Benchmarks trades flat with negative bias

Indian equity indices continue to trade flat hovering along the neutral line as high interest rates and inflation seem to be taking a toll on investors confidence, while globally, worries persist over the Eurozone and quantitative easing (QE2) in the US, which ends in June. Moreover, leads from markets across the globe also remained neutral as the European counterparts were trading in green zone and Asian equity indices exhibited mixed trend. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,450 and 18,200 levels, respectively. The market breadth on the BSE was in favor of advances in the ratio of 1592:1079 while 113 scrips remained unchanged.

Besides, on the macro front, Reserve Bank of India (RBI) may be pressurized to raise policy rates when it undertakes mid-quarter monetary policy review on June 16, 2011 after the recent data shows gain in food prices in mid-May 2011. Also, the annual monsoon rains have reportedly hit Kerala two days earlier than expected, boosting prospects for a harvest that could spur Asia's third-largest economy which in turn may help ease food inflation and boost rural income.

The BSE Sensex lost 22.21 points or 0.12% at 18,243.89. The index touched a high and a low of 18,380.17 and 18,199.52 respectively.

The BSE Mid-cap index was up 0.74%, while the Small-cap index was trading with gain of 0.62%.

On the BSE sectoral front, Health Care up 2.04%, Consumer Durables up 1.88%, Realty up 1.52%, Bankex up 0.61% and PSU up 0.49% were the top gainer. While, Auto down 0.70%, Oil & Gas down 0.61%, FMCG down 0.30%, Capital Goods down 0.28% and Metal down 0.14% were the only laggards in the BSE sectoral space.

The top gainers on the Sensex were Cipla up 3.46%, RCom up 3.41%, DLF up 2.66%, HDFC up 1.40% and Bajaj Auto up 1.19%. On the flip side M&M down 2.75%, Hindalco down 2.00%, ONGC down 1.41%, ITC down 1.11% and Tata Steel down 0.98% were the major losers on the BSE index.

Meanwhile, Prime Minister Dr. Manmohan Singh is quite optimistic on performance of Indian economy and has expressed confidence that his government will be able to achieve 8.5% growth during the current financial year. "As of now I have not seen any sign that we should change our view with regard to our ability to sustain a growth rate of 8.5%. I am confident that we will be able to sustain a growth rate of 8.5% this year," Dr. Manmohan Singh said.

PM is very positive despite the fact that Indian economy is facing some serious problems and in contrast to his confidence, the finance ministry is expected to revise its forecast for the present fiscal year due to high inflation, unstable crude oil price, slow investment and RBI's aggressive minatory policy stand. The Reserve Bank of India and other international bodies had already revised their forecast downward for India. RBI in its annual credit policy had revised its forecast for India's GDP growth to 8% from 8.6%. Similarly, IMF (International Monetary Fund) and World Bank had revised their forecast for Indian economy and expect that India's economy would grow around 8% and 9% respectively. 

With reference to country's agriculture situation and its impact on inflation, Dr. Singh said, "Whatever evidence we have, we expect a normal monsoon. And if the monsoon is normal, it will strengthen our ability to control food inflation." Normal monsoon will help to reduce food inflation by increasing agriculture productivity. Food inflation is serious concern for the Indian economy as it continues to remain more than 8% for last some time. The Wholesale price Index inflation was 8.66% in April, much higher than the central bank's comfort zone of 5-6%. 

On oil price scenario, PM Dr. Singh said, 'There are problems with regards to the burden of oil subsidies. They have to be tackled and all these issues will be claiming our attention in weeks and months to come'.

The S&P CNX Nifty lost 5.05 points or 0.09% at 5,471.05. The index touched high and low of 5,509.30 and 5,458.60 respectively.

The top gainers on the Nifty were Sun Pharma up 4.23%, Ranbaxy up 4.23%, Cipla up 3.18%, RCom up 2.76% and DLF up 2.60%.  While, M&M down 4.41%, Cairn down 2.52%, Hindalco down 2.10%, ONGC down 1.73% and SAIL down 1.64% were the major losers on the index.

On the Asian front, Hang Seng added 0.29%, Straits Times up 0.27%, and Taiwan Weighted gained 0.16%. On the flip side Shanghai Composite down by 0.14%, Jakarta Composite eased 0.43%, KLSE Composite slipped 0.38%, Nikkei 225 shed 0.18% and Seoul Composite declined 0.31%.

The European markets have opened a positive note as the France's CAC 40 added 0.19%, Germany's DAX rose 0.41%. Stock markets in London remained closed on account of Memorial Day holiday

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