Indian equities snap two day rally; settle with over half a percent cut

It turned out to be a resilient performance by the Indian benchmarks which snapped a tumultuous session with moderate losses but managed to outclass the gloomy global markets that suffered nasty lacerations.  The session largely remained characterized by choppiness as investors seemed reluctant to pile up hefty positions after the recent upmove and indulged only in stock specific activities amid thin trading volumes. Post the gap down opening, key indices showed some signs of bounce back after the report released by commerce ministry stated that India's food inflation declined to 8.06% for the week ended May 21 on the back of cheaper pulses, wheat and some vegetables. The latest inflation figures were seen as a silver lining after Wednesday's sluggish economic reports confirmed fears of a slowdown during the first quarter. However, the upside chances remained capped in the session as low economic growth expectations, high risk perceptions and a resulting moderation in valuations weighed on sentiments. Meanwhile daunting global leads from the Asian markets which traded with large cuts along with somber opening of European equity indices too restricted the local benchmarks from reversing initial losses. The bourses showed a sound performance amid all the turbulences and remained range bound, not showing any signs of capitulation. The NSE's 50-share broadly followed index Nifty, shut shop with over half a percent cut just at the crucial 5,550 support level while Bombay Stock Exchange's Sensitive Index, Sensex deposed over a hundred points and closed below the psychological 18,500 mark. The broader markets too slipped in line with their larger peers as the midcap index shed 0.68% and the smallcap index fell 0.78% points. Shares in broadcaster Sun TV fell more than 27% amid reports that Maran family-owned Sun TV Network was a beneficiary of pay-offs by an overseas telecom firm while Spice Jet fell more than 16% after media reports said a public lawsuit had named the companies' chairman's brother Dayanidhi Maran in a telecoms probe. Marketmen attributed the steep fall in both counters to news reports of a Public Interest Litigation (PIL) filed against Dayanidhi Maran for his alleged role in the telecom scam. All stocks of the ADAG pack nosedived particularly Reliance Communication and Reliance Mediaworks which plunged by 4.11% and 6.23% respectively after reports opined that a special CBI court will pass an order on the plea to probe the alleged involvement of Anil Ambani. Meanwhile, shares of Tata Teleservices (Maharashtra) skyrocketed by 6.46% after the CBI stated that the Tata group company did not benefit in any way from the 2G telecom scam and that there was no irregularity in the issuance of licenses to Tata Telecom. On the other hand Index heavyweight Reliance Industries climbed by half a percent ahead of its Annual General meeting scheduled on Friday. The country's second largest two-wheeler maker Bajaj Auto surged 2.22% on reporting its highest ever motorcycle sales for May at 3,17989 units in last month, registering a jump of 18%. Among sectoral gainer, sectors like FMCG and Consumer Durables showed some fervor as they abstained from giving into the selling pressure and moved higher by 1.01% and 0.34% respectively. However, the rate sensitive sectors like Banking counter along with the Metal pack had to bear the maximum brunt as they got pounded by 1.52% and 1.32% respectively.

On the global front, most Asian equity indices got clobbered out of shape with the Chinese benchmark being the top laggard after deposing two percent points. While political worries in Japan too added to the selling in the Tokyo market as a result Nikkei crumbled by over one and half a percent. The European equities too traded on a pessimistic note as France's CAC plunged 0.96%, and Germany's DAX fell 1.02% and London's FTSE 100 declined 0.80%. On the other hand, the screen trading for US index futures indicated that the Dow could open on a flat note.

Earlier on Dalal Street, the benchmark got off to a gap down start as sentiments got pulverized by overnight butchery on Wall Street on the back of weak economic data like slowing US factory activity and private employers adding lesser than expected employees, which stoked fears that the pace of global economic recovery may be slowing down. However, the indices which saw smart gains in last couple of session showed resilience and tried to reverse the intraday loses after the official weekly data on inflation showed signs of ease in rate of price rise. After attaining intraday high levels in early moments of afternoon session, the indices gyrated in a narrow range through the second half but some volatility in the dying hours of session ensured that the frontline indices snap the two straight session of gaining streak with losses of well over half a percent and settle around psychological 5,550 and 18,500 levels. Markets slipped on thin volumes of around 75000 crore compared to Wednesday turnover. Market breadth remained negative as there were 1148 shares on the gaining side against 1659 shares on the losing side while 141 shares remained unchanged.

Finally, the BSE Sensex slipped by 114.63 points or 0.62% to settle at 18,494.18 while the S&P CNX Nifty fell 41.65 points or 0.74% to settle at 5,550.35.

The BSE Sensex touched a high and a low of 18,540.67 and 18,390.57, respectively. The BSE Mid cap and Small cap index down 0.68% and 0.78% respectively.

The top gainers on the Sensex were Hindustan Unilever up 3.53%, Bajaj Auto up 2.22%, ITC up 0.77%, Reliance up 0.54% and Hero Honda up 0.53%.

On the flip side, Reliance Infrastructure down 4.66%, Reliance Communication down 4.11%, ICICI Bank down 3.10%, Tata Motors down 2.81%, Mahindra & Mahindra down 2.19% were the top losers on the index.

Meanwhile, crude oil output in India went up by 11 percent to 3.2 million metric tons in the month of April from a year earlier, registering its seventeenth straight monthly rise after non-state company Cairn India made its presence felt by boosting production from Rajasthan oil fields. The data released by Ministry of Petroleum and Natural Gas, also showed that natural gas production fell for the fifth straight month in April.

