VOLATILE SESSION

Indian stock markets are going through a volatile trading session on Wednesday as the benchmark equity indices have slipped-back below the psychological 16,500 (Sensex) and 5,000 (Nifty) levels in early noon trades. The frontline indices showed mild recovery in late morning trades and was trading in an extremely tight range just above the previous closing levels. However, nervous market participants turned jittery in early noon trades following the European stock markets which after a flat to positive opening, slipped into the negative terrain as the uncertainty over European debt trouble was far from over since Greek leaders were busy in cross-party talks to form a government, and the chances for a coalition slim. Stock markets across the Asian region went back to their losing ways on Wednesday with most equity indices trading lower by half to one percent. Political uncertainty in Greece intensified concerns over Europe's onerous financial trouble and undermined investors' morale. Deepening the feeling of instability a staunch leftist is likely to stitch together a coalition government with the aim of tearing up Greece's bailout agreements, a move that would spark a dangerous escalation of the Euro-zone debt crisis. Back home, the concerns from money market showed little signs of dying down as the anemic rupee slipped closer to 54 against the US dollar despite recent measures from the central bank to support the beleaguered currency. Meanwhile, the quarterly earnings from banking majors like Union Bank and Punjab National Bank do not seem to have gone down well with the Street as investors have not only punished the two banks by around two and half a percent each but even pummeled the BSE's Bankex index which plunged over a percent. The high beta Realty and Metal counters too bore the brutal brunt of hefty selling pressure in the session. However, the gains in defensive - FMCG and IT counters did their bit by capping losses for the benchmark equity indices. Index heavyweight ITC bucked the weak trend prevailing in markets and rallied over four percent after declining almost 8% in last six days, after Citigroup opined that the government has proposed an amendment to the pricing methodology for an excise duty announced in March. The change would be positive for cigarette manufacturers as it would provide better pricing flexibility and margin upside.

Moreover, the broader markets traded on a negative note with moderate cuts of around half a percent in the afternoon trades. The bourses consolidated on large volumes of over Rs 0.9 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1386:1006 while 112 scrips remained unchanged.

The BSE Sensex is currently trading at 16,558.18 up by 12 points or 0.07% after trading as high as 16,615.74 and as low as 16,436.41. There were 11 stocks advancing against 19 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index shed 0.18% and Small cap fell 0.42%.

On the BSE sectoral space, FMCG up 2.45%, Capital Goods up 0.93%, IT up 0.73%, TECk up 0.34% and Healthcare up 0.12% were the only gainers, while Realty down 1.81%, Metal down 1.01%, Oil & Gas down 0.92%, PSU down 0.86% and Bankex down 0.85% were the major laggards in the space.

ITC up 4.49%, TCS up 2.54%, BHEL up 1.62%, L&T up 1.52% and HUL up 0.95% were the major gainers on the Sensex, while DLF down 2.60%, Sterlite down 1.92%, NTPC down 1.89%, M&M down 1.63% and Coal India down 1.61% were the major losers in the index.

Meanwhile, the Petroleum and Oil Ministry has suggested that the government should hike the excise duty on diesel cars to offset the benefits of subsidized diesel enjoyed by them. The suggestion is in line with the view that the rich should not benefit from subsidies as it is not meant for them.

Diesel is the most consumed fuel in the country and is sold at a subsidized rate to lessen transportation costs. Prices of petrol on the hand have been deregulated. With the recent surge in prices of crude oil, petrol which is predominantly used in passenger cars, has seen a substantial hike. However diesel continues to be subsidized by the government.

As a result the demand for passenger cars has shifted from petrol cars to diesel cars. Hence it is suggested that the price of these be raised to discourage their consumption and prevent the misuse of the subsidy.

The government has budgeted Rs 40,000 crore as fuel subsidy for the 2012-13 fiscal. The Finance Minister has targeted to bring down the subsidy bill to 2% of GDP in the current fiscal. The government is also targeting better management of subsidies under the public distribution system (PDS) so that it reaches the intended beneficiaries.

As per a Planning Commission report using a particular method of measuring leakages, the government spends Rs 3.65 through budgetary food subsidies to transfer Re 1 to the poor.

The S&P CNX Nifty is currently trading at 5,006.85, higher by 6.90 points or 0.14% after trading as high as 5,013.20 and as low as 4,959.65. There were 19 stocks advancing against 31 declines on the index.

The top gainers on the Nifty were ITC up 4.50%, TCS up 2.62%, BHEL up 1.86%, L&T up 1.72% and BPCL up 1.30%.

JP Associates down 2.65%, SAIL down 2.46%, DLF down 2.19%, Sterlite down 2.07% and Grasim down 2.03% were the major losers on the index.

In the Asian space, Shanghai Composite plunged 1.59%, Hang Seng declined 0.72%, Jakarta Composite sank 1.20%, KLSE Composite declined 0.26%, Nikkei 225 got pounded by 1.49%, Straits Times Index dropped by 0.47%, KOSPI Composite slumped 0.85% and Taiwan Weighted dived 0.93%.

The European markets got off to a positive start as France's CAC 40 added 0.24%, Germany's DAX rose added 0.55% and United Kingdom's FTSE gained 0.02%.