Indian benchmarks' pullback rally gets a halt after five successive days

Disguised bears once again spoiled the sanguine mood of the domestic markets bringing down the five day pullback run to an emergency halt as profit booking remained the order of the day's trade. All heavyweight stocks that saw hefty bottom fishing in the previous sessions got pounded by large margins as investors squared off positions on speculations over the widening of the lingering 2G corruption investigation. The shares of Anil Dhirubhai Ambani Group (ADAG) companies proved to be a huge dampener for the bourses as they dragged the benchmarks by quite a margin after plunging back to their multi-month lows on fears of few ADAG companies' alleged involvement in the scam. The weak opening of European markets too weighed on the local sentiments. The CNX Nifty witnessed intense resistance around the crucial 5600 levels and the index drifted by around one hundred fifty points from there on and settled around 5,450 level while the Bombay Stock Exchange's Sensitive Index, or Sensex plummeted around three hundred points to end a touch above the psychological 18,200 mark. The broader markets too got decimated to a large extent as the BSE's midcap index shaved off 1.98% and smallcap index sulked 2.35% in Friday's session, underperforming their larger peers by quite a margin. The high beta Realty counter languished at the bottom of the BSE sectoral space after being slaughtered by 4.04% gains as all the thirteen sectoral indices finished in the red with majors like Unitech sinking 6.94% followed by DLF which  off-loaded 2.04%. The rate-sensitive Auto pocket too remained on the seller's radar today as it shrank 2.39% after stocks like Ashok Leyland and Tata Motors witnessed huge sell-off and went home with 4.40% and 3.91% losses respectively. Besides, index bellwethers like Reliance Industries and ONGC took brutal cuts of 1.69% and 3.40% respectively. Shares of PSU Banks like Bank of Maharashtra (BoM), Dena Bank and Vijaya Bank surged on the Bombay Stock Exchange boosted by the government's decision to infuse Rs 352 crore, Rs  539 crore and Rs 368 crore capital in them respectively by way of preferential allotment of equity shares. However only Bank of Maharashtra managed to return home with gains of 4.85%

On the global front, with the exception of the Chinese Shanghai Composite, all Asian benchmarks closed on a sanguine note with most of the indices snapping one of the best weeks in last two months. The Hong Kong and the Indonesian benchmarks remained the top gainers in the space after surging close to two percent each. The European counterparts on the other hand were trading with a negative bias as investors resorted to hefty profit booking. On the other hand, the screen trading for US index futures too indicated that the Dow could open on a pessimistic note.

Earlier on the Dalal Street, the indices got off to an optimistic start as the investors seemed to have carried Thursday's momentum in today's session. The investors traded with conviction in the initial hours tracking the positive leads from the Asian markets and the overnight gains on the Wall Street which bounced back on the back of a strong manufacturing report, overshadowing the bigger than expected rise in jobless claims. However, the bourses witnessed intense selling pressure in a volatile afternoon session after surging to three-week highs in initial trade. The frontline indices treaded on a southbound journey thereafter as investors gradually started taking profits off the table which led the benchmarks to snap Friday's session around low point of the day. The indices eventually failed to extend their winning momentum for the sixth successive day of trade as local investors lost some conviction five working days ahead of the Budget 2011. Volumes for markets were higher than Thursday at over Rs 2.08 lakh crore while the turnover for NSE F&O segment too remained higher at over Rs 1.91 lakh crore on Friday. The market breadth on the BSE was abysmal as there were 773 shares on the gaining side against 2085 shares on the losing side while 122 shares remained unchanged.

Finally, the BSE Sensex plunged 295.30 points or 1.60% to settle at 18,211.52 while the S&P CNX Nifty plummeted 87.50 points or 1.58% to end at 5458.95.

The BSE Sensex touched a high and a low of 18,690.97 and 18,159.82, respectively.

RCom down 6.80%, Rel Infra down 5.60%, Jaiprakash Associates down 5.54%, Tata Motors down 3.91% and ONGC down 3.40% were the major losers on the Sensex.

On the other hand, HUL up 1.99%, Jindal Steel up 1.55%, Cipla up 0.57%, BHEL up 0.56% and Wipro up 0.27% were the only gainers on the index.