The official data showed that refinery output rose an annual 6.6 percent in April, its fifth consecutive monthly rise however, the rate of growth eased as compared to March month since crude processing at private refineries declined. Asia's second-biggest energy consumer also registered 9.3% decline in output of natural gas to about 4.1 billion cubic metres in April from a year ago as output from the Reliance-operated D6 block in the east coast declined after touching about 60 million cubic metres per day. The output from fields started to decline from October last year because of technical problems in the reservoir.

Out of the total refiners in India, the 17 public sector refineries processed around 10.4% more crude oil, during the month, while the combined output of the private refineries declined 1.7% from a year ago.

Reliance Industries, whose two refineries at Jamnagar in western Gujarat state account for about a third of India's refining capacity, does not report data for its 580,000 bpd export-focused plant to the government. The data also does not include crude processing by 120,000 bpd Bina refinery in central India.

While the global crude oil market hasn't paid much of an attention to Indian crude oil production, the recent report of an 11% gain in Indian April crude production may be seen as a negative for the world energy markets, but that potentially negative news was countervail by the fact that Indian refiners saw their activity levels rise in excess of 6%, which in turn points to decent ongoing product demand in India.

The only gainers on the BSE sectoral space were FMCG up 1.01%, Consumer Durables (CD) up 0.34% and Oil & Gas up 0.15%.

The top losers in the BSE sectoral space were Bankex down 1.52%, Metal down 1.32%, Realty down 1.26%, Auto down 1.16% and Power down 0.85%.

India's coffee exports surged by 41.77 per cent in May this year to 80,367 tonnes on the back of robust global demand. As per the Coffee Board data, shipments of the brew stood at 56,690 tonnes in the year ago period. The numbers are quiet encouraging in the backdrop of a recent report of USDA, that stated that India's coffee exports are expected to decline by 16.7 per cent to 2,40,000 tonnes in the 2011-12 crop year (October-September) due to lower production and tight carry-over stocks.

USDA has said that coffee exports may dip from the current year's record level due to lower international coffee prices, which could reduce importers' demand for Indian coffee. However, if international demand remains strong, exports could increase at the expense of domestic consumption.

The good surge in the export can be attributed to the strong global prices that have prompted foreign buyers to increase their purchases of Indian coffee as they look for new supply options. The total export realization rose by more than two-fold to $244.41 million in May 2011 as compared to $113.42 in the corresponding period of the previous year, while ,export earnings in rupee terms rose by 89.21 per cent to Rs 1,008.51 crore from Rs 532.99 crore in the period under review.

The per tonne value realization for Indian coffee was higher in May, 2011, at Rs 1,35,442 per tonne, compared to Rs 94,018 per tonne in the year-ago period. In the first eight months of the coffee year 2010-11 (October-September), the shipments of coffee rose by 44.07 per cent to 2,47,372 tonnes as against 1,71,704 tonnes in the year-ago period. In the January-May, 2011 period, exports of the brew were up by 42.58 per cent to 1,81,308 tonnes as compared to 1,27,160 tonnes in the same period year ago.

India largely exports coffee to Italy, Germany, Belgium, the Russian Federation and Spain. Besides that, there is some positive development in Coffee exports to Japan, the world's fourth largest coffee consumer, which may be willing to take a more positive view of Indian coffee; this is after a controversy over lindane residue about five years ago led to a drop in exports from about 6,000 tonnes to less than 1,700 tonnes at present. At a recent event organized by the Specialty Coffee Association of Japan, the hosts said that a period of five years was perhaps a good enough time for lindane - whose use has been banned since - to be flushed out of the Indian ecosystem.

The S&P CNX Nifty touched high and low of 5,568.20 and 5,521.95, respectively.

The top gainers of the Nifty were Hindustan Unilever up 3.25%, SAIL up 2.66%, Bajaj Auto up 2.43%, Sun Pharma up 2.13% and ITC up 0. 80%.

On the flip side, Reliance Infrastructure down 4.75%, Reliance Communication down 3.99%, Sesa Goa down 3.49%, Tata Motors down 3.13% and Reliance Power down 2.59% were the major losers on the index.

European markets were trading in red. France's CAC 40 plunged by 1.17%, Britain's FTSE 100 down 0.75%, and Germany's DAX lower by 0.96%.

Most of the Asian equity indices finished the day's trade in the negative terrain on Thursday as investors remained concerned about the global economic outlook, while political worries in Japan too added to the selling in the Tokyo market as a result Nikkei crumbled about 1.70 percent in the trade today. Moreover, Chinese benchmark tumbled 1.4 percent on Thursday after a slump on Wall Street and amid worries that country's central bank may raise interest rates during the Dragon Boat Festival when financial markets will be closed next Monday. However, Stock markets in Indonesia remained shut for trade today on account of Ascension day holiday.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,705.18	-38.39	-1.40
Hang Seng	23,253.84	-372.59	-1.58
KLSE Composite	1,558.04	1.62	0.10
Nikkei 225	9,555.04	-164.57	-1.69
Straits Times	3,160.60	-12.27	-0.39
Seoul Composite	2,114.20	-27.14	-1.27
Taiwan Weighted	8,991.36	-70.99	-0.78
Jakarta Composite	-	-	-

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