Fragile Indian stock markets have taken yet another nasty laceration on the first day of February as prolonged position squaring once again remained the order of the day and investors at large looked to avoid long positions. Across the board ruthless selling for the fifth consecutive day hammered the frontline domestic indices to fresh five month lows. The chief cause of concern for the local bourses remains the substantial plough back of funds from foreign institutional investors who were net sellers to the tune of Rs 2900 crore in previous three sessions while they sold nearly Rs 6,000 crore in the whole of January. Sentiments got weighed down also as macroeconomic concerns played spoilsport leading the local markets to crack of over one and half a percent, in the face of a sanguine global market which traded with conviction after worries over Egyptian unrest eased to some extent. The NSE's 50-share broadly followed index, Nifty drifted deep into the red but managed to hold above the 5,400 support level while the Bombay Stock Exchange's Sensitive Index Sensex took a three hundred point cut and settled around the psychological 18,000 level. The broader markets too got butchered in line with the larger peers and the BSE's midcap and smallcap indices plummeted 1.63% and 1.44% respectively. The rate sensitive, Real Estate stocks once again languished at the bottom of the BSE sectoral list after tumbling 4.04%, shaving off over 14% in last seven trading sessions. Realty majors like Unitech and HDIL continued the downtrend as they slipped 10.59% and 4.64% in the day's trade. The Auto pocket too witnessed relentless profit booking as it shaved off 2.83% with the likes of Tata Motors and Amtek Auto being battered 6.92% and 6.26% respectively. Index bellwether Reliance Industries extended its losing streak and ended the day with 2.57% losses. National Thermal Power Corporation got dragged 1.96% after posting a marginal increase of 0.27% in its net profit of Rs 2371.48 crore for the quarter ended December 31, 2010 as compared to Rs 2364.98 crore for the quarter ended December 31, 2009. No sectoral index managed to go home with gains while Sterlite Industries, HDFC and Hindalco remained the only stocks which closed in the green terrain on the BSE Sensex.
On the global front, cues from the Asian markets remained optimistic as sentiments in the region got a fillip from better than forecasted US consumer spending numbers. While, the European counterparts too traded with a positive bias and the DAX garnered around a percentage point remaining the biggest gainer in the space. On the other hand, the screen trading for US index futures indicated that the Dow could open 0.33% higher at the opening.
Earlier on the Dalal Street, the benchmark faltered after commencing the first day of the February month on a firm note. The frontline indices showed no intentions of bouncing back and continued to tread southwards as selling picked up pace. The afternoon session saw some short covering but to no avail as investors took profits off the table and the benchmarks eventually finished the day with large cuts, around the crucial levels. Volumes for markets remained marginally higher compared to Monday at around Rs 1.39 lakh crore while the turnover for NSE F&O segment too stayed higher at over Rs 1.22 lakh crore. The market breadth on the BSE was abysmal as there were 922 shares on the gaining side against 1916 shares on the losing side while 154 shares remained unchanged.
On charts: S&P CNX Nifty has taken good support around 5,402 and closed above this level , if it breaks this level, next supports will be around 5,348 and 5,241 levels while it may face resistance round 5617and 5685. However, Nifty is in over sold territory.
Finally, the BSE Sensex plunked 305.54 points or 1.67% to settle at 18,022.22 while the S&P CNX Nifty plummeted 88.70 points or 1.61% to end at 5417.20.
The BSE Sensex touched a high and a low of 18,452.06 and 17,982.17, respectively.
Tata Motors down 6.92%, Jindal Steel down 4.34%, Jaiprakash Associates down 4.32%, L&T down 3.66% and Reliance Communications down 3.47% were the major laggards on the Sensex.
On the other hand, Sterlite Inds up 0.64%, HDFC up 0.36% and Hindalco Inds up 0.20% were the only gainers on the index.
The BSE Mid-cap and Small-cap indices plunged 1.63% and 1.44%, respectively.
Meanwhile, foreign direct investment (FDI) into India has registered a sharp decline in the January-November 2010 period. Total FDI in the period under review stood at $18.99 billion as against $25.5 billion in the same period of 2009, thus registering a decline of about 26%, showed the data released by the department of industrial policy and promotion (DIPP).
Indian policy makers have been blaming the decline on week global economic scenario. Deputy Chairman of the Planning Commission Montek Singh Ahluwalia had said recently that while there was some weakening in the last few months in the FDI, it was mainly because of weaker global regime and investment will pick-up in coming months.
