D-Street prolongs the lull; Auto stocks accelerate

Tuesday's session turned out to be another day of consolidation for the Indian frontline equity indices which wandered directionless and snapped the session on a dull note, below the neutral line as investors remained on the sidelines amid absence of significant upside triggers. Markets exhibited sideways pattern as cautious investors appeared reluctant to take positions in large cap stocks and instead, chose to square off positions at every rise. The markets seem to have formed a firm base around the psychological 5,650 and 18,750 levels and are showing little signs of budging from those levels as consistent foreign fund inflows ahead of the first quarterly earnings announcement provided the much needed support and limited downside risks for the frontline indices. Foreign institutional investors (FIIs) were net buyers of Rs 1131.72 crore worth of shares on Monday, taking their total investment value to Rs 6,216 crore from June 23. Meanwhile, investors kept a close eye on Indian government's action on major reforms like reduction in subsidies, inter reduction of goods and services tax and liberalization of FDI and expected that if the government gets some of these reforms through parliament and get them implement then, there could be some outperformance in the near term. Downside pressures were also mitigated by reports that inflation may see more meaningful decline and growth could also slow and stabilize in the coming months. Furthermore, amid the rising fears of global economic slowdown, the data released by finance ministry gave some confidence to investors as it showed that foreign direct investments in India more than doubled to $4.66 billion in May from $2.21 billion a year earlier. On the global front, leads from the Asian markets remained subdued as Asian peers settled on a mixed note while the European counterparts too exhibited similar kind of trends, lacking any conviction to climb notably higher.

Back home, the benchmarks failed to go get off to an encouraging opening and traded below the neutral line in a very narrow range through the session. After hitting intraday low levels in the mid afternoon session of trade, the key indices showed some signs of recovery but profit booking at higher levels ensured they snap the session with moderate losses. The NSE's 50-share broadly followed index Nifty, settled with one third of a percent losses below the crucial 5,650 support level while Bombay Stock Exchange's Sensitive Index, Sensex slipped by over fifty points to close below the important psychological 18,750 levels. The broader markets witnessed some buying interests in the session however position squaring in the dying hours brought the midcap and smallcap indices around their previous closing levels. The midcap index eased 0.09% while the smallcap index added 0.20%. On the sectoral front, it was the Oil and Gas pocket which languished at the bottom of the table with 1.60% losses as heavyweight Reliance Industries plummeted by over two and half a percent on reports that British Petroleum (BP) and RIL deal may get delayed further as oil ministry is likely to send it for the approval of cabinet committee on economic affairs (CCEA). The defensive FMCG sector too witnessed hefty bouts of profit booking plunging over 1% as majors like ITC and HUL sank by 1.58% and 0.85% respectively. Furthermore, BHEL drifted by 4.5% following reports that that the Cabinet is likely to approve disinvestment of 5% of the government's equity in state-run equipment company next week. On the other hand, the rate sensitive automobile pack climbed by close to 1% as they saw some buying interest on the back of strong June sales numbers. The IT counter too remained amid the thick of things and gained 0.37% as majors like Wipro and Infosys gained 1.06% and 0.53% respectively. The markets consolidated on weaker volumes but breadth remained positive as there were 1497 shares on the gaining side against 1371 shares on the losing side while 145 shares remained unchanged.

Finally, the BSE Sensex slipped by 69.92 points or 0.37% to settle at 18,744.56, while the S&P CNX Nifty lost 18.40 points or 0.33% to settle at 5,632.10.

The BSE Sensex touched a high and a low of 18,837.88 and 18,694.05, respectively. The BSE Mid cap index was down by 0.09% and Small cap index was up by 0.20%.

The top gainers on the Sensex were Mahindra & Mahindra up 2.24%, SBI up 1.57%, Wipro up 1.06%, Maruti Suzuki up 0.90% and Sterlite Inds up 0.76%.

On the flip side, BHEL down 4.49%, Reliance down 2.53%, Hindalco Inds down 1.63%, ITC down 1.58% and DLF down 1.20% were the top losers on the index.

Meanwhile, despite the 30% surge in the fiscal deficit for the first two months of the current financial year, government will stick to fiscal target of 4.6% of GDP for the current fiscal year. Finance Minister Pranab Mukherjee said, 'government will stick to the fiscal deficit target of 4.6 per cent of GDP for 2011-12 despite huge revenue sacrifice due to duty cut on petroleum products'.

