Markets remain lethargic in trade; auto, banking main draggers

The key equity indices remained lethargic in trade as concerns about inflation and the impact of the latest hike in interest rates on India Inc's margins in the near future is weighing on the investor's sentiments. On the global front, key Asian markets are trading mostly in the green; while US index futures are showing an up-tick in screen trade. Back home, all the BSE sectoral indices with an exception of FMCG, which was up by 0.22% were trading in the red with deep cuts. Auto was leading the pack of losers followed by banking, information technology, oil & gas and power sectors. Broader markets were trading in opposite direction; while the BSE Mid cap index lost 0.12%, the BSE Small cap index advanced 0.03%. The market breadth on the BSE was negative; the losers thrashed the gainers in a ratio 1266:1091 and 110 shares were unchanged. Meanwhile, SKS Microfinance extended losses and slumped 16% in trade today at this point of time after it reported a net loss of Rs 69.76 crore for the quarter ended March 31, 2011 as compared to profit after tax of Rs 62.89 crore for the quarter ended March 31, 2010. For the year ended March 31, 2011, the company's net profit declined by 36% to Rs 111.63 crore as compared to Rs 173.95 crore for the year ended March 31, 2010.

The BSE Sensex shed 109 points or 0.59% at 18,409.81. The index has touched a high of 18,643.58 and a low of 18,367.21, respectively.

The BSE Mid cap index lost 0.12%; while the BSE Small cap index advanced 0.03%.

All the BSE sectoral indices with an exception of FMCG, which was up by 0.22% were trading in the red with deep cuts. Auto down 1.15%, Bankex down 1.13%, Information Technology (IT) down 0.67%, Oil & Gas down 0.48% and Power down 0.31% were the major losers in the BSE sectoral space.

Bharti Airtel up 1.75%, Tata Power up 1.09%, Hindalco Inds up 0.45%, M&M up 0.16% and Jindal Steel up 0.09% were the only gainers on the Sensex.

On the flip side, Tata Motors down 2.33%, JP Associates down 2.14%, ONGC down 2.08%, Hero Honda down 1.85% and HDFC Bank down 1.81% were the major losers on the index.

The top economic adviser and chairman of the Prime Minister's Economic Advisory Council, C. Rangarajan lowered India's estimates of growth forecast by half a percentage point to 8.5%, citing inflationary pressures. 'Persistence of high inflation is inimical to medium-term growth,' Rangarajan said. This cut in the growth projection follows the Reserve Bank of India's (RBI) stance, which in its latest monetary policy announcement had said that it expects the growth to slow down to 8% in this fiscal. The central bank had hiked its key policy rates by 50 bps, the ninth hike in the last 15 months. Earlier the Finance Minister during the announcement of the budget had projected Indian economy to grow at 9% in the current fiscal (2011-12),

Meanwhile, Kaushik Basu, Chief Economic Adviser to the Finance Ministry too had indicated that the government will be revising downward the growth forecast as inflation mostly driven by costlier foods, has been uncomfortably high for more than a year, despite the RBI raising key interest rates several times. According to latest data available, inflation based on the wholesale price index accelerated at 8.98% in March, faster than February's pace of 8.31%.

Further, terming high crude oil prices as detrimental to growth prospects, Finance Minister Pranab Mukherjee has said that if the oil prices continue to exert pressure at the existing level, it will be difficult to manage both inflation and achieve high GDP growth merely through domestic policies and there may be a possibility that India's GDP growth coming down to around 8%. India imports nearly 80% of its crude needs and the government provides a subsidy to state-run fuel retailers to sell diesel and cooking fuels below cost. Though the government has budgeted Rs 200 billion to compensate oil companies, the subsidy burden would rise if crude prices jump dampening the effect of policy measures undertaken by the government. In first nine months itself total under recovery of the oil marketing companies was about Rs 47,000 crore.

Nonetheless, several multilateral agencies have already revised the growth forecast for India downward for the current year. While IMF had lowered the projection to 8.2% from 8.4% for 2011, ADB too has said that India's growth will slow to 8.2% in 2011-12, from earlier estimated 8.7%, on high crude oil prices.

The S&P CNX Nifty lost 34.75 points or 0.63% at 5516.70.  The index has touched a high and a low of 5586.05 and 5502.40, respectively.

The top gainers of the Nifty were Bharti Airtel up 1.71%, ACC up 1.37%, Ranbaxy Lab up 1.22%, Grasim Inds up 0.93% and Tata Power up 0.88%.

On the flip side, JP Associates down 2.25%, Tata Motors down 2.22%, ONGC down 1.95%, Axis Bank down 1.87% and Hero Honda down 1.79% were the major losers on the index.

Rest of the Asian markets were trading mostly in the green. Shanghai Composite increased 0.43%, Hang Seng jumped 0.75%, KLSE Composite climbed 0.18%, Straits Times surged 1.35%, and Taiwan Weighted soared 0.65%; while Jakarta Composite declined 0.22%, Nikkei 225 tumbled 0.70% and Seoul Composite dipped 0.05%.

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