The local equity markets were trading lower in late morning session despite the good news that India's weekly food inflation decreased to 13.07% for the period ended January 29, 2011 compared to 17.05% in the previous week. Meanwhile, investor's sentiments have turned cautious as the Indian government will announce industrial output data for the month of December 2010 tomorrow, February 11, 2011. Industrial production growth slumped to 2.7% in November 2010 as against a revised 11.30% growth in October 2010, as growth in the manufacturing output slowed sharply. Most of the regional peers barring Shanghai composite were trading in red while US index futures are also showing down tick in the screen trade. Back home, all the sectors except Fast Moving Consumer Goods (FMCG) are trading in the red. Realty, Consumer Durables (CD), Metal and Oil & Gas segments were witnessing maximum selling pressure. The 30-scrip sensitive index-- Sensex--of the Bombay Stock Exchange (BSE) and the 50-scrip S&P CNX --Nifty-- of the National Stock Exchange (NSE) are still holding on to their psychological levels of 17,200 and 5,200 levels. The broader markets took hit from bears with BSE Mid-cap and Small-cap indices plunging by 1.81% and 2.33%, respectively. The market breadth on the BSE was also extremely weak; the losers thrashed the gainers in a ratio of 1987:582 while 70 shares remained unchanged.
The BSE Sensex dropped 195.35 points or 1.11% at 17,397.42. The index touched a high and a low of 17,603 and 17,636.88, respectively.
The BSE Mid-cap and Small-cap indices dipped 1.81% and 2.33%, respectively.
All the BSE sectoral spaces baring Fast Moving Consumer Goods (FMCG) up 0.45%, were trading in the red. Realty was down 5.02%, Consumer Durables (CD) down 2.85%, Metal down 1.61% and Oil & Gas down 1.46% were the major losers.
The top gainers on the Sensex were Reliance Infra up 7.45%, ITC up 2.63%, Hero Honda up 1.32%, JP Associates up 0.90% and Tata Motors up 0.82%.
Bharti Airtel down 4.38%, SBI down 4.18%, BHEL down 3.14%, Hindalco Industries down 2.32% and Sterlite Industries down 2.28% were the top losers on the index.
The Chamber of Indian Industries (CII) on Thursday urged the government to provide higher tax incentives on agricultural activities in the forthcoming General Budget in order to encourage greater private investment and adoption of new technologies in the sector.
"CII has recommended encouraging private sector participation through various tax measures in agriculture", the CII said in a statement. It added that the additional tax incentives should be given on spending on new technologies and inputs like better fertilizers and seeds etc that will improve the productivity in the long run and help improve overall harvest.
The industry body said that in order to give a boost to the farm sector, the government should incentivize best practices soil testing, residue analysis and diagnostics etc. This will not only boost productivity and help improve availability of farm goods but will also result in rise in farm income and hence support India's domestic consumption story. The demand comes at a time when inflation in India has been high for over a year and is looking increasingly resistant to traditional measures. The RBI had in its last policy review on January 25 hiked its short term lending rate by 25 basis points (bps) implementing seventh rate hike in the current financial year so far. However, with the food inflation so far giving thumbs down to both the strong Kharif harvest and rapid monetary tightening by the central bank, options with policy makers are fast shrinking.
The union government has seen a lot of criticism for ignoring the farm sector since the financial deregulation started in early 1990s. Capital formation in the farm sector, as a percentage of gross domestic product (GDP) came down significantly over the next couple of decades and has resulted in slowdown in productivity improvement or even stagnation in case of some crops. Giving greater incentives to the farm sector to push capital formation will improve productivity of farm operations and help improve overall output.
The S&P CNX Nifty declined 42.45 points or 0.81% to 5,211.10. The index touched a high and a low of 5,272.50 and 5,196.80, respectively.
The top gainers of the Nifty were Reliance Infra up 7.42%, SAIL up 3.53%, ITC up 2.60%, HCL Tech up 2.34% and ACC up 1.98%.
The top losers of the index were M&M down 3.66%, Tata Power down 2.90%, TCS down 2.83%, L&T down 2.61% and ITC down 2.35%.
All the regional peers barring Shanghai composite increased 0.66% were trading in the red; Nikkei 225 decreased 0.11%, Hang Seng shed 0.73%, Jakarta Composite trimmed 2.00%, KLSE Composite declined 1.01%, Straits Times tumbled 1.24% and Seoul Composite plunked 1.81%.
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