MARKETS CONSOLIDATE

Domestic benchmarks snapped the session on a flat note as they consolidated on Monday's  after rising around one and half a percent. Investors remained cautious right from the initial hours of trade as leads from across the world remained subdued because of escalating prices of international crude which are hovering around the highest level since 2008 on the back of geopolitical risks to supplies and on expectations of improving economic growth. Meanwhile investors also took cues from the HSBC Markit survey which showed slight moderation in India's service economy to 58.8 in March as compared with 60.2, the seven-month high seen in February amidst continued pressure on costs, particularly due to rising wages and also owing to high overall inflation. Reports that India's central bank accepting that inflation in the country continues to remain at elevated and unacceptable levels despite the continued monetary tightening delivered by it throughout the last financial year, too did no good to the local sentiments. However a late short covering rally in metal and information technology counters helped the frontline indices to recuperate from the low point of session. The NSE's 50-share broadly followed index Nifty, settled on an absolutely flat note as it held on to the crucial 5,900 support level while Bombay Stock Exchange's Sensitive Index, or Sensex drifted a tad above the psychological 19,700 level. However, contrary to their larger peers, the broader markets carried forward yesterday's rally as BSE's Midcap and Smallcap indices went home with gains of 0.79% and 1.38% respectively, outclassing the large caps by quite a margin. On the sectoral front, the Consumer Durables pocket grabbed the top gainer's position as stocks like Bajaj Electricals and Whirlpool garnered 3.38% and 2.79% respectively. The Metals counter too remained amid the thick of things and advanced 1.21% on the back of surge in heavyweights like Sesa Goa and Sterlite Industries which zoomed 6.36% and 2.57%. On the other hand, the weakness was witnessed in Oil and Gas counters which languished at the bottom of the table with 0.46% losses. Index heavyweight Reliance Industries failed to make its presence felt in the session as it slipped by 0.56% by the end of trade. 

On the global front, Asian equity indices finished the day's trade in the mixed terrain. South Korean benchmark Seoul Composite remained the top gainer in the space after rising over half a percent, supported by gains in technology stocks like LG and Hynix Semiconductor. The European markets traded in the red terrain as France's CAC, Germany's DAX and Britain's FTSE slipped by around half a percent point. On the other hand, the screen trading for US index futures indicated that the Dow could open in the red zone.

Earlier on Dalal Street, the benchmark got off to a positive start as investors remained optimistic amid expectations of encouraging fourth quarter earnings by corporate. However, the indices slipped into the red terrain in no time as investors followed unenthusiastic leads from the US and Asian markets. The indices moved only sideways in a tight range till mid morning session but drifted to intraday lows in the initial moments of the second half. However, a sudden revival was witnessed thereafter as investors covered their short positions in the dying hours of trade to eventually recover most of the lost ground and settle around the crucial support levels. Markets registered higher volumes of over Rs 1.20 lakh crore compared to Monday while the turnover for NSE F&O segment too remained on the higher side at over Rs 1.04 lakh crore. Market breadth remained extremely positive as there were 1985 shares on the gaining side against 944 shares on the losing side while 75 shares remained unchanged.

Finally, the BSE Sensex declined by 14.19 points or 0.08% to settle at 19,686.82 while the S&P CNX Nifty closed tad higher by 1.60 points or 0.03% to end at 5,910.05.

The BSE Sensex touched a high and a low of 19,770.21 and 19,523.54 respectively. The BSE Mid-cap and Small-cap indices gained by 0.79% and 1.38%, respectively. 

Sterlite Industries up 2.83%, Reliance Communication up 2.79%, TCS up 2.30%, Tata Motors up 2.04% and Hero Honda up 1.66% were the major gainers on the Sensex.

On the flip side, Tata Power down 1.77%, Mahindra & Mahindra down 1.49%, Hindustan Unilever down 1.45%, Larsen & Toubro down 1.34% and HDFC down 1.30% were the Major losers on the index.

In a move aimed at giving some leeway to players in the forex market, the government has capped service tax on foreign exchange transactions at Rs 5,000. Forex market players had protested the imposition of services tax and it was apprehended that the tax will impact volumes in the market.

In order to moderate the impact of the tax proposal, the government has issued a notification by which the maximum tax paid on a particular transaction will not exceed Rs 5,000. According to the notification, tax on foreign exchange transactions would be calculated at the rate of 0.1% of the gross amount of currency exchanged for an amount up to Rs 1,00,000, subject to the minimum amount of Rs 25.