In June, government hiked the prices of diesel, kerosene and domestic cooking gas by Rs 3/liter, Rs 2/liter and Rs 50 per cylinder, with this price hike, it has also removed duties on crude oil and its products to keep the price hike as minimum as possible, this decision of slashing excise and custom duties on crude oil product had cost around Rs 49,000 crore to the government.

This huge revenue sacrifice by government is expected to have negative impact on government's fiscal deficit. On the other hand, denying impact on fiscal deficit, finance minister said, 'I don't think so because we are still trying to keep the target.' He further added that the fiscal deficit would ultimately depend on final analysis based on revenue receipt and expenditure. 'But just now we need not rush to any conclusion,' finance minister added.

However, since the rate cuts take effect for the remaining three quarters only, including the share of states, the total revenue loss will be around Rs 35,000-36,000 crore for the present financial year. Earlier, the government has expressed its anxiety over plunge in revenue collection, direct and indirect taxes, for the current fiscal year due to moderation in pace of economy's expansion on account of instability in international commodity prices and high inflation.

During April-May 2011, government's fiscal deficit increased by 30% to 1.30 lakh crore from 1 lakh crore in the first two month of last fiscal year. This sharp 30% surge in fiscal deficit is due to moderation in revenue collection, the tax revenue fell by 28% and the non tax receipts fell by more than 55 % in the April-May to Rs 5,613 crore from Rs 12,761 crore in corresponding period of last year.

The top gainers on the BSE sectoral space were Auto up 0.88%, IT up 0.37%, Bankex up 0.33%, Consumer Durables (CD) up 0.16% and TECk up 0.03%. While Oil & Gas down 1.60%, FMCG down 1.29%, Realty down 1.29%, Power down 1.18% and Capital Goods (CG) down 1.13% were the only losers in the BSE sectoral space.

The S&P CNX Nifty touched high and low of 5,659.85 and 5,612.30, respectively.

The top gainers of the Nifty were Ranbaxy up 3.11%, Grasim up 2.98%, M&M up 2.62%, Reliance Capital up 2.46% and SAIL up 2.34%.

On the flip side, BHEL down 5.01%, Cairn down 3.38%, Reliance down 2.65%, Hindalco down 1.97% and ITC down 1.53% were the major losers on the index.

India's seafood export fell by 4.5% to $146 million in the month of May. This moderation in export has come due to less demand from its major markets such as European Union and Japan, both the nation accounts for almost 46% of India's Marine exports. During May 2010, the seafood exports stood at $153 million, according to the data released by the Marine Products Export Development Authority (MPEDA).

Due to fragile economic conditions demand, from European economy is not growing, an MPEDA official said, European economy is still fragile and demand is yet to pick up, further adding he said. Besides, exporters are getting less number of orders from Japanese market due to the occurrence of earthquake and tsunami.

Of the India's total marine exports, European nations have the largest share of 26% followed by Japan 20% and United States 17%.  During the April and May of 2011-12, marine exports dropped 4.3% to $316 million compared to the same period of last financial year.

During last financial year, India's export of marine products grew by a remarkable 25.5% to $2.6 billion in 2010-11 compared to the last fiscal. Country's seafood exports comprise black tiger shrimp, fresh water prawn shrimp, frozen versatile fish, frozen skip jack and frozen squid and the shipments are mostly from coastal states like Maharashtra, Kerala, Tamil Nadu and West Bengal.    European markets were trading mixed. France's CAC 40 lost 0.34%, Britain's FTSE 100 gained 0.22% and Germany's DAX advanced by 0.26%.

Asian equity indices finished the day's trade on a mixed note on Tuesday as investors remained on the safer side ahead of US nonfarm payrolls data due later in the week while, renewed concerns over fresh tightening measures by Beijing weighed sentiment in the region. Japanese Nikkei edged marginally higher in the trade, extending its rally to a sixth session and hitting a fresh two-month closing high, helped by hopes of a slowly improving economic outlook.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,816.35	3.54	0.13
Hang Seng	22,747.95	-22.52	-0.10
Jakarta Composite	3,924.13	-29.39	-0.74
KLSE Composite	1,581.85	-0.50	-0.03
Nikkei 225	9,972.46	7.37	0.07
Straits Times	3,129.69	-23.75	-0.75
Seoul Composite	2,161.75	16.45	0.77
Taiwan Weighted	8,784.44	9.72	0.11

 

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