With investors bracing for a rate increase when the Reserve Bank of India (RBI) releases policy on Tuesday, local bourses after getting cautious start have turned lower. The RBI is seen raising rates by a quarter percentage point and is widely expected to raise rates by a total of 75 basis points for the rest of 2011.Weak Asian stocks coupled with data showing sustained selling by foreign institutional has bought in choppiness into the markets, thereby marking sluggish start of the new Futures & Options (F&O) series. As Rising at a slower-than-expected pace, US real GDP grew 1.8 percent in the first quarter. Weather disruptions, higher food and energy prices and a sizeable decline in government outlays weighed on economic growth. On the global front, despite overnight extended gains of US markets on some good earnings number, Asian Indices have succumbed to profit booking, barring Shanghai Composite which is up marginally by 0.11%.Meanwhile, US future indices are trading mixed on the screen trade. Back Home, the losses of the equity markets have been capped by rise in Index heavyweight Reliance Industries (RIL), the stock rose 0.43% to Rs. 978 on bargain hunting, halting a four-day fall. The company said recently that it is drawing up a plan to raise gas production from its D6 deepwater block in the Krishna Godavari basin in the KG basin, off India's east coast.
Further, though the selling in the stocks from Capital Goods, Consumer Durables and Bankex have dragged the market lower, the stocks belonging to Healthcare, Fast Moving Consumer Goods, Oil & Gas counters are putting forth a tough fight for keeping the market momentum on the positive side. The benchmark 30 share Index-- Sensex--on BSE is trading near its intra- day low, while 50 scrip Index--Nifty--on NSE is trading below its physiological level of 5800 mark. Meanwhile, the broader indices after trading flat have surrendered to the selling pressure and have edged lower. The overall market breadth on BSE is in the favour of declines which have outperformed advances in the ratio of 1158:1061, while, 86 shares remained unchanged.
The BSE Sensex is currently trading at 19,247.00, down by 45.02 points or 0.23%. The index has touched a high and low of 19,356.50 and 19,212.63 respectively. There were 15 stocks advancing against 15 declines on the index.
The broader indices were trading in red too; the BSE Mid cap index declined by 0.08% while, Small cap index was down by 0.33%.
The top gaining sectoral indices on the BSE were, HC up by 0.97%, FMCG up by 0.91%, Oil and Gas up by 0.55% and PSU up by 0.07%. While CG down by 1.47%, CD down by 0.85%, Bankex down by 0.76%, Metal down by 0.58% and Auto down by 0.42% were the top losers on the index.
The top gainers on the Sensex were HUL up by 1.81%, JP Associates up by 0.68%, RCom up by 0.60%, Reliance Industries (RIL) up by 0.59% and Bajaj Auto was up by 0.48%.
On the flip side, Hero Honda down by 1.83%, L&T down by 1.68%, HDFC Bank down by 1.59%, Hindalco Industries down by 1.53% and M&M down by 1.38% were the top losers on the index.
Meanwhile, the Telecom Regulatory Authority of India (TRAI) has initiated a review of interconnection usage charges (IUC) amidst proposals of deep cuts in these charges that while lower the cost of calls for the consumers but will also impact the profitability of major players significantly. It will at the same time benefit newer players.
The regulator has asked the industry regarding what the new IUC regime should be for the coming three years. It has proposed that the ICU charges could be further brought down and has asked for Industry's views on the same. Another issue raised by the regulator is whether the termination fee should be a part of the capex and if the depreciation should be at 10% on straight line method or not.
The most important issue here is ICU, as it has substantial impact on companies' revenues. The ICU charges refer to the fee that mobile services operators pay to one another for using their networks for originating, carrying and terminating calls. At present, the ICU charges are pegged at a ceiling rate of 20 paise a minute as termination fees and 65 paise a minute for carrying the STD calls. ICU charges typically constitute 75% of the total cost of a mobile call made from one operator to another.
If the ICU is brought down, it will benefit new operators as they have relatively very small network compared to the incumbent once. Since, new players will be paying much larger money to incumbent players that what they would be getting, owing to their smaller network and lesser number of subscribers, any reduction in ICU will obviously help them on a net-net basis. On the other hand, the move will have a negative impact on industry leaders who will partly lose the edge they have against new players in terms of their huge network and large subscriber numbers.
The telecom regulator feels that this could be a viable way to ensure level playing field for new operators. However, given that tariffs are already at very low levels in the 2G space and operators' margins are already under severe pressure, any substantial decline in ICU form current level will impact the industry badly. With the incumbents and newer operators already at opposite end over a number of issues, the latest move by the regulator will further divide the industry.
The S&P CNX Nifty is currently trading at 5,769.30, lower by 16.15 points or 0.28%. The index has touched a high and low of 5,764.50 and 5,769.30 respectively. There were 27 stocks advancing against 23 declines while one stock remained unchanged on the index.
The top gainers of the Nifty were Ambuja Cement up by 3.64%, Sun Pharma up by 2.59%, Ranbaxy up by 1.79%, HUL up by 1.70% and RPower up by 1.13%.
Hero Honda down by 1.91%, Reliance Capital was down by 1.67%, Axis Bank down by 1.66%, IDFC down by 1.64% and Hindalco down by 1.62% were the major losers on the index.
Most of the Asian counterparts were trading in the red; Hang Seng declined 0.52%, Jakarta Composite slid 0.29%, KLSE Composite decreased 0.14%, Straits Times shed 0.26%, Seoul Composite plunged 1.08% and Taiwan Weighted dropped 0.99%.
On the flip side, Shanghai Composite was holding up with the gains of 0.11% 
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