CONSOLIDATION

After showcasing an awe-inspiring performance in the last session, Indian frontline equity indices slipped into consolidation mode in Wednesday's session and registered their first negative close of the year 2012. Benchmark indices failed to extend the two session gaining momentum, as investors lacked conviction to take larger bets a session after witnessing a vivacious close to three percent rally on Tuesday. The psychological 4,780 (Nifty) and 16,900 (Sensex) levels have once again proved as though nuts to crack for the frontline indices as they failed to sail beyond those levels or the second time in last eight trading sessions. Marketmen took to hefty selling pressure after the key indices touched intraday high levels in the second half which dragged the indices to the lowest levels in the session as investors continued to square off positions from the rate sensitive Automobile and Technology counters. On the other hand, stocks from the PSU counter remained in demand in the session after SEBI's announcement of two new means through which local firms could sell shares without floating a public issue, as the move is likely to prove helpful in expediting the government's disinvestment programme which will help it to reduce its fiscal deficit via stake sale of public sector units. Meanwhile reports that India's resilient service sector expanded in December at sharpest pace since July on the back of strong new business and output growth went largely unnoticed by market participants. Leads from the Asian space too remained uninspiring as some markets there rallied on the back of encouraging US economic reports while the rest plunged after Chinese Premier's remarks that China faces relatively difficult business conditions. Also the European shares after initial wild swings are trading in the red terrain with moderate cuts.
Earlier on Dalal Street, the benchmark got off to a flat start as the indices showed signs of consolidation in early moments of trade, a session after the sharp rally. The bourses kept oscillating in a narrow range around the neutral line through the first half but the key gauges showed a sharp uptick in the second half of trade tracking the European bourses. However, the optimism was extremely short lived as investors took the opportunity to take profits off the table and dragged the key gauges to the lowest point of the session in no time. Thereafter, there appeared mild short covering which helped the bourses to pare the losses by the end. Eventually, the NSE's 50-share broadly followed index - Nifty declined by one third of a percent to close at sub 4,750 levels while Bombay Stock Exchange's Sensitive Index - Sensex shed fifty points and closed below the psychological 15,900 mark. Moreover, the broader markets showed some resilience and managed to keep their heads above the water to close with marginal gains, outperforming their larger peers. On the BSE sectoral space, the PSU index remained the top gainer in the space with over one and half a percent gains followed by the Capital Goods and rate sensitive Bankex indices which ended with notable gains. On the other hand, the rate sensitive Auto index plummeted over a percent followed by the Technology counter that slipped by around a percent. The markets slipped on larger volumes of over Rs 1.01 lakh core while the turnover for NSE F&O segment also remained on the higher side as compared to that on Tuesday at over 0.88 lakh crore. The market breadth remained positive as there were 1499 shares on the gaining side against 1200 shares on the losing side while 135 shares remained unchanged.
Finally, the BSE Sensex lost 56.72 points or 0.36% to settle at 15,882.64, while the S&P CNX Nifty declined by 15.65 points or 0.33% to close at 4,749.65.
The BSE Sensex touched a high and a low of 16,004.69 and 15,822.32 respectively. The BSE Mid cap and Small cap indices up by 0.17% and 0.10% respectively.
The major gainers on the Sensex were Tata Motors up 3.38%, BHEL up 2.44%, Hindalco Industries up 2.43%, ICICI Bank up 2.43% and ONGC up 1.06%. While, Bajaj Auto down 4.70%, M&M down 4.25%, Hindustan Unilever 3.00%, Bharti Airtel down 2.95% and Hero MotoCorp down 2.75%, were the major losers on the index.
On the BSE sectoral space, PSU up 1.73%, Capital Goods (CG) up 1.10%, Bankex up 0.69%, Metal up 0.63% and Power up 0.56% were the top gainers while Auto down 1.21%, TECk down 0.88%, Consumer Durables (CD) down 0.67%, FMCG down 0.52% and IT down 0.49% were top losers on the BSE sectoral space.
Meanwhile, Service sector activity in India improved in the month of December as the sector grew at the fastest pace since July on the back of strong new business and output growth. The encouraging service sector report came a day after manufacturing activity data showed that the sector resiliently bounced in the month of December as it accelerated at a swiftest pace in last six months, highlighting the fact that the Indian private sector output registered strong growth in the last month of 2011.
According to the seasonally adjusted HSBC Business Activity Index, the service sector accelerated to 54.2 in December, as against 53.2 in the previous month of 2011. A figure above 50 signals expansion in production while, a number below 50 indicates contraction. Though the service sector growth in the month under review remained lower than the long-run series average, however, the purchasing managers' index (PMI) reading for the services sector, which measures the overall health of the sector, suggested that activity saw strongest improvement in business conditions in last five months.

After showing signs of cooling and even slipping to a two and a half year low of 49.1 in October, the service sector has bounced back as new orders increased for the thirty-second straight month in December while outstanding business also rose after remaining broadly unchanged in the last two months. Besides, employment in the sector too rose in the month after six straight months of showing job losses. But, the rate of input cost inflation grew deeper as it rose at the fastest rate in four months, remained stubbornly above the long-run series average.

Thus, the strong Manufacturing and Service sector PMI have propelled the HSBC Composite Index, which covers both the manufacturing and service sectors, to 54.7 in the 2011's last month, higher from 52.3 seen in November 2011. However, concerns over slowing domestic economic condition amid uncertainty over global growth prospects still pose potential downside risks for the sectors.  The S&P CNX Nifty touched a high and low of 4,782.85 and 4,728.85, respectively.
The top gainers on the Nifty were HCL Tech up 3.92%, Tata Motors up 3.12%, Reliance Infra up 2.66%, Ranbaxy up 2.55% and BHEL up 2.22%.
On the flip side, Bajaj Auto down 4.58%, M&M down 4.16%, ACC down 3.64%, Bharti Airtel down 3.39% and Hindustan Unilever down 3.10% were the top losers on the index.
The European markets were trading mixed. France's CAC 40 lost by 0.64%, Britain's FTSE 100 up by 0.22% and Germany's DAX declined by 0.35%.
Sentiment remained bullish in the Asian region and most of the Asian peers ended the trade in the green following a rally in US markets on Tuesday. The US Institute for Supply Management said last night that it's manufacturing index hit 53.9 percent in December, an increase of 1.2 points from November and the fastest rate in six months, surpassing expectations. Any figure over 50 indicates growth while anything below suggests a contraction. Meanwhile, Japanese Nikkei rose over a percentage point to a three-week closing high on Wednesday as investor risk appetite returned after upbeat US and European economic data improved the global growth outlook. However, Chinese and Hong Kong benchmarks edged lower in the trade after Chinese Premier's remarks that China faces relatively difficult business conditions.