Benchmark indices plunge deep into red

The Benchmark equity indices have once again started receding in late afternoon session as European markets were trading in negative terrain FTSE and CAC-40 have shed more than one percent and the US Dow futures was down by 137 points in screen trade, as tension intensified in Libya, which again caused oil prices to surge. An earthquake in New Zealand that killed at least 65 people and a decision by Moody's Investors Service to cut the outlook for Japan's Aa2 bond rating to negative from stable also weigh, meanwhile all the other Asian markets settled in red with deep cuts. These global negative sentiments are affecting investors on the Dalal Street. Back home, In the BSE sectoral space Oil & Gas index is up 2.62%, RIL and Cairn India has contributed majorly to this sector. All the other sectoral indices on the BSE are in the red. Auto down 2.18%, Capital Goods (CG) down 2.11%, Bankex down 1.99%, Metal down 1.30% and Public Sector Undertakings (PSU) down 1.20% .The broader markets too saw selling pressure. The BSE Mid-cap and Small-cap indices declined 0.88% and 0.67%, respectively. The market breadth on the BSE was in favour of declines in the ratio of 1680:1037 while 105 scrips remained unchanged.

The BSE Sensex declined 157.22 points or 0.85% at 18,405.88. The index touched a high and a low of 18,457.90 and 18,248.49, respectively.

The BSE Mid-cap index declined 0.88%, while the Small-cap index was down by 0.67%. 

In BSE sectoral space Auto down 2.18%, Capital Goods (CG) down 2.11%, Bankex down 1.99%, Metal down 1.30% and Public Sector Undertakings (PSU) down 1.20% were the major losers; while Oil & Gas up 2.62% was the only gainer on the BSE sectoral space.

The top gainers on the Sensex was RIL up 3.61%, Sterlite Inds up 1.33%, RCom up 1.01% and Rel Infra 0.27%.

Hero Honda down 3.81%, JP Associates down 2.96%,Tata Motors down 2.88%, L&T down 2.71% and Jindal Steel down 2.70% were the top losers on the index.

The Prime Minister's Economic Advisory Council (PMEAC) has in its latest review of Indian economy projected a growth rate of 8.6% for 2010-11 in line with the advanced estimates released earlier by the central statistical organization (CSO) and 9% in 2011-12. It also advocated appropriate tightening in monetary and fiscal policies to protect the economy from inflation.

Both, in the Economic Outlook released in July 2010, and in the earlier review, the Council had taken a view that economic growth in 2011-12 will be about 9%. It had revisited the view on the components of GDP in July 2010, somewhat reducing the projected growth rate for industry and increasing it for services. Overall, the Council still believes that it was very much possible to achieve a growth rate of 9% in the next fiscal.

It has however slightly changed the projections for GDP components. The farm sector is now expected to grow by 3%, the industrial sector by 9.2% and the services sector by 10.3%. Per capita GDP at factor cost is projected to increase by 7.5% in 2011/12, as against 7.1% in 2010/11. "These adjustments reflect ongoing changes observed in the industrial and services sector, both in respect of the domestic economy and global prospects," said the PMEAC.

On the inflation front, the council expected that wholesale price index (WPI) based inflation which had reversed direction in December 2010 on account of an unexpected rise in vegetable prices, would begin to ease towards the end of January 2011. The headline rate on this count is expected to come down further during February and March 2011 to about 7%. Further declines can be expected during the first quarter of 2011-12 and but the PMEAC said that combination of appropriate policy management should be undertaken to create conditions conducive to returning the economy to the path of 5% inflation.

Further, in view of the forthcoming Budget, the Council made a case for withdrawing some of the tax incentives to the industry to put the economy back on track for fiscal consolidation. The Indian government had cut excise duty by 4% across the board following the global slowdown and only hiked it back by 2% in last Budget. The PMEAC has now said that given the strong prospects of growth, and need to cut deficit, the government should return to pre-crisis levels in terms of excise duty.

It observed that the buoyant revenues during FY11 so far could result in significant improvement in the overall income of government. However, as capital expenditures too have shown a sharp increase in the first half of the year, the fiscal deficit outcome for 2010-11 could be only marginally better than the budget estimates. However, there is a need to continue bringing down the deficit that will require withdrawing stimulus and early implementation of major tax reforms that are planned, that is, the GST and the DTC.

The S&P CNX Nifty tumbled 54.05 points or 0.98% to 5,464.55. The index touched a high and a low of 5519.45 and 5455.75, respectively. 

The top gainers of the Nifty were Cairn India up 4.30%, RIL up 3.70%, Reliance Capital up 1.04%, Sterlite Inds up 1.02% and RCom was up 1.01%.

The top losers of the index were Hero Honda down 4.34%, Suzlon down 3.59%, BPCL down 3.51%, Sun Pharma down 3.33% and Axis  Bank was down 3.59%.

All the Asian markets settled in the red with deep cuts. Shanghai Composite plunged 2.60%, Hang Seng dipped 2.11%, Jakarta Composite tripped 1.33%, KLSE Composite lost 0.80%, Nikkei 225 slid 1.78%, Straits Times declined 1.68%, Seoul Composite shed 1.76% and Taiwan Weighted slipped 1.87%.

European markets were trading in red. FTSE declined 1.35%, DAX tumbled 0.66% and CAC-40 shed 1.59%.

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