Indian equities come off day’s lows; PSU, FMCG counters pare losses

Fragile Indian equity markets have managed to pare some part of its losses to trade a tad higher above the intraday low levels as some short covering that was evident in PSU and the defensive - FMCG counters. The frontline indices are caught amid the pandemonium of ruthless risk aversion after new warnings of world recession and as fears grew over the future of European banks with heavy exposure to sovereign debt. The key gauges are trading around the fifteen month low levels while the fifty share benchmark index Nifty has even drifted below the psychological 4,900 levels for the first time since May 27, 2010. Meanwhile, Planning Commission Deputy Chairman Montek Singh stated that Indian economy has capacity to grow at 9% from next year and he also expected the GDP to grow by 8.3-8.5% in the current fiscal year. On the global front, European stock markets furthered their declining momentum despite the massive collapse in the previous session as on worries euro-zone authorities and policymakers have no solutions for the euro zone debt crisis while concerns that major economies could be headed into a double dip recession too tormented sentiments. Back home, the technology and software counter continued to languish at the bottom of the BSE sectoral space on being slaughtered by around four percent amid fears of a worsening crisis in Europe and stalling global economic growth will adversely impact their earnings. The Capital Goods and Consumer Durables pockets too bore the brunt of hefty selling pressure and slipped over three percent.

Meanwhile, the broader markets showed little resilience and once again suffered nasty laceration amid volatile trades, performing in line with their larger peers. The bourses plummeted on good volumes while the market breadth on BSE was dominantly in favor of declines in the ratio of 2049:571 while 90 scrips remained unchanged.

The BSE Sensex is currently trading at 16,198.77 down by 271.02 points or 1.65% after trading as high as 16,287.72 and as low as 16,114.60. There were 11 stocks advancing against 19 declines on the index.

The broader indices were trading on a bleak note; the BSE Mid cap index slipped 1.77% and Small cap shed 2.19% respectively.

On the BSE sectoral space, there were no gainers while IT down 4.86%, 3.61 down 2.79%, Capital Goods down 3.38%, Consumer Durables down 2.55% and Healthcare down 1.58% were the major losers on the index.

Cola India up 1.61%, Hero Moto up 1.41%, ONGC up 1.02%, Tata Power up 0.67% and Bharti Airtel up 0.57% were major gainers on the Sensex, while Infosys down by 6.31%, Tata Motors down 4.77%, Hindalco down 3.77%, TCS down 3.77% and L&T down 3.73% were the major losers on the index.

Meanwhile, the Reserve Bank of India's Technical Advisory Committee (TAC) on Monetary Policy chaired by the Governor D Subbarao has the opinion that government's fiscal situation has put burden of controlling inflation on the RBI's Monetary Policy. The government is targeting to restrict fiscal deficit to 4.6% of GDP in 2011-12 from 4.7% achieved in last fiscal year.

'Most members felt that there could be a slippage in the fiscal deficit budgeted in the Union Budget 2011-12. They (members) were concerned that the fiscal situation had placed the entire burden of inflation management on monetary policy,' the RBI said in minutes of TAC on Monetary Policy meeting. The RBI's TAC on Monetary Policy meeting, was held in the backdrop of first quarter review of the monetary policy announced in July.

On the issue of the global situation, the TAC had expressed concern over the debt crisis in Europe and United states. "Members also expressed concerns over rising incipient inflationary pressures in advanced economies, even as the emerging market economies (EMEs) were still battling with high inflation" the RBI minute said.

As per the TAC, inflation remained to be a major concern. The inflation rate continued to be stubbornly high. Inflation expectations were high and wages were rising. This could worsen the vicious wage-prices spiral, which to some extent was already evident, the minute said.

Given the present global scenario and slowdown in the investment and economic growth rate, TAC members has the view that the RBI should maintain balance between controlling inflation and formulating monetary policy.

On the issue of the monetary policy measure, four TAC members has suggested a pause in the hike for 26 July quarterly policy review, whereas two members were recommended to increase its policy rates by 25 basis points to give a signal to the market about its continuing anti-inflationary stance. And one member suggested increasing CRR by 25 basis points. However, RBI increased its short term leading and borrowing rates by 50 basis points in first quarter monetary policy review.  The RBI's TAC has no voting rights and it has purely advisory role. The final decision on increase/decrease rates are taken by the RBI Governor.

The S&P CNX Nifty is currently trading at 4,866.65, lower by 77.50 points or 1.57% after trading as high as 4,893.60 and as low as 4,839.05. There were 15 stocks advancing against 35 declines on the index.

The top gainers of the Nifty were IDFC up 2%, Kotak Bank up by 1.29%, Hero Moto up 1.21%, Ranbaxy up 1.19%, and Tata Power up 1.10%.

Infosys down 5.90%, Tata Motors down 4.47%, L&T down 3.90%, BHEL down 3.90% and TCS down 3.83% were the major losers on the index.

Asian markets traded on a somber note, Shanghai Composite plunged 1.22%, Hang Seng sank 2.72%, Jakarta Composite slumped 2.76%, KLSE Composite shaved off 1.43% Nikkei 225 plummeted 2.51%, Straits Times sulked 2.96%, Seoul Composite nosedived by 6.22% and Taiwan Weighted receded 3.57%.

The European markets traded on somber note as France's CAC 40 eased 1.17%, Germany's DAX shed 0.70% and London's FTSE slipped 0.85%. 

#4406, Lane V, New Madhopuri, Ludhiana-141008, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0jIwsHOwcrCw=