FRAGILE MARKETS

Indian equities witnessed yet another unstable day of trade as markets across the globe got annihilated on the back of lingering public protests in Egypt which showed little signs of dying down. However, the local benchmarks showed some intentions to bounce back in to the green territory in the dying hours of trade but only managed to close below the neutral line. Hefty short covering in the late trade by investors at lower levels ensured that the domestic indices which plunged around one and half a percent in the early trade, go home with moderate losses. The NSE's 50-share broadly followed index, Nifty took a marginal cut and ended a tad above the 5,500 support level while the Bombay Stock Exchange's Sensitive Index Sensex drifted lower to close around the psychological 18,300 mark. The broader markets too failed to cope up with the relentless selling pressure and the BSE's midcap and smallcap indices declined 0.44% and 0.80% respectively. The high beta, Real Estate stocks once again languished at the bottom of the BSE sectoral list after tumbling 2.23%, shaving off over 10% in last three trading sessions. Realty majors like HDIL and Unitech continued to sulk, being the biggest laggards in the space as they slipped 5.97% and 5.68% in a single day. The FMCG counter too witnessed huge profit booking as it shaved off 2% with the likes of Nestle India and ITC sliding deeper into the red with 4.83% and 3.18% losses respectively. On the flipside, Capital goods pack went home with 3.26% gains supported by Siemens which skyrocketed 17.32% after the company's promoters made an open offer to the shareholders for acquiring up to 6,68,29,060 fully paid-up equity shares constituting 19.82% of share capital at a price of Rs 930 per share. Power stocks too saw huge buying interests as it gained 1.31% on the BSE sectoral space. ONGC surged 3.69%, being the top gainer on Sensex after reporting net profit of Rs 7083.23 crore for the quarter ended December 31, 2010 as compared to Rs 3053.58 crore for the quarter ended December 31, 2009, up 131.96%.

On the global front, cues from the Asian markets largely remained negative as investors relentlessly squared-off positions, on the back of the civil upheaval in Egypt as investors remained apprehensive that the political unrest in Egypt may continue and spread across the Middle East. While the European counterparts too traded on a pessimistic note and the FTSE 100 shed around half a percent, being the biggest loser in the space. On the other hand, the screen trading for US index futures indicated that the Dow could get a flat to positive start at the opening.

Earlier on the Dalal Street, the benchmark cracked over one and half a percent on start tracking global cues which remained highly unsupportive while soaring domestic inflation and rate rise fears too weighed. The frontline indices continued its southbound journey as ruthless position squaring did the rounds in the first half. The benchmarks eventually finished the last day of the month with marginal cuts, just above the crucial support levels as some short covering in the dying hours of trade pulled the markets closer to the neutral line. Volumes for markets remained lower compared to Friday at around Rs 1.36 lakh crore while the turnover for NSE F&O segment too stayed low at over Rs 1.18 lakh crore. The market breadth on the BSE was negative as there were 1180 shares on the gaining side against 1660 shares on the losing side while 166 shares remained unchanged.

On charts: S&P CNX Nifty has taken support around 5,416.65 and closed above 5475 mark; if it breaks these levels, next supports will be around 5,402 and 5,365 levels while it may face resistance round 5652 and 5685. Meanwhile, Nifty should not close below 5402 level.

Finally, the BSE Sensex shed 68.21 points or 0.37% to settle at 18,327.76 while the S&P CNX Nifty slipped 6.25 points or 0.11% to end at 5505.90.

The BSE Sensex touched a high and a low of 18,395.09 and 18,038.48, respectively.

ONGC up 3.69%, BHEL up 2.98%, Hindalco Inds up 2.73%, L&T up 2.19% and M&M up 2.18% were the only gainers on the Sensex.

On the other hand, Jaiprakash Associates down 4.69%, ITC down 3.18%, HDFC down 2.73%, Bharti Airtel down 2.61% and Reliance Infra down 2.31% were the major laggards on the index.

The BSE Mid-cap and Small-cap indices trimmed 0.44% and 0.80%, respectively.

Meanwhile, the Indian government does not look in a mood to rush through the issue of allowing foreign direct investment (FDI) in the multi-brand retail space. Some of the key officials have stated in last couple of days that although government was considering the proposal of letting foreign majors set up shops in multi-brand retail no decision has been made. Secretary of the department of industrial policy and promotion (DIPP), R P Singh, has said on Saturday that until a decision was formally taken to allow FDI in front-end multi-brand, the big chains can come to India and build up infrastructure and integrate with the small retailers. What he meant was government would like to see the commitment of big retailers to the country.

