Infosys spook sentiments; benchmarks punctured almost 2%

It turned out to be a lackluster day for the local equity indices as they returned to the sell-off mode just a day after breaking the streak of closing in the red. Infosys' disappointing third quarter results remained the biggest dampener for the Dalal Street today as sentiments turned pessimistic even before the start of trade as the SGX Nifty indicated a negative opening for the Indian markets. The positive cues from Asian markets too were shrugged off by local investors as profit booking remained the flavor of the day.  The NSE's 50-share broadly followed index, Nifty retreated over triple digit to end around the psychological 5,750 support level while the Bombay Stock Exchange's Sensitive Index Sensex got punctured by around two percent to settle below the crucial 19,200 mark. The sell-off completely washed out yesterday's gains as India`s second largest software exporter Infosys came with a lower than expected results for the third quarter of fiscal 2011 and declined by nearly 5%. Though the broader markets ended the day in the red zone still they maintained good traction for most part of the day compared to their larger peers as the BSE's midcap and smallcap indices settled with over half a percent loss. In the meantime, the ministry of commerce and industry released India's food inflation numbers which rose 16.91% on annual basis during week-ended Jan 1, marginally lower compared with 18.32% recorded in the previous week. However it continued to remain at highly elevated levels putting pressure on the central bank to further tighten its monetary policy. The banking pack were hammered 3.53% in today's trade, being the biggest laggard in the BSE sectoral space, with heavyweights like SBI and ICICI Bank plunging 4.15% and 3.60% respectively. The IT and software shares too remained under immense pressure on the back of unexpectedly low numbers reported by Infosys. The BSE sectoral space went home with the Realty counter as the sole gainer after stocks like HDIL and Unitech rose over a percent each.

On the global front, Asian equity indices traded in the green through the day's trade to end mostly with gains as investors' regained conviction after the successful Portuguese bond auction on Wednesday.  While key benchmark indices in Europe were trading with a negative bias with FTSE 100 being the biggest loser in the space after shedding over half a percent point. The screen trading for US index futures also indicates that the Dow could drift marginally lower at opening.

Earlier in the day, the benchmarks failed to carry forward the momentum from yesterdays pull back and got off to a weak start. The indices traded in the negative terrain in the initial hours as investors lacked enthusiasm and continued to book profits as they continued to underperform even as Asian markets traded with some strength. Bourses showed some bit of recovery in the late first half but the sustained selling pressure thereafter ensured that the markets settle with deep cuts of around two percent point. Volumes were substantially lower than yesterday at around Rs 1.68 lakh crore while the turnover for NSE F&O segment too remained on the lower side at over Rs 1.51 lakh crore. The market breadth on the BSE was negative as there were 1104 shares on the gaining side against a 1693 shares on the losing side while 184 shares remained unchanged.

On Charts: The S&P CNX Nifty was unable break the resistance level of 5880 which was a very crucial level, going forward its next support levels will be around 5680 and 5640 and resistance will be around 5880 and 5940.

Finally, the BSE Sensex plunked 351.28 points or 1.80% to settle at 19,182.82 while the S&P CNX Nifty sank 111.35 points or 1.90% to end at 5751.90.

The BSE Sensex touched a high and a low of 19,522.38 and 19,136.27, respectively.

The major losers on the Sensex were Infosys down 4.82%, SBI down 3.91%, ICICI Bank down 3.88%, HDFC Bank down 2.90% and Wipro down 2.67%.

On the other hand, Tata Motors up 1.58%, ONGC up 1.04%, DLF up 0.61% and RCom up 0.14% were the only gainers on the index.

The BSE Mid-cap and Small-cap indices dived 0.80% and 0.65%, respectively.

Meanwhile, India's food inflation declined marginally in the latest reported week but continues to remain at highly elevated levels putting pressure on the central bank to further tighten its monetary policy despite the generally held belief that prices of food commodities are least responsive to monetary action due to inelastic nature of demand.

According to the data released by the ministry of commerce and industry on Thursday, India's food price index rose 16.91% on annual basis during week-ended Jan 1, marginally lower compared with 18.32% recorded in the previous week. Further, the decline hardly has any substance as on a sequential or week-on-week basis, the index for food goods continued upward journey rising 0.21% to 192.9 from 192.5 for the previous week. This was sixth consecutive week of rise in the index.

