Markets continue to trade in red; IT and Metal stocks pulling the markets

Indian equity markets continued to trade in red on the back of strong selling pressure in information technology (IT) and metal stocks in the late morning session. The benchmark Nifty was trading in a narrow range of 5,620-5,645 on the downside since opening. On sectoral front IT stocks continue to trade weak. Metal, Bank and realty stocks are slightly off their day lows but trading negative. While FMCG company's shares were on buyers' radar while consumer durables, oil and gas, auto and healthcare sectors were showing some support. On the global front Asian markets were trading in red and European markets are expected to open lower by reacting to weak global cues, tracking second quarter earnings season and European leaders meet on Italy concerns. Back home, market breadth was marginally positive; there were 1,240 shares on the gaining side against 1,235 shares on the losing side while 99 shares remained unchanged.

The BSE Sensex is currently trading at 18,761.62, down by 96.42 points or 0.51%. The index has touched a high and low of 18,843.97 and 18,738.32 respectively. There were 11 stocks advancing against 19 declines on the index.

The broader indices were following the benchmark; both BSE Mid cap and Small cap index were trading down by 0.13%.

The top gaining sectoral indices on the BSE were, FMCG up by 0.67%, CD up by 0.64%, Oil and Gas up by 0.26%, Auto up by 0.25% and HC up by 0.21%. While, IT down by 1.56%, TECk down by 1.34%, Bankex down by 1.22%, Metal down by 1.21% and Realty down by 1.08% were the top losers on the index.

The top gainers on the Sensex were M&M up by 2.04%, ITC up by 1.30%, ONGC up by 1.19%, Reliance Communication up by 0.92% and L&T up by 0.50%.

On the flip side, Hindalco down by 3.48%, Infosys down by 2.25%, Maruti Suzuki down by 1.46%, BHEL down by 1.37% and SBI down by 1.32% were the top losers on the index.

Meanwhile, the foreign investment in education sector may become easier if government approves the suggestion of the Department of Industrial Policy and Planning (DIPP) under the ministry of commerce and industry. The DIPP has recommended the government to remove the three year lock-in period for Foreign Direct Investment (FDI) in construction if it is for creation of education infrastructure.

Foreign investment up to 100% is permitted in the construction sector, but is subject to stringent conditions that include a three year lock-in, minimum capitalization of $5 million for joint ventures and $10 million for wholly-owned subsidiary and development of at least 10 hectares of land. The FDI policy does not make a difference on the basis of end use of the constructed asset. However, FDI policy has allowed 100% FDI in education sector since 2000.

The DIPP has circulated its recommendation to concerned ministries, seeking their views on the removal these conditions for investment in creating infrastructure for education, a priority sector for the government.  Under the public private partnership route the government has already decided to offer viability gap funding for education projects. This recommendation of DIPP would make investment in country's education sector more attractive for foreign investors. Experts have welcomed the proposal of DIPP and they have the opinion, this proposal would attract foreign investors who have not been interested in investing in India's education sector because of the strict conditions. 

From April 2000, more than $9 billion foreign investment has come into the construction sector however a major portion of this investment has gone for creation of roads and highways. The DIPP has also asked to relax the norms for construction sector in order to increase the inflow of funds. Since 2009-10 India has experienced decrease in FDI inflow, during 2009-10 it reduced by 5% and during 2010-11 inflow reduced by 25%.

However, DIPP has found stiff resistance from the Reserve Bank and the finance ministry, both of which cite the buildup of an asset bubble that had led to a huge jump in FDI flows and a price rise even in tier three cities soon after the sector was opened up in 2005. In fact, in 2007, the central bank had proposed that the government allow FDI in the sector only after nod from the Foreign Investment Promotion Board, or FIPB.

 The S&P CNX Nifty is currently trading at 5,627.60, down by 33.05 points or 0.58%. The index has touched a high and low of 5,652.90 and 5,621.90 respectively. There were 18 stocks advancing against 32 declines on the index.

The top gainers of the Nifty were M&M up by 2.08, Ranbaxy up by 1.36%, ITC up by 1.10%, Sun Pharma up by 0.97% and ONGC up by 0.94%.

Hindalco down by 3.51%, Axis Bank down by 2.34%, Infosys down by 2.27%, PNB down by 2.15% and SAIL down by 2.09%, were the major losers on the index.

All the Asian equity indices barring Shanghai Composite were trading in the red except Shanghai Composite which was trading up by 0.22 points; Hang Seng declined 1.08%, Jakarta Composite decreased 0.17%, KLSE Composite lost 0.59%, Nikkei 225 slid 0.63%, Straits Times descended 0.69%, Seoul Composite plunged 1.18% and Taiwan Weighted was down with a cut of 0.96% 

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