In a very similar statement, commerce and industry minister of India Anand Sharma too has said that while the FDI issue needs to be based on some sort of consensus. However, even as multinationals have to wait till opening of the Indian multi-brand retail space, for now they might have to focus on contemplating back-end operations development. Once back-end infra is in place, government too will be able to silent some of critiques of this move.

The Indian government is currently allowing only 51% FDI in a single-brand retail venture. In the wholesale cash-and-carry it does allow 100% FDI but such stores are only permitted to sell to entities such as provision stores and restaurants and sale to individuals is not allowed. Multinationals have been very interested to operate in multi-brand retail but so far the government is weighing the possible impact of such a move on small time grocery and other shops.

The DIPP had earlier floated a consultation paper seeking the views of various government agencies and other stake holders on allowing the FDI into the multi-brand space. The agency advocated the move saying it would help push investment into back-end infrastructure, besides logistics and agro-processing. The Planning Commission too has already supported the move but the Cabinet is still to consider it and political analysts feel that any announcement in this regard would only be made after the political atmosphere is more conducive. 

In the BSE sectoral space the top gainers were Capital Goods (CG) up 3.26%, Power up 1.31%, Consumer Durables (CD) up 1.22%, Oil & Gas up 1.22% and Public Sector Undertakings (PSU) up 0.81%.

On the flip side, Realty down 2.23%, Fast Moving Consumer Goods (FMCG) down 2%, TECk down 1.52% and Information Technology (IT) down 1.47% were the only losers in the BSE sectoral space.

In a major revision, the ministry of statistics has revised the gross domestic product (GDP) numbers upward significantly and the growth as per the new numbers now stand at 8% compared with the earlier estimate of 7.4%. The upside came due to stronger-than-estimated performance of both the manufacturing and service sectors.

"The growth rate of 8% in the GDP during 2009-10 has been achieved due to high growth in manufacturing (8.8%), financing, insurance, real estate & business services (9.2%), transport, storage and communication (15.0%), community, social and personal services (11.8%)," said a a press release by the central statistical office on Monday.

As per the latest calculations, the GDP at factor cost at constant (2004-05) prices in 2009-10 is estimated at Rs 44,93,743 crore as against Rs. 41,62,509 crore in 2008-09, thus registering a growth of 8.0% against the growth rate of 6.8% (revised) recorded during the previous financial year. At current prices, GDP in 2009-10 is estimated at Rs 61,33,230 crore as against Rs. 52,82,086 crore in 2008-09, showing an increase of 16.1% during the year.

The revised per capita income (at factor cost) in real terms (2004-05 prices), is estimated at Rs 33,731 for 2009-10 as against Rs 31,801 in 2008-09, registering an increase of 6.1% during the year. The per capita income at current prices is estimated at Rs 46,492 in 2009-10 as against Rs 40,605 for the previous year depicting a growth of 14.5%. What it means is that India has already crossed the $1000 per capita income level as part the presently prevailing exchange rate.

The government has also revised upwards the GDP growth estimate for FY2009 to 6.8% from the previous estimate of 6.7%. Although the national income estimates usually undergo three revisions but kind of revision seen in FY10 data is rather sharp. It shows that growth has been faster than most economists had been believing and hence the growth in 2010-11 has come on a much more sharper base. In that sense, the economy now seem to be much more close to hit the 9% trajectory again as it has managed average of over 8% expansion for last six quarters at least.

The S&P CNX Nifty touched a high and a low of 5526.85 and 5416.65, respectively.

The top gainers on the Nifty were Siemens up 17.49%, Dr Reddy's Lab up 4.27%, ONGC up 3.98%, Hindalco Inds up 3.40% and GAIL up 3.28%.

On the other hand, Jaiprakash Associates down 4.92%, BPCL down 3.77%, ITC down 3.09%, Reliance Infra down 2.70% and Reliance Capital down 2.50% were the top losers on the index.

European markets were trading in the red on Monday. France's CAC 40 lost 0.23%, Germany's DAX shed 0.38% and Britain's FTSE 100 slipped 0.27%.