However, the decline in FDI in India has been rather against the trend seen in other developing countries. A recent report by the United Nations Conference on Trade and Development (UNCTAD) had observed that in the last calendar year, emerging market economies (EMEs) attracted more foreign investment than developed countries for the first time in history as the global economic engine shifts to the EMEs.
The UNCTAD estimated that FDI inflows into India amounted to just $23.7 billion in 2010, as against $34.6 billion in 2009. "In India, we have seen a sharp decline and we can't explain why this has happened,' said Zhan. The decline seen in India was despite the fact that overall FDI flows into the developing economies had risen by an estimated 10% in 2010 when compared with 2009 figures". The UN agency though expects the FDI into India to continue buoyantly in years to come.
The RBI had also taken the same issue in its last monetary policy review. In the review released on January 25, the central bank had stated that since India's current account deficit (CAD) was rising it should look to attract more capital inflows in form of direct investment rather than portfolio investment as the former are more stable. It blamed the decline in FDI partly on the tedious environmental laws.
"Should global recovery be faster than expected, it may also have implication for the financing of CAD. Capital flows, which so far have been broadly sufficient to finance the CAD, may be adversely affected. Faster than expected global recovery may enhance the attractiveness of investment opportunities in advanced economies, which may impact capital flows to India. This may increase the vulnerability of our external sector. Hence, the composition of capital inflows needs to shift towards longer-term commitments such as FDI," observed the RBI.
All the BSE sectoral spaces were trading in the red with deep cuts. Realty down 4.04%, Auto down 2.83%, Capital Goods (CG) down 2.49%, Oil & Gas down 2.10% and Fast Moving Consumer Goods (FMCG) down 2.02% were the major losers.
The S&P CNX Nifty touched a high and a low of 5539.15 and 5402, respectively.
The top losers on the Nifty were Tata Motors down 6.84%, BPCL down 5.95%, Jindal Steel down 5.01%, Jaiprakash Associates down 4.81% and Reliance Capital down 4.71%.
On the other hand, HDFC up 0.50%, Bajaj Auto up 0.33%, Sterlite Inds up 0.12% and ONGC up 0.02% were the only gainers on the index.
At the time of mounting inflation, interest rate hikes and tumbling markets, Indian Railways may spare its people across-the-board increase in passenger fares, despite growing pressure on the department to revise fares to shore up its drooping finances.
The story of the Indian Railways has always been wrapped in mind-boggling numbers and it is now facing new financial challenges, largely because of the burden of Sixth Pay Commission recommendations for a pay rise for its employees and loss of freight traffic revenue. But, the railway ministry is busy doing some serious calculations in a bid to justify its plan to keep the fares untouched ahead of critical state assembly elections in the coming months as raising fares may prove detrimental to the "aam aadmi" agenda of railway minister Mamata Banerjee.
Furthermore, the railways is expected to seek more budgetary support in the year of wage hikes, two diesel price hikes and loss of traffic due to a ban on iron-ore exports from Orissa and Karnataka. The department is short of its earnings target for the first nine months of the current fiscal year by Rs 1,108 crore. Its expenditure during the period exceeded budget estimates by Rs 1,792 crore.
Meanwhile, the finance ministry and the Planning Commission of India (PCI) have asked the railways to increase the fares which have remained almost constant since 2003-04. However, it is planning to go in for an increase in premium segment fares and while AC I may be left just as a strategy to eat into the business of low-cost airlines, AC III-tier and AC II-tier may see some adjustment.
European markets were trading in the green on Tuesday. France's CAC 40 gained 0.85%, Germany's DAX jumped 0.95% and Britain's FTSE 100 advanced 0.56%.
All the Asian equity indices finished the day's trade in the positive terrain on Tuesday tracking the positive cues from the US market. The sentiment in the region got a boost of better-than-expected readings for US consumer spending and the Chicago Business Barometer. Japanese Nikkei edged higher in the trade today led by oil-related shares which gained on unrest in Egypt. Refiners and trading houses rose after Brent crude topped $100 a barrel for the first time since 2008 on Monday, helped by concerns that oil shipments through the Suez Canal could be disrupted if unrest in Egypt spread.
While Stock market in Taiwan remained shut for the week on account of Chinese Lunar New Year. Moreover, the Malaysian equity indices too remained closed today in observance of Federal Territory Day.
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