Markets end a sluggish day of trade in the red terrain

Local stock markets finished a volatile day of trade on a flat note with a negative bias. The fifty stock, Nifty settled a tad below the psychological 6,150 mark while BSE's 30-share sensitive index, Sensex contracted around a quarter percent to settle a touch lower than the crucial 20,500 level. The broader markets which were outperforming their larger peers for the last two consecutive days succumbed to selling pressure today with the midcap index losing around a quarter percent point while the small cap index ended on an absolutely flat note. Fast Moving Consumer Goods (FMCG) counter was the top sectoral gainer on the BSE, with HUL and ITC surging 2.11% and 1.40% respectively. While sugar stocks rallied for the second straight day as Indian government allowed export of sugar after it became almost certain that the domestic production for the current sugar year will be in excess of 24.5 million tonnes against domestic demand of 23 million tonnes. Sugar stocks including Bajaj Hindustan and Shree Renuka Sugar surged 1.95% and 1.58% respectively. Among the other significant gainers, index heavyweight Reliance Industries soared around two percent on reports that the company has commissioned international consultants AT Kearney and Booz and Co to prepare a business transformation plan for fiscal 2011-12. While, Suzlon Energy shares pared some of its gains to close 2.5% higher after surging as much as 5.6% after the company clarified that reports of Spain's Gamesa picking up a majority stake in the Indian wind turbine maker were speculative and inaccurate in nature. On the other hand, banking pocket remained under immense pressure on Tuesday as Bankex plunged 2.48% in the day's trade on the back of sustained selling amid fears of a sharp hike in interest rates due to rising inflation.

On the global front, cues remained favourable from the Asian counterparts which mostly closed on an optimistic note after getting off to a strong start following the overnight US market gains which surged on the back of encouraging manufacturing activity and construction spending data spurting up sentiments to a great extent. All key benchmark indices in Europe were trading in the green region with London's FTSE 100 spurting over two percent as it resumed trading today for the first time in 2011. The screen trading for US index futures also indicates that the Dow could gain in the trade today.

Earlier in the day, the bourses commenced the day in the positive territory as optimistic global cues supported investor sentiments. However, the frontline indices could not capitalize on to the early gains and drifted into the red in very early trade. Although benchmarks gathered some momentum in the early second half of trade but once again failed to keep the head above the water as investors opted to take profits off the table at higher levels. The indices remained choppy through the session and the sell-off in the dying hours of trade led the indices to close moderately lower. Volumes in the local markets picked-up to some extent to over Rs 1.18 lakh crore while the turnover for NSE F&O segment too remained on the higher side compared to Monday at over Rs 1 lakh crore. The market breadth on the BSE was extremely positive; there were 1352 shares on the gaining side against 1375 shares on the losing side while 322 shares remained unchanged. Meanwhile, according to the HSBC-Markit, India's seasonally adjusted monthly purchasing managers' index (PMI), based on a survey of over 300 companies, eased to 56.7 in December from November's reading of 58.4. Nonetheless, it continues to stay well above the watershed mark of 50, which separates expansion from contraction. The primary reason behind the decline in momentum was capacity constraints and a slowdown in new orders.

On charts: The S&P CNX Nifty closed above 6130, if the index holds above this level, the next resistance will be around 6180, 6242 and 6332 levels. On the other hand, support will be around 6070 and 6030 level.

Finally, the BSE Sensex shed 62.33 points or 0.30% to settle at 20,498.72 while the S&P CNX Nifty slipped 11.25 points or 0.18% to end at 6146.35.

The BSE Sensex touched a high and a low of 20,651.21 and 20,449.01, respectively.

Hindustan Unilever (HUL) up 2.54%, Reliance Industries (RIL) up 2.12%, ITC up 1.78%, Reliance Infra up 1.70% and Cipla up 1.64% were the major gainers on the Sensex.

On the other hand, ICICI Bank down 3.45%, Bajaj Auto down 3.12%, State Bank of India (SBI) down 3.09%, Reliance Communications down 2.50% and HDFC Bank down 1.97% were the major laggards on the index.

The BSE Mid-cap and Small-cap indices trimmed 0.26% and 0.04%, respectively.

Meanwhile, the Indian government has issued the formal notification for export of 5 lakh tonne of sugar. It has asked sugar mills to register themselves for seeking the Release Order for exports under Open General License (OGL). Mills have been allowed to export all forms of sweetener - raw, white and refined, but there will be no export subsidy.

Further, the exports under the OGL can be used for shipping output from the new crop year (beginning Oct 2010). A new factory set up in 2010-11 will not be eligible for the export entitlement. "The export quota of five lakh tonne has been pro-rated among sugar factories by taking into account their three years' average production," read a circular issued by the Agriculture and Food Ministry.

