Bourses trade range bound; inflationary concerns weigh

Local Bourses gyrating in a range bound fashion are trading lower on concerns related to European crisis and inflation. Indian equity markets tracking the negative cues of the world markets are trading weak after showcasing smart performance in the previous session. Negative global cues dampened the sentiment at Dalal Street from the beginning of the trade. As world stocks fell as Fitch Ratings lowered Greece's credit rating whereas Standard & Poor's said Italy's rating was at risk, deepening concern over Europe's sovereign debt crisis. Meanwhile, inflationary concerns also again started bothering investors as Mukherjee told at banking industry meeting on May 21 in Mumbai that "Inflation remains a major short-term challenge despite a series of monetary and fiscal measures taken to curb it". On the global front, the U.S. stocks fell on Friday on euro-zone debt worries. Meanwhile, Asian shares were trading down with Chinese shares leading the declines as lower as manufacturing data signaled a slowdown.

Backhome, on the BSE Sectoral front, only stocks from defensive-Fast Moving Consumer Goods (FMCG) sector kept up the spirit, while stocks from Bankex, Metal and Auto space plummeted the most. The 30 share barometer index--Sensex--plunged over 150 points, while the widely followed 50 scrip index--Nifty--too shed close to 1%. Even broader indices were slipping fast and thick into red as both the index were down by 0.50% each. The overall market breadth on the BSE was in the favour of declines which outpaced advances in the ratio of 1332:816, while 75 shares remained unchanged.

Stock wise action, Index heavyweight Reliance Industries (RIL) was trading lower by about a percent despite the company's fuel exports reportedly rising 25% in the first half of May 2011 from a month earlier as it shipped more gasoline to the US and demand for jet fuel grew. RIL exported at least 1 million metric tonnes of fuel products from its Jamnagar, Gujarat facility in the first half of May 2011 from 800,000 tonnes in the first half of April 2011. Also, India's largest steel maker by sales Tata Steel plunged 1.87% on reports stating that the company proposes to close part of its Scunthorpe plant, putting at risk 1,200 jobs. The plans would also see 300 jobs lost at its Teesside site. Meanwhile, Software services exporter Mahindra Satyam  skid over 3% after it posted a net loss for the fiscal fourth quarter, hurt by a one-time expense on settlement of litigation, sending its shares down more than 5 percent. The company recorded a loss of Rs 327 crore against a profit of Rs 59.60 crore in the corresponding quarter of the previous year, However, India's largest power equipment maker by sales Bharat Heavy Electricals (BHEL) and GAIL were trading in green ahead of Q4 results today.

The BSE Sensex is currently trading at 18,159.66, plunged 166.43 points or 0.91%. The index has touched a high and low of 18,269.06 and 18,106.99 respectively. There were just 3 stocks advancing against 27 declines on the index.

The broader indices too were bleeding badly; the BSE Mid cap and Small cap indices lost 0.67% and 0.59% respectively.

The major losers on the BSE Sectoral front were Bankex down by 1.99%, Metal down by 1.71%, Auto down by 1.49 %, PSU down by 0.85% and Realty down by 0.82%. Meanwhile, FMCG up by 0.93% was the lone gainer on the index.

ITC up by 2.34%, BHEL up by 0.55% and Infosys up by 0.01 % were the only gainers on the index, while ICICI bank down by 2.56%, Tata Motors down by 2.47%, Jaiprakash Associates down by 2.20%, HDFC Bank down by 2.12% and Reliance Infra down by 1.94% were major losers on the BSE Sensex.

Meanwhile, with economic growth of around 8% a year and gas gaining importance against carbon-heavy coal and oil, India could need twice as much gas as it consumes now by 2020. Analyst expect, the gas demand in India is estimated to twofold by the end of the decade that would be about 5 times more than imports of 8.86 million tonnes in the year to March 31, 2011 and liquefied natural gas (LNG) will have to supply the majority of that incremental demand.

India's LNG imports will increase in the next decade to fuel its rapidly expanding economy. Asia's 3rd largest economy is facing tough completion from Asian giants like China and Japan.

At present Indian economy is the world's 8th largest importer of LNG and imports are expected to increase by 5 times in coming decade. Indian government has to show some hurry to protect its supply of LNG as Indian buyers are facing competition from China and Japan. Rivalry for supplies is likely to be forceful as Japan could bump up LNG imports by 7 to 8 million tonnes from 70 million tonnes of LNG in 2010 to fire gas power plants to compensate for lost nuclear-power capacity. China's imports are moreover expected to rise around five-fold to 46 million tonnes by 2020 from just over 9 million tonnes of LNG in 2010.

Recent nuclear crisis in Japan have force Japanese buyers to increase the supply for the LNG and this all of sudden demand from Japan is expected to change the global LNG fundamentals and support prices for years, analyst said. The rapid increase in LNG demand from Japan will limit the ability of emerging markets such as India to source LNG, said Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch.

This much desirable additional supply is most likely to come from the top LNG exporters like Qatar, already supplies India LNG on long term contract and last year increased the supply, and Australia, where capacity is undergoing rapid expansion.

Experts have the opine that, with the increasing cost of Australian LNG Project, further delay in the long term supply deal might end up costing more to Indian buyers. The Australian LNG projects is expected to come online in 2015 or before have already reached at least preliminary long-term deals with buyers for their LNG.

The S&P CNX Nifty is currently trading at 5,434.15, down by 52.20 points or 0.95%. The index has touched a high and low of 5,456.70 and 5,417.00 respectively. There were just 7 stocks advancing against 43 declines on the index.

ITC up by 1.96%, Ranbaxy down by 1.62%, GAIL up by 0.66%, BHEL up by 0.33% and Bharti Airtel up by 0.17% were the only gainers on the Nifty.

The top losers of the index were Sesa Goa down by 4.09%, IDFC down by 2.88%, Tata Motors down by 2.43%, JP Associate down by 2.32% and ICICI Bank was down by 2.24%.

All the Asian counterparts were trading in the red; Shanghai Composite plunged 1.94%, Hang Seng dipped 1.73%, Jakarta Composite eased 1.77%, KLSE Composite declined 0.45%, Nikkei 225 shrugged off 1.62%, Straits Times knocked down 1.37%, Seoul Composite tanked off 2.13% and Taiwan Weighted lost 0.73%.

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