CONSOLIDATION

Indian benchmarks are trading on a weak note in the afternoon session as domestic sentiments got undermined by sluggish European market opening. The European markets got off to a pessimistic start a day after gathering strong gains as investors looked to book profits ahead of the US Federal Reserve's monetary policy meeting outcome. Though the domestic frontline gauges did not deviate much from the neutral line but traded in a tight range with moderate losses, below the psychological 5,150 (Nifty) and 17,100 (Sensex) levels. Meanwhile, the IMF has scaled down India's economic growth for the calendar year 2011 and 2012. It expects India to grow by 7.8% in 2011 against the earlier estimates of 8.2%, and 7.5% in 2012 besides the earlier estimate of 7.8%. Local sentiments were also hurt by PMEAC chairman C Rangarajan's expectations that inflation may stay at current elevated level for coming three months and the RBI's stance on inflation depends on the inflation scenario in the coming three weeks. On the BSE sectoral front, the Oil & Gas counter did the maximum damage as it slumped by over a percent after heavyweight Reliance Industries plummeted by over one and half a percent on reports that the CBI is set to file a case against the Mukesh Ambani-led RIL over inflation of costs. To add to it the company is likely to take a tax hit of about Rs 200 crore, as the union finance ministry has ruled that it is not exempt from paying state-level taxes on its gas sales. Profit booking was also evident in Automobile, Metal and FMCG counters which slipped by around half a percent. On the flipside, the counters like Banking, Capital Goods and Power tried hard to prevent the benchmarks from drifting deeper into the red terrain.
Moreover, the broader markets showed some resilience and traded on a positive note, outperforming their larger peers by quite a margin. The bourses consolidated on good volumes while the market breadth on BSE was in favor of advances in the ratio of 1554:1022 while 101 scrips remained unchanged.
The BSE Sensex is currently trading at 17,101.64 up by 2.36 points or 0.01% after trading as high as 17,191.12 and as low as 17,057.17. There were 16 stocks advancing against 14 declines on the index.
The broader indices were trading on a positive note; the BSE Mid cap index gained 0.64% and Small cap advanced 0.57%.
On the BSE sectoral space, Bankex up 1.13%, Capital Goods up 0.68%, Power up 0.51%, PSU up 0.51%, and Consumer Durables up 0.48% were the major gainers while Oil & Gas down 0.99%, Auto down 0.44%, Metal down 0.13% and FMCG down 0.11% were the only losers on the index.
ICICI Bank up 1.99%, JP Associates up 1.24%, SBI up 1.19%, Coal India up 1.18% and Wipro up 1.18% were the major gainers on the Sensex, while Hindalco down by 2.70%, Hero Moto down 1.71%, Maruti down 1.62%, RIL down 1.53 and HUL down 1.32% were the major losers on the index.
Meanwhile, the Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan expects inflation to stay at current elevated level for coming three months and the Reserve Bank of India's stance on inflation depends on the inflation scenario in the coming three weeks.
C Rangarajan said "Monetary policy has a role to play even in supply-side inflation," while hinting that the RBI may hike its key rates to tame inflation, if inflation stays at current level. However, he expects inflation to come down to 7% by the end of current financial year. The headline inflation, measured by the Wholesale Price Index (WPI), have been hovering around 9% from last December and for month of August it stood at 9.78%, which is very close to two digit mark.
As per the PMEAC Chairman, weak recovery in global economy and uncertainties in eurozone has raised the difficulties in restricting the current account deficit and fiscal deficit, as uncertainties in investor nations like eurozone counties and United States, will affect the capital inflow into the country.

Expenditure side management is also getting difficult on account of ballooning subsidies, especially due to international oil prices, to keep the fiscal deficit at 4.6% of the GDP as targeted, PMEAC chairman said.

However, adding further he said the economy had potential to grow at 9% but the short and medium term constraints, including inflation, were to be attended to realize the potential. But he stressed on the balancing growth and inflation in the domestic economy, by strict monetary and fiscal policy measures, to manage supply and demand side inflation.
On the impact of slowdown in eurozone and US economy, he said that the Indian IT sector might get impacted to the extent of economic slowdown in the US and Eurozone. However, he expects that the US economy will not enter into negative growth zone.
The S&P CNX Nifty is currently trading at 5,125.90, lower by 14.30 points or 0.28% after trading as high as 5,168.40 and as low as 5,119.15. There were 23 stocks advancing against 17 declines on the index.
The top gainers of the Nifty were ICIC Bank up 1.73%, Ambuja Cement up by 1.09%, SBI up 0.92%, BHEL up 0.86% and Siemens up 0.76%.
Hindalco down 2.83%, Maruti down 2.13%, Reliance down 1.88%, Hero Moto down 1.81% and Cairn down 1.80% were the major losers on the index.
Asian markets traded on a mixed note, Shanghai Composite surged 2.66%, KLSE Composite advanced 0.71%, Nikkei 225 gained 0.23%, Straits Times rose 0.38%, Seoul Composite surged 0.89% and Taiwan Weighted amassed 0.57%.
On the other hand, Hang Seng shed 0.59% and Jakarta Composite sank 0.86%.
The European markets traded on weak note as France's CAC 40 declined 0.35%, Germany's DAX slipped 0.41% and Britain's FTSE 100 shed 0.40%.