The index for 'Non-Food Articles' group also rose by 0.8% to 173.5 compared with 172.2 for the previous week. The broader 'Primary Articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI), however increased by 0.3% to 194.0 compared with 193.4 for the previous week. The annual rate of inflation, calculated on point to point basis, for this group came down to 17.58% from 20.20% for previous week.

The index for 'Fuel & Power' with a weight of 14.91% in overall WPI increased by 0.13% to touch 150.9 compared with 150.7 in the previous week. The annual rate of inflation for this group remained nearly flat at 11.53% against 11.63% in the previous week. Fuel inflation could have surged further had the government hiked diesel prices, but the move is understood to have been deferred for now.

Continued surge in food prices has become a major policy challenge for both the government as well as the Reserve Bank of India (RBI). High food prices can lead to broader inflation surge by hardening wage-price expectations. The government is expected to announce some steps including import of food commodities and allowing greater interstate movement of the same in order to curb inflation. The RBI is also expected tighten its monetary stance further in the forthcoming policy review scheduled for January 25.

All the sectoral indices, with an exception of Realty which was up by 0.54% were trading in the negative territory. Bankex was down 3.53%, Information Technology (IT) was down 3.41%, TECk down 2.76%, Consumer Durables (CD) was down 2.70% and Metal down 1.23% were the major losers in the BSE sectoral space.

Mobile banking jump starts with telco-bank deals   It will provide an additional revenue stream with vast potential to the competition hit industry   Mobile banking is finally set to take off in the country with a couple of major telecom operators entering into tie ups with leading banks to offer the services. The move can do wonders for the objective of greater financial inclusion and will go far in taking financial services to rural areas where bank branches may not be feasible. Further, it provides an additional revenue stream with vast potential to the competition hit industry. 

Bharti Airtel, the market leader in telecom space, and the State Bank of India, the largest lender in the country, have announced a deal on Wednesday to offer mobile banking services. Separately, Vodafone Essar, India's third-largest mobile phone company by users, tied up with ICICI Bank, the country's top private-sector lender, to offer mobile banking products.

In Airtel-SBI deal, both will invest Rs 100 crore in the joint venture. SBI will own 51% of the new company and Airtel will have the remaining 49% stake. The investment is in addition to infrastructure, which is already in place. SBI will appoint the chief executive officer of the new organization while the chief operating officer will be from Airtel. While SBI will take care of the banking side of the venture, Airtel will contribute its distribution and technology.

ICICI Bank and Vodafone also have announced the tie-up in a joint press release saying that there was a huge potential for offering mobile banking in rural regions, and that their tie-up will facilitate access to the financially excluded parts of society. The companies did not provide financial details of the pact.

The two agreements have come at a time when India's central bank has been urging banks to expand more into rural and semi-urban areas. Financial inclusion, or taking banking services to the marginal section of the society, is a key objective of current government and the RBI has been working towards it. At present, only about 50,000 villages in India have organized bank branches out of the total 600,000 villages.

The S&P CNX Nifty touched a high and a low of 5857.75 and 5736.70, respectively.

The top gainers on the Nifty were Ambuja Cement up 3.38%, ONGC up 1.50%, Tata Motors up 1.35%, ACC up 1.23% and DLF up 0.78%.

The top losers on the index were Infosys down 5.16%, PNB down 4.77%, SBI down 4.15%, IDFC down 3.62% and ICICI Bank down 3.60%.

On the global front, European markets were trading mixed on Thursday. France's CAC 40 added 0.08%, while Germany's DAX slipped 0.21% and Britain's FTSE 100 lost 0.74%.

All the Asian equity indices barring Seoul Composite finished the day's trade in the positive terrain as investors regained confidence after a successful Portuguese bond auction on Wednesday, which eased fears about the euro zone's debt crisis. Chinese key stock index Shanghai Composite too closed higher in trade supported by strength in oil firms after crude oil extended gains to hold under $92 a barrel. The investors sentiments also got support with commodity producers rally and as speculation mounted Europe will step up efforts to control its debt crisis. However, Korean shares lost their early gains after the central bank surprised the market with a rate increase.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,827.63	6.32	0.22
Hang Seng	24,238.98	113.37	0.47
Jakarta Composite	3,564.94	10.17	0.29
KLSE Composite	1,571.56	5.07	0.32
Nikkei 225	10,589.76	76.96	0.73
Straits Times	3,255.87	10.93	0.34
Seoul Composite	2,089.48	-5.47	-0.26
Taiwan Weighted	8,975.58	10.58	0.12

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