JITTERY MARKETS

Indian equity indices have gone on to reverse the gains accumulated in the previous session as leads remained daunting, not only locally but globally as well. After range bound trade in the initial hours, investors resorted to broad based profit booking following the worse than expected April month inflation data which came in at 8.66% against 9.04% seen in the previous month. Despite the decline in inflations numbers, higher prices are not expected to die down any time soon because of spiraling global commodity prices. The frontline indices remained under tremendous pressure as marketmen relentlessly trimmed positions on expectations of a diesel price hike and rise in diesel prices will result in higher transportation and food costs, impacting on overall profitability. Meanwhile, an Empowered Group of Ministers is expected to meet this week to decide on the oil ministry's demand to increase the price of diesel by around Rs 4 rupees a liter and liquefied petroleum gas by around Rs 25 a cylinder. Also there are fears that the RBI may further its aggressive stance against inflation and raise key policy rates in its next meeting in June, which would be the 10th increase since mid-March 2010. Moreover, sentiments remained depressing across the globe as all Asian peers settled with large cuts while the European counterparts too are trading on a bleak note. While the marginal wilt in international crude oil prices failed to enthuse the local mood as investors remained apprehensive that higher borrowing costs will hurt corporate earnings. The NSE's 50-share broadly followed index, Nifty drifted about a percent to settle around the 5,500 support level while the Bombay Stock Exchange's Sensitive Index Sensex deposed around two hundred points and ended the day just below the psychological 18,350 level. The broader markets too settled in the negative terrain but managed to outclass their larger peers by quite a margin. The BSE's midcap index fell by 0.77% and the smallcap index slipped 0.74%. The high beta Realty counter on the BSE sectoral space languished at the bottom of the table as it slipped by 1.47% with majors like DLF and Unitech taking a blow of 2.58% and 1.90% respectively. While the Metals pocket too bore the brunt of hefty profit booking as it sank 1.45% after bellwethers like Tata Steel and Jindal Steel got pounded by 2.64% and 1.87% respectively. On the other hand the Healthcare pack rallied 0.93% underpinned by Glenmark Pharma which accumulated 11.54% as its arm inked a pact with Sanofi to grant license for the development and commercialization of GBR 500. However decline in Index heavyweight Reliance Industries, ONGC and L&T put further downside pressure on the major indices. On the result front, stocks like Vishal Retail, Jindal Cotex and Pantaloon Retail, got commended by the investors in the session.

On the global front, all the Asian equity indices concluded the session with notable losses led by Hong Kong's shares which shaved of over one and a quarter percent point, being the top laggard, after the government there raised its inflation forecasts. The European counterparts too are reeling under tremendous selling pressure as investors are pulling their money off the table ahead of a key EU financial ministers' meeting to discuss a bailout plan for Portugal and also to quell speculation about Greece's debt restructuring. On the other hand, the screen trading for US index futures too indicated that the Dow could open on a negative note.

Earlier on Dalal Street, the benchmark got off to a pessimistic start tracking discouraging  leads from the Asian equity indices as sentiments largely remained influenced by Wall Street which plunged on concerns of slow economic recovery and signs that Euro-Zone sovereign debt troubles are larger than originally forecast. Thereafter, the indices traded in an extremely narrow range until the inflation data was released but post the April inflation figure announcement, the indices drifted to lower levels as rate sensitive automobile, realty and banking stocks plummeted. Though the bourses showed some signs of recovery in the early afternoon session, but ruthless position squaring almost across the board in the mid noon trades pulled the benchmarks to intraday low levels. Eventually, the bourses snapped session around the psychological 5,500 and 18,350 levels. Markets plunged on lower volumes of over Rs 1.09 lakh crore while the turnover for NSE F&O segment remained lower compared to Friday at over 0.99 lakh crore. Market breadth remained negative as there were 1052 shares on the gaining side against 1713 shares on the losing side while 134 shares remained unchanged. Finally, the BSE Sensex plunged 186.25 points or 1.01% to settle at 18,345.03 while the S&P CNX Nifty shed 45.75 points or 0.83% to end at 5499.

