Markets under pressure as selling intensifies

Local equity markets are witnessing some intense selling pressure as investors are seemingly booking profits on the last trading day of the week. Positive global cues are also not helping the local markets much as it is gripped by its internal conundrum because of rising inflation and fears of more rate hike in policy rates in the near future. A sharp surge in crude oil prices amid fears of a supply disruption due to the tension in the Middle East is also hurting sentiment to an extent. The other key Asian markets are trading in the green and US index futures too are showing an up-tick in screen trade. Back home, all the sectoral indices on the BSE, with an exception of Metal are trading in the red. Oil & Gas was leading the pack of losers followed by information technology and technology counters. Realty and banking segment also languished in trade today. Similarly, broader markets too are trading in the red; the BSE Mid-cap and Small-cap indices lost 0.30% and 0.33%, respectively. Meanwhile, index heavyweight -- RIL which is down by three and half-a-percent since morning, is the main dragger which is not letting the markets move up. The stock is trading in the red after the reports came out that its gas production from the KG-D6 block may fall sharply in FY13. The market breadth on the BSE was in favour of declines in the ratio of 1539:1025 while 116 scrips remained unchanged.

The BSE Sensex tanked 193.93 points or 1.07% at 17,955.94. The index touched a high and a low of 18,259.61 and 17,908.35, respectively.

The BSE Mid-cap and Small-cap indices lost 0.30% and 0.33%, respectively.

All the sectoral indices on the BSE, with an exception of Metal up by 0.58% are trading in the red. Oil & Gas down 2.54%, Information Technology (IT) down 1.36%, TECk down 0.98%, Realty down 0.97% and Bankex down 0.76% were the major losers.

Meanwhile, in an indication that further deregulation of fuel prices was not on the government's cards, the Prime Minister's Economic Advisory Council (PMEAC) today said that the government would have to wait for inflationary pressure to calm down before taking any such step. The under-recoveries in the fuel have increased and deregulation of say diesel at this stage would mean a hike of over Rs 10 a litre, which is obviously not feasible either politically or economically.

Global crude prices have firmed up substantially off late due to the disturbances in middle-East and may continue to remain over $100 a barrel for some more time. The PMEAC said in this wake that it would be difficult to deregulate diesel at one go as it would require substantial increase in prices of the fuel and thereby will further push inflation. It rather proposed that diesel prices should be increased in a staggered manner over a period of time to minimize the overall impact on poor people.

The government had earlier deregulated the price of petrol last year to bring it in line with the global prices while hiked the administered prices of diesel, domestic LPG and kerosene. The move was aimed at cutting the under-recoveries in the oil sector which have been threatening to reach unsustainable levels over last few years. While diesel prices were then hiked by Rs 2, its full deregulation was postponed in wake of high inflation.

Although government has been saying that once inflation comes down it would deregulate diesel prices as well, it has been out of luck on the matter so far. Neither has the inflation come down really over the last one year or so, nor did the global crude prices have softened enough to allow deregulation. If anything, the recent surge in crude prices have widened the gap between retail prices of fuels and costs and thus making complete deregulation nearly impossible for now.

The top gainers on the Sensex were Tata Steel up 0.63%, Bajaj Auto up 0.58%, Maruti Suzuki up 0.56%, Hero Honda up 0.32% and Bharti Airtel up 0.22%.

On the flip side, RIL down 3.46%, BHEL down 2.35%, Cipla down 2.07%, Wipro down 1.71% and HDFC down 1.69% were the major losers on the index.

In a move aimed at allowing more autonomy to the public sector companies (PSUs), the government has on Thursday eased the norms for according the Maharatna status to the Central public sector enterprises (CPSEs). A Maharatna status provides much greater financial autonomy and hence cuts the lag in decision making.

According to the original norms, in order to be granted the status of Maharatna, a PSU must be having Navratna status and should be listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations. Further, it should have an average annual turnover of more than Rs.25,000 crore, an average annual net worth of more than Rs.15,000 crore and an average annual net profit after tax of more than Rs.5,000 crore during the last 3 years of operations. The last part of the norms is which has been relaxed and now a company with average net income of Rs.20,000 crore in the last three years will also qualify for Maharatna status.

"The criteria for grant of the Maharatna status to CPSEs have been re-examined in the context of representations received from various administrative ministries/departments and the need to suitably empower mega Navratna CPSEs so that they can effectively face the challenges of competition, both domestic and foreign and further expand their operations," said a release by the government on Thursday.

The Maharatna management has greater autonomy compared with their Navratna counterparts in a number of spheres. The Boards of Maharatna CPSEs has powers to make equity investment to establish financial joint ventures and wholly owned subsidiaries and undertake mergers and acquisitions, in India as well as abroad, subject to a ceiling of 15% of the net worth of the concerned CPSE in one project and limited to an absolute ceiling of Rs.5,000 crore. The similar ceiling in case of Navratna PSUs is Rs.1000 crore. Further, Maharatna management has powers to create below Board level posts up to E-9 level.

The Indian government had introduced the Navratna scheme in 1977 to identify CPSUs that had the potential to become global giants. The Boards of Navratna CPSUs were given a number of powers in the areas of capital expenditure, investment in joint ventures and mergers and acquisitions etc. However, over time, some of the Navratna companies have grown very big and have considerably larger operations than their peers.  As a result, the government felt that the CPSUs at the higher end of the Navratna, with large size and global operations, and potential to become Indian Multinational Companies (MNCs), should be recognized as a separate class, i.e. Maharatna.  At present, four CPSEs including ONGC, Indian Oil Corp, SAIL and NTPC have been given the Maharatna status. 

The S&P CNX Nifty sank 52.35 points or 0.96% at 5394.30. The index touched high of 5483.05 and a low of 5383.35, respectively.

The top gainers on the Nifty were SAIL up 1.86%, Sesa Goa up 1.61%, Maruti Suzuki up 1.01%, Bajaj Auto up 0.95% and Tata Steel up 0.94%.

On the other hand, RIL down 3.44%, BHEL down 2.70%, Dr Reddy's down 2.08%, Cipla down 2.03% and HCL Tech down 1.87% were the major losers on the index.

Rest of the Asian markets are trading in the green at this point of time. Shanghai Composite added 0.51%, Hang Seng soared 0.37%, Jakarta Composite advanced 0.49%, KLSE Composite rose 0.15%, Seoul Composite gained 1.13%, Nikkei 225 surged 2.72%, Straits Times advanced 0.13% and Taiwan Weighted jumped 1.35%.

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