Weakness continues on D-street; broader indices bleed

Indian Equity markets have further slid lower in the mid morning session as panic stricken retail investors and foreign investors have continued their selling spree. The markets which are plagued with various concerns like high inflation, global oil price rise and ongoing corruption scam at this point of time are reacting to any type of rumour in a volatile manner indicating extreme nervousness however also pointing to some sort of bottom formation. The local bourses weighed down by the fall of key heavy weights and tracking weak regional peers are losing strength stem by stem as the benchmark index BSE--Sensex-- has tanked 114 points  while the widely followed 50 share index--Nifty--on NSE too has lost 22 points. On the global front, Shares in Asia's markets surrendered to profit taking, after the head of the Federal Reserve signaled the US economic recovery was still weak and warned against sharp spending cuts. Though, the US future indices were showcasing mixed trend in screen trade. Back home on the BSE Sectoral front, only stocks from Fast Moving Consumer Goods and Power sectors were riding high while stocks from Realty, TECk, Consumer Durables counters were tailing the nervousness of the markets. Bucking the trend at this point of time, are shares from ADAG group firms, Reliance Infrastructure and Reliance Communications which have rebounded even as the broader market continued to bleed on concerns of likely fall in earnings and a slowdown in economic growth after the previous session's sharp setback. The overall market breadth on BSE is in the favour of declines which lashed advances in the ratio of 1673:681, while, 69 shares remained unchanged.

The BSE Sensex is currently trading at 17,478.42, down by 114.35 points or 0.65%. The index touched a high of 17,636.88 and a low of 17,461.12 respectively. There were 13 stocks advancing against 17 declines on the index.

The broader indices continue to underperform the benchmarks; the BSE Mid cap and Small cap indices tumbled by 1.10% and 1.41% respectively.

Fast Moving Consumer Goods up by 0.59% and Power up by 0.52% were the only gaining sector on the BSE,

On the other hand, Realty down by 2.81%, TECk down by 1.66%, Consumer Durable down by 1.56%, Metal down by 1.40 %, and IT down by 0.99% was the major losers on the index.

The top gainers on the BSE were, Reliance Infra up by 8.66%, RCom up by 4.59%, ITC up by 2.11%, Hero Honda up by 1.87% and JP Associates up by 1.59%.

Bharti Airtel down by 5.30%, SBI down by 3.59%, Cipla down by 3.42%, Hindalco Inds down by 2.46% and Tata Steel down by 2.11% were the top losers on the index.

Meanwhile, India is likely to see a strong growth in the current financial year, but the same will moderate in the next fiscal due to factors like higher base effect and further monetary policy tightening by the central bank to counter an increasingly sticky looking inflation, expects the global financial services conglomerate HSBC.

The HSBC has pegged growth in India's gross domestic product (GDP) in the current fiscal year at 9.1%, which is quite on the higher side when compared with the market expectations. Even the central statistical organization (CSO) has pegged the growth in FY11 at 8.6%, despite the first half figure of 8.9%. However, for the next fiscal year, the SBC expects the growth to moderate to 8.1%.

'In FY 2012, we expect growth to slow down to 8.1%, mainly on account of the base effect coming into play and further tightening of monetary policy (by the Reserve Bank of India) to combat inflation,' said the HSBC Chief Economist for India and ASEAN Global Research, Leif Eskesen. The central bank of the country is likely to further hike its key rates by up to 100 basis points (bps) in the calendar year 2011, having already hiked the same by 25 bps in January policy review, he added.

On the inflation front, the HSBC expects headline figure to be around 7% by the end of the fiscal year on March 31, the same level where the central bank pegged inflation in its last monetary policy review. The RBI had earlier put the fiscal-end inflation at 5.5% but revised the same upwards to 7% on January 25 following a sharp reversal in headline inflation, mainly due to surge in food inflation the month of December.

Most economists expect that RBI was still somewhat behind the curve in tackling inflation and was continuing to balance growth-inflation trade-off. However, as the inflation problem becomes increasingly sticky, the central bank will have to become more aggressive in order to anchor inflation expectations and save the long term Indian growth story. The HSBC expect that the RBI would hike rates by at least 100 bps in 2011 to check inflation and anchor inflation expectations.

The S&P CNX Nifty is currently trading at 5,231.45, down by 22.10 points or 0.42%.The index has touched a high of 5,272.50 and 5,225.75. There were 28 stocks advancing against 22 declines on the index.

The top gainers of the Nifty were Reliance Infra up by 9.31%, Reliance Communication up by 4.44%,  SAIL up by 3.89%, Ranbaxy up by 2.53% and Reliance Capital up by 2.35%.

The top losers of the index were Bharti Airtel down by 5.22%, Cipla down by 3.47%, SBI down by 3.34%, Tata Steel down by 2.47% and Sesa Goa down by 2.30%.

All the Asian markets barring Shanghai composite were trading in the red; Nikkei 225 was down by 0.08%, Hang Seng was down by 0.73%, Jakarta Composite down by 2.00%, KLSE Composite was down by 1.01%, Straits Times was down  by 0.86% and Seoul Composite was down by 1.07%.

On the flip side, Shanghai Composite was up by 0.70%.

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