The BSE Sensex touched a high and a low of 18,492.68 and 18,319.88, respectively. The BSE Mid-cap and Small-cap indices rose 0.77% and 0.74% respectively.

The top losers on the Sensex were JP Associates down 3.20%, Bajaj Auto down 2.72%, M&M down 2.71%, Tata Steel down 2.64% and DLF down 2.58%.

On the flip side, Hero Honda up 3.87%, BHEL up 0.93%, Bharti Airtel up 0.83% and TCS up 0.01% were the only gainers on the index.

The top losers in the BSE sectoral space were Realty down 1.47%, Metal down 1.45%, Bankex down 1.18%, FMCG down 1.02% and Oil & Gas down 0.97%; while Healthcare (HC) up 0.93% and Consumer Durables (CD) up 0.22% were the only gainers in the BSE sectoral space.

Meanwhile, the Ministry of Defence has raised objections over exploration in two out of the four blocks of Krishna-Godavari basin as they lie between two proposed defence establishments. The defence ministry has raised some objections pertaining to safety issues in the deepwater gas block and has pointed out that the blocks fall within its missile testing range. However, the ministry gave a go ahead to work on the rest of the shallow water blocks and the consortium partners could continue with data collection without interruption.

Consequently, oil and gas major ONGC may not be able to take up exploration work in two of already allotted KG Basin blocks in which it holds 80% - 90% stakes respectively. While Andhra Pradesh Gas Infrastructure Corporation (APGIC), which along with ONGC and others won four blocks in the last New Exploration Licensing Policy (NELP) bidding, holds 10% stake in each block.

Due to the Defence Ministry's objections, not a single KG Basin block identified as having oil and gas production potential was put up for auction in the recently concluded NELP bidding round. Despite several meetings between senior officials of both the defence and petroleum ministries, there has been no progress on the issue. Hence, the matter has to be resolved either at the Prime Minister level or Cabinet committee level.

According to the Ministry of Petroleum and Natural Gas, the KG Basin, which is spread over 50,000 square kilometers, along the East Coast of India, is estimated to have up to 1,130 million metric tonnes of oil and oil-equivalent gas, or approximately 60 trillion cubic feet of natural gas.

Likewise, there are three other blocks which may see similar objections in the upcoming NELP-X oil and gas licensing round, as the Defence Research and Development Organisation (DRDO) is mulling to set up a missile testing unit at Machilipatnam, at the southern end of the KG Basin, while on the northern end, the Indian Navy wants to set up a naval port for its regular exercises 60 km South of Visakhapatnam, the headquarters of the Eastern Naval Command.

The S&P CNX Nifty touched a high and a low of 5541.80 and 5487.65, respectively.

The top gainers of the Nifty were Ranbaxy Lab up 4.87%, Hero Honda up 4.12%, Sun Pharma up 3.10%, Ambuja Cement up 2.83% and Bharti Airtel up 0.95%.

On the flip side, JP Associates down 3.37%, DLF down 3.28%, Siemens down 2.89%, Bajaj Auto down 2.81% and Tata Steel down 2.73% were the major losers on the index.

European markets were trading in the red. France's CAC 40 rose 1.40%, Germany's DAX advanced 1.37% and Britain's FTSE 100 was trading higher by 0.83%.

All the Asian equity indices finished the day's trade in the negative terrain on Monday on concerns over the European debt crisis and sentiments also weighed down after Goldman Sachs Group Inc., downgraded Japanese and Korean shares. Following the downgrade, Japan's Nikkei 225 Stock Average sank 0.9 percent and South Korea's Seoul Composite retreated 0.75 percent. Moreover, Hong Kong's Hang Seng Index plummeted 1.4 percent after the government raised its inflation forecast.