For transactions between Rs 1 lakh and Rs 10 lakh, the tax rate would be Rs 100, plus 0.05% of the gross amount of currency exchanged, while transactions above Rs 10 lakh would be subject to a fixed rate of Rs 550 plus 0.01% of the gross amount of the currency exchanged. The maximum tax payable for any transaction has been capped at Rs 5,000.

Union Finance Minister Pranab Mukherjee had, in the FY12 General Budget, proposed two new methods for calculation of service tax on forex transactions. Under the first method the service tax would be charged at 0.1% of the gross amount of currency exchanged. A second option is to compute service tax at .0%1 of the difference between the price at which transaction is implemented and the Reserve Bank of India's (RBI) reference rate for the day of transaction per unit of Indian currency involved in the transaction.

The changes have been made to take care of the concerns raised by bankers and other forex market players who had contended that a higher services tax will not only impact their costs but can also dampen volumes in forex market and hence hamper price discovery and boost grey markets. The government has already exempted the commercial banks from paying services tax when they enter into transactions with other commercial banks. However, transactions involving customers of banks will be taxed as per the revised provisions.

Consumer Durables (CD) up 1.58%, Metal up 1.21%, TECk up 0.61%, Realty up 0.60%, and IT up 0.51% were the major gainers in the BSE sectoral space.Oil & Gas down 0.46%, FMCG down 0.40%, Bankex down 0.23% and Capital Goods (CG) down 0.04% were the only losers in the BSE sectoral space.

The S&P CNX Nifty touched a high and a low of 5,928.65 and 5,855.85 respectively.

The top gainers on the Nifty were Sesa Goa up 6.87%, Ranbaxy up 3.13%, Sterlite Industries up 2.77%, SAIL up 2.62% and RCOM up 2.61%.

The top losers on the index were Tata Power down 1.97%, DLF down 1.82%, Kotak Bank down 1.55%, Bajaj Auto down 1.55% and Hindustan Unilever down 1.47%.

Slight moderation has been observed in India's service economy when compared with the seven-month high seen in February amidst continued pressure on costs, particularly due to rising wages and also owing to high overall inflation, though the overall performance of the services sector remains strong.

The seasonally adjusted HSBC Markit Business Activity index, based on a survey of over 450 companies, which has come to be regarded as an excellent advance indicator of economic activity, showed slight moderation to 58.8 in March from 60.2 seen in February. However, in an absolute sense the overall level of index continues to indicate substantially rapid expansion in the services sector.

According to the Survey, Indian companies reported a marked rise in new business during March, with positive expansion sustaining continuously since May 2009. However, the latest expansion of new business slowed slightly from February's eight-month high, which brought down the overall index slightly. Employment in the services sector also rose at the fastest rate since June 2010, indicating increasing demand side of the businesses.

At the same time, inflationary pressures continued to increase in March, as both input and output prices rose at stronger rates than in the previous survey period. The increase in input prices was only marginally weaker than January's series record high, while the latest rise in charges was the fastest since July 2008.

Overall, the Indian service providers remained optimistic regarding future business prospects in March. Over half of the companies surveyed expect activity to increase over the next twelve months, boosted by growth of new work intakes. Ongoing improvements in general economic conditions and increased marketing activity are projected to support the rise in new business.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India and ASEAN at HSBC said, 'The growth momentum in the services sector remains strong, although it eased a bit in March. However, input costs and prices charged are still trending up and at a faster pace. This highlights that inflation remains the dominant concern, not growth, calling for RBI to continue the tightening cycle.'  European markets were trading in mix on Tuesday. France's CAC 40 declines 0.59%, Germany's DAX was dropped by 0.32% and Britain's FTSE 100 crash by 0.40%.

Asian equity indices finished the day's trade on a mixed note on Tuesday. Japanese Nikkei dropped more than one percent in today's trade as investors remained worried on concerns linger over the crisis at Fukushima, which has seen radiation emitted into the air, contaminating farm produce and drinking water. Tokyo Electric Power (TEPCO), which operates the plant, sank about 19 percent, headed for its lowest close in almost 60 years. However, Seoul Composite rose more than half a percent supported by gains in technology stocks LG and Hynix Semiconductor edged higher in the trade today.

Meanwhile, stocks markets in China, Hong Kong and Taiwan remained closed on account of a public holiday.