MARKETS CRUMBLE

After marking a flat opening, key benchmarks have extended their losses with Sensex slumping over 200 points, breaching its crucial 17,200 mark. The Asian stock markets too are giving mixed lead today with a slight upside bias on disappointing economic data from the United States offset by solid corporate earnings news. Back home, markets may remain volatile this week as traders will roll over positions from the near-month March 2012 series to April 2012 series. The March 2012 derivatives contracts expire on March 29, 2012. All the sectoral indices on the BSE traded lower. Banks, realty, power, capital goods, oil and gas and IT stocks were witnessing the selling pressure in early trade. Moreover, the broader indices too were struggling to get some traction and the market breadth on the BSE was negative; there were 603 shares on the gaining side against 944 shares on the losing side while 80 shares remained unchanged. 

Bucking the trend, Shree Renuka Sugars, Balrampur Chini and Bajaj Hindusthan gained over in the early trade as EGoM headed by Finance Minister will meet today to decide on allowing additional export up to 1 million tones of sugar in the 2011-2012 marketing year. Among individual stocks, Maruti advanced in early trade on reports that the company plans to set up 1,700 crore rupee diesel plant in Gurgaon and has hiked prices of its vehicles by up to 17,000 rupees following the hike in excise duty in the Budget.

The BSE Sensex opened at 17,377.59; about 16 points higher compared to its previous closing of 17,361.74, and has touched a low of 17,132.95, while high remain its opening.

The index is currently trading at 17,149.60 down by 212.14 points or 1.22%. There were only 2 stocks advancing against 28 declines on the index.

The overall market breadth has made a negative start with 37.06% stocks advancing against 58.02% declines. The broader indices too were trading in the red; the BSE Mid cap and Small cap indices declined 0.62% and 0.40% respectively.

The major losing sectoral indices on the BSE were, Bankex down by 1.63%, Realty down by 1.53%, Power down by 1.51%, CG down by 1.44% and Oil and Gas down by 1.31%, while there were no gainers on the index.

The few gainers on the Sensex were Jindal Steel up by 1.14% and Maruti Suzuki was up by 0.18%.

On the flip side, Hero ICICI Bank was down by 2.96%, BHEL was down by 2.20%, TCS was down by 2.08%, GAIL was down by 2.02% and NTPC was down by 1.87% were the top losers on the Sensex.

Meanwhile, it is unlikely that diesel prices will be deregulated in the near future but petrol prices may be hiked. As per Oil Minister, S Jaipal Reddy, petrol prices have seen a recent discontinuation of deregulation and need to be relooked into, however prices of diesel will require more forethought and consultations as it involves more than just numbers.

Even though petrol prices have been deregulated, any hike in them is made by the oil companies after consulting the government. Given the recent assembly elections, the UPA government had not allowed the oil companies to hike petrol prices in tandem with its international prices. This led to the companies suffering losses to the tune of Rs 4,500-crore.

Recently, Indian Oil has been pressing the government to fully compensate it for the losses or it will have no option to pass on this burden to the consumers. If this happens, the still fragile inflation numbers could witness a further upswing. At present, the government compensates oil firms for losses only on diesel, domestic LPG and kerosene.

The government's rising fiscal deficit is making it difficult for it to sustain fuel subsidies. Moreover it is eroding the government's credibility in the national as well as international markets. The recent budget has made the government's commitment clear on the food security bill and the food minister has stated that it could be implemented by the end of the calendar year. Given this huge rise in its expenditure, the government will find it difficult to sustain its subsidy bill unless it cuts down somewhere else.

A hike in diesel price is receiving considerable push from economic quarters, followed by support for deregulating LPG. However given the UPAs difficult allies, it may not be an easy task. This fact has only been strengthened by the recent roll back in the hike of rail fares.

The S&P CNX Nifty opened at 5,274.35; about 4 points lower compared to its previous closing of 5,278.20, and has touched a high and a low of 5,274.95 and 5,207.90 respectively.

The index is currently trading at 5,214.70, lower by 63.50 points or 1.20%. There were only 4 stocks advancing against 46 declines on the index.

The top gainers of the Nifty were Jindal Steel up by 1.52%, Kotak Bank up by 0.95%, Maruti Suzuki up by 0.39% and JP Associates up by 0.38%.

On the flip side, Hero Axis Bank down by 3.25%, ICICI Bank down by 3.00%, BHEL down by 2.77%, IDFC down by 2.77% and TCS down by 2.10%, were the major losers on the index.

Asian markets were trading on a mixed note; Shanghai Composite was up 2.33 points or 0.10% to 2,351.87, Hang Seng was up 4.64 points or 0.02% to 20,673.44, KLSE Composite was up 0.91 points or 0.06% to 1,586.74 and Nikkei 225 was up 25.13 points or 0.25% to 10,036.60.

On the flip side, Jakarta Composite was down 15.17 points or 0.38% to 4,026.39, Straits Times was down 6.69 points or 0.22% to 2,983.39, Seoul Composite was down 10.59 points or 0.52% to 2,016.24 and Taiwan Weighted was down 105.61 points or 1.31% to 7,971.00