NERVOUS MARKETS

Indian markets made a nervous start to the week as the benchmarks plummeted around one and half a percent as investors took profits off the table after seeing the indices surge about four and half a percentage points in the previous week. With the situation in Libya changing every hour, crude oil at 29 month high levels remained a persistent headwind to the equity markets in today's trade as fears  of inflation and hike in interest rates due to rise in crude oil prices kept rate sensitive sectors under tremendous stress. On the political front, the differences between ruling UPA allies Congress and the DMK, undermined sentiments right from the early moments of trade as the DMK on Saturday announced that it was pulling out of the alliance and that its six ministers would quit after the failure of seat-sharing talks with the Congress for the April 13 assembly polls in the Tamil Nadu. However, 5,400 level proved to be a strong support for the 50 share benchmark as it managed to pare some part of its losses from there on, as reports that Congress was making last minutes efforts to keep the alliance intact with DMK emerged. The cues from the global space too remained subdued with markets in Asia finishing mixed while the European markets too mirrored similar trend. The NSE's 50-share broadly followed index, Nifty closed with a cut of around three fourth of a percent above the crucial 5,450 support level while the Bombay Stock Exchange's Sensitive Index, or Sensex took a blow of over two hundred fifty points  to settle above the 18,200 mark. The broader markets too snapped the day with similar losses as the BSE's midcap index went home with 1.41% loss while the smallcap index slipped 1.43%. On the BSE sectoral front, the rate sensitive Auto counter languished at the bottom of the table as it got clobbered by 2.55% after majors like Ashok Leyland and Maruti Suzuki plummeted 5.48% and 3.73% respectively. While the Capital Goods pack too got pounded in Monday's trade as it sank 2.36% after heavyweights like BHEL and L&T respectively sulked 3.21% and 2.69%. There remained no gainer on the BSE sectoral space while only a handful of stocks managed to enlist their names in the Sensex's gainers list. NTPC bounced back in late trade to settle with 0.34% gains, investors showed buying interests in the stock on reports that the firm is planning to set up a 15 MW solar power plant at Anta in Rajasthan, it is in consultation with a German government-owned bank, KfW, among others, for the purpose of tying up for funding of this project.

On the global front, majority of the Asian equity indices settled in the negative territory as crude prices rallied to a 2-1/2-year high level after surpassing $105 mark, threatening to disrupt the global economic recovery. Japanese benchmarks, Nikkei 225 remained the top laggard in the space as it went home after plunging over one and half a percent points. The European markets too failed to show any kind of fervor and exhibited mixed trend with FTSE 100 trading with less than half a percent gains. On the other hand, the screen trading for US index futures indicated that the Dow could open on a flat note.

Earlier on Dalal Street, the benchmarks made a gap down start as investors reacted on Saturday's reports of DMK's decision to withdraw its six ministers from the United Progressive Alliance (UPA) government which dragged the indices lower as trading progressed. Worrying Indian political situation tormented local sentiments and dragged the benchmarks to intra-day low of around 18,000 mark. However the bourses bounced back on some short covering in the late hours of trade and eventually snapped the day with losses of about one and half a percent. Volumes for the markets remained on higher side at over Rs 1.29 lakh crore while the turnover for NSE F&O segment too was higher at over Rs 1.17 lakh crore. Market breadth improved on bargain hunting at lower levels from shrewd market players but remained negative as there were 908 shares on the gaining side against 1972 shares on the losing side while 114 shares remained unchanged.

On Charts: The S&P CNX Nifty finally closed above the 5460 levels which was very crucial on weekly chart. The index may face strong support around 5402 levels if this breaks next levels will be around 5,352 mark. On the other hand, resistance will be around 5,480 and 5,550 mark.

Finally, the BSE Sensex decline 263.78 points or 1.43% to settle at 18222.67 while the S&P CNX Nifty declined 75.60 points or 1.36% to end at 5463.15.

The BSE Sensex touched a high and a low of 18361.65 and 18,058.71, respectively. The BSE Mid-cap and Small-cap indices gained 1.41% and 1.43%, respectively.

Wipro up 1.04%, Tata Power up 0.96%, Cipla up 0.38%, NTPC up 0.34% and ITC up 0.03% were the only gainers on the Sensex.

On the flip side, Maruti Suzuki down 3.73%, Tata Motors down 3.64%, Reliance Communication down 3.48%, BHEL down 3.21% and SBI down 2.87% were the main losers on the index.

Worried over the impacts of rising crude oil prices and worsening political situation in the Middle-East on the domestic economy, the Finance Minister Pranab Mukherjee has asked Reserve Bank of India (RBI) to take strong steps to tame inflation.

As the RBI is about to announce its mid-quarterly review of the monetary policy on March 17, experts say that another round of rate hike are most likely expected. The RBI has since March 2010, raised the key policy rates 7 times in order to curb inflation. Though the effects of these rate hikes showed and the inflation graph started showing a negative path recently, these efforts may prove useless because of increasing crude oil prices in Middle East and North Africa, because of their local issues. Libya's ruler Gaddafi has not yet shown any sign of leaving the crown, which resulted in more uncertainty in crude prices.

Mukherjee has stated in his address to the RBI board that there is need for sustaining post-crisis economic recovery and growth momentum, while keeping inflation in check against the uncertainty of oil price rise. The minister had said that "This (keeping inflation in check) is essential for furthering the government's agenda on inclusive development."

Meanwhile, crude prices in the international market have escalated to $116 a barrel and as India imports 80% of its crude oil needs such a spurt in price would have adverse affect on the economy. Also, though the government has take a number of steps to keep inflation in check like banning exports of certain items like wheat and reducing or eliminating duties on some products to increase their availability in the domestic markets, growing global uncertainties have taken toll over India economy and has paralyzed the growth of the domestic economy.

The main losers in the BSE sectoral space were Auto down 2.55%, Capital Goods (CG) down 2.36%, Realty down 1.66%, Bankex down 1.60% and Metal down 1.43%. There were no gainers in the BSE sectoral space.

India has successfully tested an indigenously developed ballistic missile interception system by shooting down an incoming ballistic missile - a Prithvi variant - in Orissa. The system successfully destroyed an "attacker" ballistic missile with an interceptor missile, over the Bay of Bengal off Orissa coast. With this, India has joined the likes of US, Russia and Israel in an elite group of countries to have accomplished the mission.

DRDO scientists launched a target "attacker" missile from launch pad P-3 from the Integrated Test Range (ITR) at Chandipur on-Sea in Balasore district, about 70 km from Wheeler Island at an altitude of 16 km over the Bay of Bengal. This is the DRDO's sixth interceptor mission, and five have been successful including a hat-trick in the first three.

The interceptor has its own mobile launcher, secure data link for interception, independent tracking and homing capabilities, as well as, sophisticated radars. The success of the interceptor missile mission demonstrates the country's capability to neutralize adversarial satellites in space.

The S&P CNX Nifty touched a high and a low of 5,491.25and 5,408.45, respectively.

The top gainers on the Nifty were Dr Reddy up 2.74%, Cairn India up 1.95%, Wipro up 1.74%, Reliance Power up 1.36% and Tata Pawer up 0.97%.

The top losers on the index were Tata Motors down 4.21%, BPCL down 3.97%, Maruti down 3.83%, Reliance communication down 3.81% and Sun Pharma down 3.74%.

European markets were trading in the mix on Friday. France's CAC 40 declined 0.17%, Germany's DAX rose 0.23% and Britain's FTSE 100 surged by 0.45%.