The OGL is a permit under which mills can export sugar without any restriction and conditions. These permits will be issued only to the tune of allowed export quantity, that is 5 lakh tone. However, the export under OGL would be over and above the export obligation of about 1.5 million tonne of sugar via the Advance License Scheme (ALS) and shipments of imported stocks stuck at ports.

Sugar output in the country declined sharply in 2008-09 season forcing the biggest consumer of sweetener and the second largest producer to turn to imports. Production remained down again in the last season on account of poor monsoon. However, this season, there was a substantial increase in sugarcane planting following high sugar prices in 2009 and production is expected to surge to 24.5 million tonne compared with domestic consumption of 23 million tonne. 

The main losers in the BSE sectoral space were Bankex down 2.48%, Realty down 1.12%, Consumer Durables (CD) down 0.59%, Public Sector Undertakings (PSU) down 0.58% and Auto down 0.55%.

On the other hand, Fast Moving Consumer Goods (FMCG) up 1.70%, Oil & Gas up 1.29%, Healthcare (HC) up 0.87%, Power up 0.10% and Information Technology (IT) up 0.05% were the only gainers in the BSE sectoral space.

The scam hit telecom sector is finally up for some overhaul. Kapil Sibal, the Union Minister of communications and Information Technology has announced an action plan for the next 100 days which will build small steps to release of the New Telecom Policy. Sibal said that the action plan will ensure that the common people continue to get services at the reasonable cost, the Industry remains robust and the government gets its share of revenue.

"We will hold consultations with key stakeholders to evolve a clear and transparent regime covering licensing, spectrum allocation, tariffs, linkage with roll out performance, spectrum sharing/trading, M&As, etc, in a technology agnostic environment, after due consideration of TRAI (Telecom Regulatory Authority of India) recommendations,' he added.

Sibal is planning to introduce a comprehensive telecom policy within the current calendar year which will override the New Telecom Policy (NTP) of 1999, among other things. 'Eleven years have passed since NTP '99 and many changes have taken place thereafter. Action will be initiated to formulate a comprehensive Telecom Policy 2011 including the recognition of telecom as infrastructure and as an essential service,' the minister said.

The two most critical issues facing the industry at this stage are the security related aspects of 3G services and the TRAI's recommendations on 2G spectrum. Private telecom operators who won the 3G spectrum last year in an auction, have not yet been granted approval for starting video calling services on their networks, pending installation of real time interception facilities on their networks owing to concerns raised by Intelligence agencies.

Another issue facing the industry is regulator's 2G recommendations which called for a much higher price for the excess 2G spectrum held by incumbent telecom operators. The prices for such spectrum was recommended to be computed form the prices discovered in the 3G auction which has been severely contended by telecom players. Some other recommendations have also been dubbed biased and regressive by some major players in the industry and no final call the matter has yet been taken. 

The S&P CNX Nifty touched a high and a low of 6181.05 and 6124.40, respectively.

The top gainers on the Nifty were Suzlon Energy up 2.86%,HCL Technologies up 2.11%, Hindustan Unilever (HUL) up 2.01%, Reliance Industries (RIL) up 1.93% and Reliance Infra up by 1.69%.

On the other hand, ICICI Bank down 3.28%, State Bank of India (SBI) down 3.21%, Reliance Communications down 3.17%, Bajaj Auto down 2.94% and HDFC Bank down by 2.41% were the top losers on the index.

All the Asian equity indices barring Taiwan Weighted finished in the positive terrain on Tuesday as investors confidence got boost from a rally on the Wall Street overnight. The major indices in the region viz Japanese Nikkei, Chinese Shanghai and Hong Kong's Hang Seng all ended the day's trade with a gain of 1-1.5%. Japanese Nikkei hit 30-week high in its first day of trading for the year on the back of strong global manufacturing data that has lifted equities worldwide and boosted the dollar against the yen. While Taiwan's index remained the lone loser in the region as investors took profits in tourism and banking shares after a recent rally, including top financial firm Cathay Financial.

Shanghai Composite surged 44.57 points or 1.59% to 2,852.65, Hang Seng jumped 232.43 points or 0.99% to 23,668.48, Jakarta Composite rose 32.54 points or 0.87% to 3,760.06, KLSE Composite increased 18.47 points or 1.20% to 1,551.89, Nikkei 225 soared 169.18 points or 1.65% to 10,398.10, Straits Times added 14.52 points or 0.45% to 3,250.29 and Seoul Composite was up by 15.06 points or 0.73% to 2,085.14.

On the flip side, Taiwan Weighted declined 28.11 point or 0.31% to 8,997.19.

European markets were trading in the green on Tuesday. France's CAC 40 gained 0.58%, Germany's DAX added 0.08% and Britain's FTSE 100 rose 1.93%.

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