SETBACK

Indian frontline equity indices suffered a setback in Friday afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. The benchmarks have receded to new lows in the session as they shaved off close to a percentage points and breached 16,600 (Sensex) and 5,000 (Nifty) levels on the downside. Sentiments remained dismal as worries over global economic growth prospects prompted marketmen to take profits off the table amid little signs of any supportive leads. The better than expected US economic reports, like the US GDP data which showed that the economy grew at a 1.3 percent pace in the second quarter, faster than previously estimated, along with the Jobs data which signaled that applications for jobless benefits dropped by a more-than forecast 37,000 to 391,000, failed to bolster local sentiments. While Chinese PMI data indicated that the factory sector contracted slightly for a third consecutive month in September, hurt by the Chinese central bank's liquidity tightening measures to curb inflation and as overseas demand for exports faltered. On the domestic front, the Union Cabinet approved a new bill on regulating and developing Mining which will mandate coal companies to provide 26 percent of post-tax profit for the welfare of affected people, a move intended to benefit mostly tribals. Shares of mining companies like Seas Goa shot up by 3.5% post the report hit headlines. On the other hand, Anil Dhirubhai Ambani Group's stocks like Reliance Communications, Reliance Capital, R Power and Reliance Infrastructure sank deeper into the red terrain and suffered nasty lacerations in the range of 4-10%. On the BSE sectoral space, Power pocket remained top laggards in the space with around one and half a percent cuts while sectors like high beta - Realty and PSU too witnessed some selling pressure. On the flipside, the Consumer durable counter was to only index which bucked the somber trend prevailing in the space and climbed by around a percent.
Moreover, the broader markets too slipped from the high point of the day and traded on a flat note in afternoon trades but outclassed their larger peers. The bourses rose on weak volumes of over Rs 0.50 lakh core, considering this is the first day of a new F&O series while the market breadth on BSE was in favor of declines in the ratio of 1248:1220 while 119 scrips remained unchanged.
The BSE Sensex is currently trading at 16,575.79 down by 122.28 points or 0.73% after trading as high as 16,745.16 and as low as 16,495.51. There were 4 stocks advancing against 26 declines on the index.
The broader indices were trading on a flat to positive note; the BSE Mid cap index added 0.13% and Small cap rose 0.04%.
On the BSE sectoral space, Consumer Durables up 0.96% was the only gainer while Power down 1.31%, Realty down 1.29%, PSU down 1.05%, Bankex down 1.03% and FMCG down 0.95% were the major losers in the space.
Bharti Airtel up 2.54%, L&T up 0.61%, RIL up 0.32% and M&M up 0.12% were the only gainers on the Sensex, while ONGC down 2.66%, Tata Power down 2.25%, Hero Moto down 1.95%, Tata Steel down 1.79% and SBI down 1.54% were the major losers on the index.
Meanwhile, Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan on September 29 said that the government is likely to miss the fiscal deficit target of 4.6% for the current fiscal as growth is expected to moderate.
The PMEAC Chairman said 'In the current year, the budgeted fiscal deficit is 4.6% (of GDP). It is going to be difficult to achieve this. All the numbers do not gel well,' however by adding further he said 'But I think it should be one of efforts to ensure that fiscal deficit is in the lines of what was estimated."
Earlier, the economic growth was estimated at 8.2% for 2011-12. PMEAC Chairman said despite a stronger agricultural growth than what was estimated earlier, the economy is expected to grow about 8% during the current fiscal as there are serious concerns. 'Therefore, taking all these factors into account, I believe the growth rate of the economy can be close to 8% per annum,' he added. However, Rangarajan believe that the India can grow by 9% given the saving and investment rates.
Identifying Inflation, balance of payment and fiscal consolidation as the short-term constrain to growth, Rangarajan said 'I believe there are short-term concerns and medium-term constraints which will come in the way of achieving 9% growth'.
Backing Reserve Bank of India's monetary policy stance on inflation, he said 'In fact today the non-food manufacturing index exceeds 7.5 per cent. Therefore, we should be using monetary policy to tame inflationary expectations.' By adding further he said 'We should use monetary policy in way that demand preference is brought down'.
In last 18 months, the RBI has increased its short term lending and deposit rates by 12 times to control inflation. However, the headline inflation measured by the Wholesale Price Index (WPI) has been hovering around two digit mark.
On the Current Account Deficit (CAD), PMEAC Chairman said 'I don't think that by taking both imports and exports of goods and services taken together we might exceed 2.5% of GDP of the CAD this year.' So far, financing of CAD has not been a problem. The approach paper of 12th Five-Year Plan and our own calculation indicates that we will have CAD of 2.5% of GDP'.
PMEAC Chairman said at present, there is no problem in financing CAD of 2.5%. By adding further he said, 'So long we continue to maintain a healthy growth rate and so long as fiscal deficit continue to remain at reasonable control, there should be no problem in attracting capital flow'.
However, he said that the capital flows by very nature are very volatile. It is influenced by both domestic and international factors. It is also affected by push factor and as well pull factor. So, therefore, we need to moderate our dependence on the financing of CAD through capital flows.
On the borrowing he said 'I think the effort of the government will be to retain the fiscal deficit at the budgeted level and I do not expect the borrowing programme of the government of India as of now to exceed what was originally estimated'.
The S&P CNX Nifty is currently trading at 4,972.35, lower by 43.10 points or 0.86% after trading as high as 5,025.55 and as low as 4,952.75. There were 11 stocks advancing against 39 declines on the index.
The top gainers on the Nifty were Seas Goa up 3.19%, Ranbaxy up 2.94%, Bharti Airtel up 2.53%, Ambuja Cement up 1.73% and ACC up 0.86%.
R Capital down 9.61%, R Com down 6.70%, R Infra down 6.65%, R Power down 4.26% and Siemens down 3.79% were the major losers on the index.

Asian markets traded on a mixed note, Shanghai Composite declined 0.40%, Hang Seng plunged 2.19%, KLSE Composite eased 0.03%, Nikkei 225 inched down 0.01% and Straits Times sank 1.27%.

On the contrary, Jakarta Composite climbed 055%, Seoul Composite gained 0.02% and Taiwan Weighted garnered 0.60%.
The European markets traded on a bleak note as France's CAC 40 declined 0.91%, Germany's DAX plunged 1.14% and Britain's FTSE 100 descended 0.87%.