Local stock markets continue to show dismal trends in the Monday afternoon session amid a slew of feeble leads. But investors are approaching the situation cautiously ahead of tomorrow's RBI policy meet. The indices have taken around a half a percent cut since interest rate sensitive Banking stocks have taken the maximum beating while the Auto counter too was not spared either. Meanwhile reports of India's manufacturing growing in April at the fastest pace in five months and reflecting the continued strength in business conditions despite RBI's eight time hike in interest rates since the start of 2010, failed to enthuse the markets. Moreover, the government said in a statement on Monday that India's exports surged to record high growth of 37.6% while imports rose by 22% in the fiscal year 2010/11 and the trade deficit was at $104.8 billion, marginally higher than the provisional forecast of $104.4 billion. Apart from the quarterly earnings announcements, the cement dispatches and auto sales numbers are keeping the markets buzzing this afternoon. On the global front, cues remained sanguine as some of the trading Asian markets closed with smart gains while the European markets too opened on a strong note. The wilt in crude prices also went largely unnoticed as local investors indulged only in stock specific activities. PSU oil marketing companies like HPCL, BPCL and IOC spurted in the range of 1% to 3.50% after reports that the companies will hike prices this month after the conclusion of state elections.
Meanwhile, the broader markets too are trading without any enthusiasm as the midcap index has eased 0.54% while the smallcap index traded with 0.49% losses. The market breadth on the BSE was in favor of declines in the ratio of 1030:1511 while 112 scrips remained unchanged.
The BSE Sensex fell by 74.47 points or 0.39% at 19,061.49. The index touched a high and a low of 19,253.87 and 19,038.10 respectively.
The BSE Mid-cap index fell by 0.54% and Small-cap index was down 0.49%.
On the BSE sectoral front, Realty up 1.36%, Healthcare up 0.98%, FMCG up 0.48%, Teck up 0.23% and Power up 0.17% were the major gainers.
On the other hand, Bankex down 1.67%, Metal down 0.74%, PSU down 0.73%, Auto down 0.65% and Consumer Durables down 0.42% were the major laggards in the space.
The top gainers on the Sensex were Tata Power up 2.26%, DLF up 2.24%, Cipla up 1.51%, JP Associates up 1.19% and Bharti Airtel up 0.73%.
On the flip side only SBI down 3.08%, Maruti Suzuki down 1.65%, Sterlite down 1.27%, Jindal Steel down 1.10% and M&M down 0.90% were the major losers on the index.
Meanwhile, the Indian Cabinet is likely to take up a proposal of the commerce and industry ministry to open up multi-brand retail sector for foreign investors soon. The issue of allowing foreign direct investment (FDI) in retail has been debated a lot in recent days given its positive implications for retail infrastructure in the country and potential negative impact on small shopkeepers.
The Department of Industrial Policy and Promotion (DIPP), nodal agency dealing with FDI related issues, has circulated a Cabinet note which advocates opening up of multi-brand retail for FDI. But the note also talks about restrictions including a minimum capital investment of $100 million, of which 50% would have to be invested in the back-end infrastructure like cold storage or soil testing labs etc.
While the Indian government presently allows FDI of 49% in the single brand retail, foreign players are kept away from the multi-brand retail space as it worries that there could be significant negative implications of the move on small players. How the presence of multinationals would impact the road side small time stores is still to be envisaged. The government is also worried that large retailers may drive small players out of the business by following illegitimate business practices.
However, with the ongoing high food inflation, the argument for allowing FDI in retail has strengthened. Many economists feel that by opening the doors for the multinational players, a substantial amount of investment in the backend infrastructure like cold storage chains, transportation links etc can be ensured. This will help improve the efficiency of supply chains, and hence bring down prices. Market prices for many food goods are much higher than farm gate prices bringing out of inefficiencies of the backend infrastructure in the farm sector.
The government in this wake is now deliberating on introducing FDI in multi-brand retail in a phased manner. To begin with, it may allow foreign investors only in big cities which have a population of over 1 million. There are at least 36 such cities in India and this would provide a good platform for global majors. The government on its part can see how much benefit of the move is generated in terms of improvement in infrastructure and then can take a call on further liberating the FDI.
The S&P CNX Nifty slipped 30.25 points or 0.53% at 5,719.25. The index touched high and low of 5,775.25 and 5,714.35, respectively.
The top gainers on the Nifty were Tata Power up 2.27%, DLF up 2.13%, BPCL up 2.05%, Cairn up 1.93% and Dr Reddy's up 1.72%.
On the other hand, Kotak Bank down 3.51%, PNB down 3.38%, SBI down 1.3.37%, Bajaj Auto down 2.61% and Ambuja Cement down 2.59% were the major losers on the index.
On the Asian front, Jakarta Composite climbed 0.45%, Nikkei 225 jumped 1.57% and Seoul Composite surged 1.67%.
Stock markets in China, Hong Kong, Malaysia, Singapore and Taiwan remained shut on account of May Day and Labor day holidays.
The European markets have opened a positive note as the France's CAC 40 climbed 0.60%, Germany's DAX garnered 0.75%
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