Markets lose some more ground; food inflation data eyed

Indian equity markets today are showing lackluster trade. After the huge cut witnessed yesterday the market seems to be in no mood of recovery and are trading uncertain. The volatility in the markets is also because of the weekly food and fuel inflation data which is due around noon, while investors continue to remain cautious ahead of the RBI's mid quarterly review, fearing a rate hike and so are vouching for much safer instrument to trade in. The key equity indices are lagging behind and are struggling to achieve their physiological level of 20,300 Sensex and 6100 mark Nifty respectively. The domestic markets seem to be performing in line with the regional peers- directionless, as the Asian counterparts are trading on mixed note since morning. The US future indices too are mostly trading in red. Back home, on the sectoral front, keeping up the momentum are stocks from TECk, Power, Consumer Durables and Information Technology space, while, stocks from Capital Goods, Auto, Public Sector Undertaking, Bankex and Realty counters are down and out. The broader indices too have surrendered to the selling pressure as both Midcap index and Small cap index have bowed down by 0.39% and 0.05% respectively. The overall market breadth has now inched down in the favour of decline in the ratio of 1375:967 to the advances, while, 91 shares remained unchanged.

The stocks that are buzzing include; Tata Steel, Sterlite Industries and Hindalco, Tata Steel spurted after New Millennium Capital Corp said it received environmental approval for its iron ore project with the Indian steelmaker and the joint venture partners expect to begin production by the second quarter of 2012.

The BSE Sensex index is currently trading at 20,224.97, down by 76.13 points or 0.38%. There were 13 stocks advancing against 17 declines on the index.

The broader indices have surrendered to selling pressure; the BSE Mid cap was down 0.52 % while Small cap was up by 0.18 %.

The top gaining sectoral indices on the BSE were, TECk up by 0.20%, Information Technology up by 0.15%, Power up by 0.14%, Consumer Durables was up by 0.04% While, Capital Goods down by 1.01%,Realty down by 0.88%,Auto down by 0.80%,Public Sector Undertaking and Bankex both were down by 0.72%.

The top gainers on the Sensex were Reliance Infra up by 1.15%,HDFC Bank up by 0.93%,Bharti Airtel up by 0.86%,Reliance Communication up by 0.82% and Tata Power up by 0.61%.

Tata Steel up by 0.79%, Tata Power up by 0.75%, HDFC Bank up by 0.59%, Bharti Airtel up by 0.49% and Hindalco was up by 0.47%.

Bajaj Auto down by 2.92%, Sterlite Industries down by 2.78%, ONGC down by 2.52%, SBI down by 2.27%, and Cipla down by 2.07% were the top losers on the index.

SARIAH 50 which opened at 1,251.53 is currently trading down by 5.49 points or 0.44% at 1,240.89 from its previous close of 1,246.38

Meanwhile, despite the government having lowered the import duty on natural rubber to 8.5% from 20% earlier, the tyre companies are not seeing much relief and continue to bear the heat of surging prices of the crucial raw material. Natural rubber prices have touched record highs and tyre makers are buying the commodity at more than double the cost they did about a year ago.

In recent days, tyre makers have bought natural rubber at levels of Rs 210-212 per kg as sellers have been raised prices following a similar increase in the international markets. In past, tyre makers have been postponing the purchase hoping the prices will come down. Now however, as the prices remain sky high, tyre companies are struggling to secure the required supplies. The situation has been worsened by many suppliers hoarding output hoping for a further rise in prices.

The industry had been demanding a cut in import duty on rubber and after much delay the government did lowered the duty to 8.5% from 20% recently. However, tyre industry has failed to take much benefit. The industry contends that cut has come too late and since the global prices now are much higher than local prices, even a lower import duty may not be of much help at this stage.

The S&P CNX Nifty is currently trading at 6,059.80, down by 20.00 points or 0.33%. There were 22 stocks advancing against 28 declines on the index.

The top gainers of the Nifty were HCL Technology up by 1.40%, Sun Pharma up by 1.20%, GAIL  and Reliance Infra both up by 1.16%, and Bharti Airtel up by 1.10%.

The top losers of the index were Sterlite Industries down by 2.90%, Bajaj Auto down by 2.62%,ONGC down by 2.59%, Ambuja Cement down by 2.56% and Cipla down by 2.52%.

The government has deferred a decision on the urea price decontrol till the start of next fiscal. This development came after the Group of Ministers (GoM), including Union agriculture minister Sharad Pawar, oil minister Murli Deora and planning commission deputy chairman Montek Singh Ahluwalia met and probably decided that inflation was too high for raising urea prices that would be necessary to implement even a partial deregulation of the commodity.

In the meeting of the GoM, a committee of secretaries was asked to look into the matter. The urea policy has been kept unchanged as of now, said fertilizer secretary S Behuria after the meeting of the GoM. 'The department would form a committee to look into nutrient-based subsidy (NBS) for urea and on the recommendations made by the committee, the GoM will decide on the policy,' he added.

The government had introduced the NBS scheme in April 2010 and decontrolled the pricing of potassic and phosphatic fertilizers. Under the NBS, fertilizer companies are given subsidy according to actual nutrient content of a fertilizer and not at a volume based flat rate as was the case earlier. But the government had then kept its control on price and movement of urea, which constitutes half of India's total fertilizer consumption.

The industry was expecting at least a hike of 20% or so in retail prices of urea and 10% for other fertilizers. The industry has been saying that the full benefit of the NBS policy would accrue only when urea was also brought under the scheme. Although non-urea fertilizers have been decontrolled since this fiscal, it is not possible for companies to raise their prices much without a similar movement in urea prices, as that would simply push more consumption of urea and reduce demand of non-urea fertilizers.

Asian market were trading on a mixed note; Hang Seng was up by 0.04 %, Nikkei 225 was up by 1.27%, Straits Times was up 0.61% and Taiwan Weighted was up by 0.18%.

On the flip side, Shanghai Composite was down by 0.23%, Jakarta Composite was down by 0.79%, KLSE Composite was down by 0.02% and Seoul Composite was down by 0.43%.

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