The BSE Mid-cap and Small-cap indices dipped 1.98% and 2.35%, respectively.

Meanwhile, as the 'Budget Day' comes near, India's small and medium enterprises (SME) have heavy expectations from the finance ministry. The sector contends that while Indian economy has been growing strongly over last several years, the result on the employment front as SMEs have been largely neglected.

The Indian Industries Association (IIA) in this wake expects that the government will take the forthcoming Budget as an opportunity to correct this mistake and will announce greater incentives for SMEs which form the core of Indian economy. Not only SMEs generate greater employment for every rupee of incentive extended to them, but they also serve as an important medium of social inclusion, one of the top agenda items of ruling coalition.

The industry body contends that small businesses have been increasingly cornered in an increasingly globalised atmosphere. This has impacted the employment situation in the country and government should therefore provide suitable tax based incentives to SMEs to ensure they remain cost efficient when compared with large industries. 

The SMEs also want suitable changes made in the limited liability partnership (LLP) model so as to make it more adaptable for the small businesses. In fact, the LLP was brought out with objective of empowering small businesses. However, nothing much happened because of number of clauses of LLP remain difficult for SMEs to be met. As such, the industry is expecting government to take steps to tweak the LLP rules so as to make it more apt for small businesses.

Another demand of the industry is subsidized funding. While small businesses have been making increasing contribution to nation's growth and exchequer, the increasing interest rate regime in the country at present has been making things difficult for SMEs.  As such, the sector wants the government to provide subsidized loans for working capital needs as well as export credit. It expects the government to give suitable advice to the central bank in this context in the forthcoming Budget.

All the BSE sectoral spaces were trading in the red with deep cuts. Realty down 4.04%, Auto down 2.39%, Oil & Gas down 2.09%, Capital Goods (CG) down 1.97% and Consumer Durables (CD) down 1.84% were the major losers.

India and Malaysia have signed the Comprehensive Economic Cooperation Agreement (CECA) at Putrajaya, Malaysia on Friday, paving the way for a free flow of trade between the two countries. The treaty was signed by the India's Commerce and Industry Minister Anand Sharma and his Malaysian counterpart Mustapa Mohamed, in the presence of the Indonesian Prime Minister Najib Razak.

Speaking after signing of the treaty, Sharma said that based on India's experience with Korea, having signed a similar agreement with that country in 2009, the trade between Malaysia and India will also grow sharply in the current year. Sharma added that bilateral trade between the two countries had risen by 40% within a year despite a difficult economic backdrop.

'We (India and Malaysia) already have concrete trade relations. So, with this CECA signing and implementation, I can say with optimism that 2011 will be much better than 2010,' he said. The two countries have set a bilateral trade target of $15 billion by 2015, with the agreement scheduled to be implemented from July 1.

The decision to explore the feasibility of comprehensive economic co-operation between India and Malaysia was made during the latter's former Prime Minister Tun Abdullah Badawi's visit to India in December 2004. The subsequent meeting between the industry ministers of two countries agreed to establish a Joint Study Group which gave its report in 2007 on the possibility of the CECA. However, both the countries first wanted the broader trade agreement between India and the 10-member ASEAN, which includes Malaysia as well.

India has been signing a number of trade pacts off-late in line with its look East policy and lack of concrete timeline for a new multilateral deal. The agreement with Malaysia was India's third such treaty with an ASEAN member, having signed separately a free trade pact with the bloc. Before this, India has signed agreements with Indonesia and Singapore. It is also negotiating a services treaty with the ASEAN and has recently signed a pact with Japan while the CECA with the European Union are also almost in the final stages of negotiations. 

The S&P CNX Nifty touched a high and a low of 5599.25 and 5441.95, respectively.

The top gainers on the Nifty were HUL up 2.21%, Jindal Steel up 1.63%, BHEL up 0.96%, Cipla up 0.69% and Dr Reddy's up 0.61%.

Rel Capital down 6.83%, RCom down 6.65%, Suzlon down 5.75%, RPower down 5.30% and Jaiprakash Associates down 5.21% were the major losers on the index.

European markets were trading in the red on Friday. France's CAC 40 lost 0.31%, Germany's DAX shed 0.27% and Britain's FTSE 100 dipped 0.47%.

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