which is expected later in the day.

On the global front, majority of the Asian markets closed in the red terrain with the Chinese benchmark plummeting 3.02%, being the leading laggard in the space as investors anxiously awaited the release of December inflation data to be announced later this week. While key benchmark indices in Europe continued to trade with a negative bias with DAX 40 being the biggest loser in the space.

Earlier on the Dalal Street, the benchmark indices got a subdued start tracking the sluggish Asian markets following China's latest tightening measures to fight inflation. After touching the low point of the day in the very initial hours, the benchmarks showed highly volatile trend in day's trade lacking any major triggers. The frontline indices traded in a tight range in the first half but the second half saw the indices touch intraday high levels. However, position squaring by investors at the high levels brought the bourses off the day's high to eventually end the choppy trading session in the positive territory but with only modest gains. Volumes were substantially lower than Friday at around Rs 1.39 lakh crore while the turnover for NSE F&O segment too remained on the lower side at over Rs 1.24 lakh crore. The market breadth on the BSE was extremely negative as there were 862 shares on the gaining side against a 1986 shares on the losing side while 149 shares remained unchanged.

On Charts: The S&P CNX Nifty has closed above 5648 (200 EDMA) level which was a very crucial level. However, if it breaks this level and closes below this level the present bearish sentiment may continue further. Going forward, its next support levels will be around 5568 and 5478 and resistance will be around 5760 and 5820.

Finally, the BSE Sensex advanced 21.81 points or 0.12% to settle at 18,882.25 while the S&P CNX Nifty flattened and was up 0.20 points to end at 5654.75.

The BSE Sensex touched a high and a low of 19,018.94 and 18,779.38, respectively.

The top gainers on the Sensex were HDFC up 3.15%, Infosys up 2.06%, Cipla up 1.87%, TCS up 1.74% and Bajaj Auto up 1.62%.

Reliance Infra down 7.84%, JP Associates down 5.55%, RCom down 4.77%, Sterlite Inds down 3.80% and DLF down 3.19%, were the top losers on the index.

The BSE Mid-cap and Small-cap indices declined 1.39% and 1.40%, respectively.

Meanwhile, as the global crude oil prices continue to rise, the government is looking at options to save the common man from excessive burden even as the financial health of oil marketing companies (OMCs) has to be protected. Already it has allowed increase in petrol prices to help bring them in line with rising global crude oil prices. But it is difficult to allow a similar hike in diesel and cooking gas due to high inflation that the country is presently facing.

One way out of the trouble could be cutting the excise duty on diesel and cooking gas which will reduce the under-recoveries that the OMCs are facing without raising the prices. This will however impact the budget math of the government as excise revenue from petroleum products make a significant chunk of government's incomes.

The plan earlier was that a review of the oil sector duty regime would be conducted while preparing the budget for next fiscal due to be unveiled on February 28. However, crude oil prices have been surging sharply over last few fortnights and as a result the pressure on publically owned fuel retailers has been rising as under-recoveries mount. This may force the government to take a decision on tweaking the oil sector duty structure earlier than release of the budget. 

The OMCs are currently selling diesel and cooking gas at a loss of Rs 6.99 a litre and Rs 275 a gas cylinder respectively. Total under-recoveries in the current financial year are now expected to surge to beyond Rs 70,000 crore. So far the government has only provided compensation of Rs 13,000 crore and even after accounting for the discounts from upstream companies, the OMCs are facing substantial losses. This can seriously impede the growth plans of OMCs and impact their financial health. Not only will this put the country's long term energy security into jeopardy but also hit government's plan to selling its stake in oil sector companies.

The top losers on the BSE sectoral front were Realty down 2.37%, Metal down 1.32%, Capital Goods (CG) down 1.17%, Power down 1.16% and Helathcare (HC) down 0.59%.

On the flip side, Information Technology (IT) up 1.73%, TECk up 1.33%, Consumer Durables (CD) up 0.25%, Bankex up 0.23% and Fast Moving Consumer Goods (FMCG) up 0.16% were the gainers in the BSE sectoral indices.

Even as the headline inflation in India continue to remain at highly elevated levels, the recent significant rise in price of steel has further added to inflationary pressures as food and energy costs are already soaring. Since steel is an input for so many products, the rise in steel prices has a cascading impact on overall pricing structure in an economy.

Over the last one month, prices of various steel products, particularly the flat category, have increased by 9-12% in India. However, the steel industry cannot be held guilty as its cost of production has been increasing at a much faster pace, and despite the recent increase, the steel companies would probably be earning margins which are less than the year-ago levels.

The industry has already had a bleak quarter December as margins have been hit due to rising costs amidst stagnant prices. Even though steel demand in India is reasonably strong, there has been a lot of import of the commodity which has been keeping the pressure on prices. With a pick-up in infrastructure projection expected in first quarter of 2011, steel demand should further improve.

However, it is the cost of production which is keeping the industry under pressure. Prices of both iron ore and coking coal prices have been on the rise in recent months. Iron ore prices which had softened considerably towards the end of September quarter following a surge early in the year have again been on the rise in recent months. The trend may further firm up in wake of overall rising global commodity prices. Another key steel input, coking coal, too has seen substantial increase in prices. Coking coal prices grew by 75% over 2009 and after remaining somewhat flatter in 2010 is now again likely to surge on account of floods in Australia which has taken around 5% of the global supplies off the charts.

The S&P CNX Nifty touched a high and a low of 5696.15 and 5624.15, respectively.

The top gainers on the Nifty were HDFC up 3.47%, Kotak Mahindra Bank up 2.84%, Cipla up 2.49%, Axis Bank up 2.36% and Bajaj Auto up 2.34%.

The top losers on the index were Reliance Infra down 7.47%, Reliance Capital down 6.15%, RPower down 6.09%, JP Associates down 5.62% and RCom down 4.77%.

European markets were trading in the red on Monday. France's CAC 40 shed 0.37%, Germany's DAX slid 0.20% and Britain's FTSE 100 trimmed 0.18%.

Most of the Asian equity indices barring KLSE Composite and Nikkei finished the day's trade in the negative terrain on Monday. Chinese Shanghai Composite declined more than three percent on lingering concerns over monetary tightening as investors anxiously await the release of December inflation data which is slated to be released later this week. The sentiments in the region were also weighed down as China raised banks' reserve requirement ratio by 0.50 percentage point on Friday.Hong Kong's Hang Seng is closed lower with real estate and financials tracking mainland action.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,707.10	-84.24	-3.02
Hang Seng	24,156.97	-126.26	-0.52
Jakarta Composite	3,535.73	-33.41	-0.94
KLSE Composite	1,574.49	4.60	0.29
Nikkei 225	10,502.86	3.82	0.04
Straits Times	3,238.63	-7.33	-0.23
Seoul Composite	2,099.85	-8.32	-0.39
Taiwan Weighted	8,925.09	-74.41	-0.83

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