Market continues to trade weak; Nifty below 5400 levels

Indian equity indices continue to trade weak under heavy selling pressure hovering around the lowest point of the day as market participants fear that inflationary pressure and hike in interest rates would lead to higher borrowing costs, thereby hurting corporate earnings. Investor sentiments were also spoiled on the back of renewed concerns over the euro zone debt crisis as Fitch Ratings cut Greece's credit rating and Standard & Poor's said Italy's rating was at risk, deepening concern over Europe's sovereign debt crisis. Majority of Asian markets traded with nearly two percent cut while the European counterparts too joined the rally exhibiting similar trends by trading nearly one and half percent cut. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,400 and 18,000 levels, respectively after hitting 9-week low. The Sensex outperformed the Mid-cap and the Small-cap indices on the downside. The market breadth on the BSE was in favor of declines in the ratio of 717:1940 while 100 scrips remained unchanged.

The BSE Sensex was down 343.36 points or 1.87% at 17,982.73. The index touched a high and a low of 18,269.06 and 17,971.02 respectively.

The BSE Mid-cap index was down 1.40%, while the Small-cap index was trading with loss of 1.46%.

On the BSE sectoral front, FMCG up 0.41% and Consumer Durables up 0.13% were the only gainers. While, Realty down 3.17%, Power down 2.90%, Capital Goods down 2.86%, Bankex down 2.75% and Metal down 2.48% were the major laggards in the BSE sectoral space.

The top gainer on the Sensex was ITC up 2.13%. On the flip side BHEL down 6.67%, Tata Motors down 3.63%, Reliance Infra down 3.60%, ICICI Bank down 3.48% and ONGC down 3.21% were the major losers on the BSE index.

Meanwhile, the new National Manufacturing Policy (NMP) is expected to get some headway on June 2, with the committee headed by the Prime Minister Manmohan Singh taking a final call on the proposed draft of NMP. The new policy is aimed to increase the share of manufacturing sector in India's GDP from 16% to 25% by 2022, with the idea of shifting the large proposition of work force from agriculture to manufacturing. Manufacturing contributes over 80% in overall industrial production. Under the upcoming policy, the government has proposed to set up integrated greenfield mega-investment zones to attract global investment and latest technologies. There have been many confrontations among the various ministries since a discussion paper on the NMP was floated by the department of industrial planning and promotion of the commerce ministry and major differences emerged among the ministries on the proposed draft. The Ministry of Labour and Environment had raised their concerns over the labour and environment issues, as the Ministry of Commerce and Industry had suggested an exemption from labour laws for easier hiring and firing of workers. In the proposal, the Contract Labour Abolition Act would also not be applicable and workers' rights to join unions would also be curtailed. Instead, an alternative safety net would be provided to workers in these zones.

As per the discussion paper, which was issued by DIPP around last year, "The situation of the manufacturing sector in India is a cause of concern, especially when seen in the context of transformation registered in this sector by other Asian countries in similar stages of development. While the dramatic shifts in global manufacturing bases over the past four decades have brought these economies in focus, India has not been able to fully leverage the opportunities provided by the dynamics of the world economy".

The DIPP suggests making National Manufacturing and Investment Zones (NMIZ). These NIMZ are expected to come up across the country and their sizes would be double that of Special Economic Zone (SEZs). The NMIZ are planned to be specifically drawn for the establishment of manufacturing facilities for domestic and export-led production, along with the associated services and infrastructure. The processing area may include one or more SEZs including industrial parks, warehousing zones and export oriented units. The land would be acquired by the state governments. 

Anxiety has been raised by many ministries on NMIZ, and hence the industry minister Anand Sharma said in the Confederation of Indian Industry's India-Africa Forum Summit "the PM had intervened in the matter; the meeting will take place on June 2. Once the PM gives his nod, the policy would then be formally approved by the Cabinet Committee on Economic Affairs".

Sharma added, "it was imperative for India to have a new policy to make India a manufacturing hub. The new policy is also expected to attract huge foreign investments, besides encouraging large-scale industrial activity. Foreign investment inflows have seen a decline in 2010-2011, compared to 2009-10. Besides, this would result in job creation which remains a primary concern for the government".

To address differences over the proposed NMIZ policy, Prime Minister Manmohan Singh is scheduled to hold a meeting with at least six ministers, including commerce and industry minister Anand Sharma, finance minister Pranab Mukherjee, labour and employment minister Mallikarjuna Kharge, environment minister Jairam Ramesh, corporate affairs minister Murli Deora, HRD and telecom minister Kapil Sibal and planning commission deputy chairman Montek Singh Ahluwalia. The planned meeting is also expected to consider to formulae the National Manufacturing Competitiveness Council and Planning commission.

The S&P CNX Nifty lost 107.35 points or 1.96% at 5,379.00. The index touched high and low of 5,456.70 and 5,373.00 respectively.

The top gainers on the Nifty were ITC up 1.47% and BPCL up 0.67%.  While, BHEL down 6.88%, SesaGoa down 4.35%, IDFC down 4.04%, Reliance Infra down 3.88% and Tata Motors down 3.64% were the major losers on the index.

The Asian markets were trading in red. Hang Seng dipped down 2.11%, Jakarta Composite slipped by 2.70%%, Seoul Composite dropped by 2.64%, Nikkei 225 down by 1.52%, Shanghai Composite tumbled 2.90%, Taiwan Weighted fell 1.01%, Strait Times down 1.83% and KLSE Composite down 0.78%.

The European markets were trading in red. CAC 40 dipped 1.91%, DAX declined down by 1.80% and FTSE 100 slipped 1.61%.

Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0nJwsTMwMLA==