TRYING TO RECOVER

After showing signs of consolidation for most part of the morning trades, despite the over seven percent collapse in IT bellwether Wipro post its disappointing quarterly earnings numbers, stock markets in India took a turn for the worse in late morning trades. The frontline equity indices suffered a sharp kneejerk reaction and plummeted over a percentage points to touch the session's lows in early noon trades around the psychological 17,000 (Sensex) and 5,150 (Nifty) levels. The wave of selling pressure hit the shores of domestic markets after global credit rating agency S&P threatened to downgrade the sovereign bond rating of India by slashing its economic outlook to negative from stable, citing slow progress on its fiscal situation, as well as deteriorating economic indicators. Sentiments went awry after the reports surfaced as investors took to across the board position squaring as the lowered outlook jeopardizes India's long-term rating of BBB-, which is the lowest investment grade rating. However, the markets soon recovered after finance ministry officials reacted to the reports saying that the rating outlook change was not unanticipated and the revision will not impact capital inflows and India continues to remain an attractive investment destination. On the other hand, the European markets got off to a positive opening providing the much needed support to local bourses, while the Asian markets exhibited mixed trends. European markets extended the gaining momentum after encouraging quarterly earnings by majors raised expectations of a better than expected earnings season while the upside was capped as investors remained cautious ahead of the outcome of US Fed meeting. However, the downside in frontline gauges was capped by the gains in defensive - FMCG and rate sensitive - Auto counters which provided the much needed support to the indices. However, the high beta Realty index remained the top laggard in the space with over one and half a percent cut while the beaten down IT counters too got pounded post of the quarterly result announcement by bellwether Wipro.

Moreover, the broader markets too succumbed to the selling pressure that was being exerted on their larger peers, but are gradually paring losses and are trading with around half a percent loss. The bourses sank on good volumes of over Rs 0.60 lakh core, on the penultimate day of April series F&O contract expiry. While the market breadth on BSE was in favor of declines in the ratio of 1585:876 while 108 scrips remained unchanged.

The BSE Sensex is currently trading at 17,111.28 down by 96.01 points or 0.56% after trading as high as 17,249.61 and as low as 17,019.24. There were 10 stocks advancing against 20 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index sank 0.72% and Small cap shed 0.53%.

On the BSE sectoral space, FMCG up 0.28% and Auto up 0.07% were the only gainers, while Realty down 1.65%, Consumer Durables down 1.54%, Power down 1.41%, Capital Goods down 1.30% and IT down 1.26% were the major laggards in the space.

Bharti Airtel up 1.58%, Maruti Suzuki up 1.24%, Sterlite up 1.04%, Hero Moto up 0.95% and HDFC Bank up 0.42% were the major gainers on the Sensex, while Wipro down 7.35%, GAIL down 3.19%, BHEL down 1.90%, ICICI Bank down 1.83% and NTPC down 1.73% were the major losers in the index.

Meanwhile, rural India has transitioned from thatched roof houses and muddy roads to factories and cell phones, as per a study done by Credit Suisse. The findings of the study are not only interesting but also successfully change the perception of 'rural' in India.

'Rural India, in our view, is no longer an agrarian economy exposed to the vicissitudes of an erratic monsoon. All agriculture is rural by definition, but the converse is no longer true,' says the report. It also states that agriculture in India is now much less dependent on the erratic Indian monsoon and has been linked to the national economic cycles to which it was more or less immune so far. Agriculture is now only about one-fourth of rural GDP - from being close to half a decade back.

The major change has been the increasing share of manufacturing and services in the rural GDP. Manufacturing GDP in rural India witnessed an 18 percent CAGR during 1999-09, and is now 55 percent of India's manufacturing GDP.

 In 1978, around 81 percent of rural males considered agriculture as their primary job. This ratio fell to 67 percent in FY05 and 55 percent in FY10. The trend is similar for female rural employment as well. Growth in services employment is equally robust.

Indian villages themselves are increasingly being classified as 'towns' based on their population density and employment characteristics, even though they do not have a municipal body. In the coming times it is expected that India's urbanization is likely to take a different path as compared to other emerging economies.

Consumption will continue to skew towards lower price points and 'rural urbanization' themes. The 'new urban' consumption categories like two-wheelers, building materials/paints, media, tobacco, footwear, healthcare, personal products with low price points (like toothpaste) are thus expected to see sustained growth due to the rapid development of the rural area.

The S&P CNX Nifty is currently trading at 5,194.15, lower by 28.50 points or 0.55% after trading as high as 5,236.10 and as low as 5,160.65. There were 15 stocks advancing against 35 declines on the index.

The top gainers on the Nifty were Seas Goa up 1.81%, Maruti up 1.56%, Bharti Airtel up 1.40%, Hero Moto up 1.37% and Cairn up 1.36%.

Wipro down 7.09%, R Power down 3.35%, GAIL down 3.15%, Siemens down 2.32% and ICICI Bank down 1.75% were the major losers on the index.

In the Asian space, Shanghai Composite climbed 0.61%, Nikkei 225 surged 0.98% and Taiwan Weighted climbed 0.86%.

On the other hand, Hang Seng eased 0.11%, Jakarta Composite fell 0.21%, KLSE Composite shed 0.11%, Straits Times dropped 0.09% and Seoul Composite lost 0.07%.

The European markets got off to a positive start as France's CAC 40 added 0.20%, Germany's DAX gained  0.50% and Britain's FTSE 100 rose 0.18%.