Sensex slips on political woes…Bucks global trend

Indian stock indices resumed their southbound journey, reversing part of the previous session’s stellar rally, after the Government failed to build a political consensus on the thorny issue of allowing FDI in multi-brand retail. The parliament was adjourned for the sixth consecutive day today as various parties, including key UPA allies, continued to demand a rollback of the Cabinet decision on opening up the retail trade.

Adding pressure to the fragile sentiment were reports that Standard & Poor's could downgrade the outlook on France's 'AAA' rating to negative in the next few days. Moody's Investors Service said that it may cut subordinated debt ratings on some EU banks. In addition, Fitch Ratings warned the US about its ballooning budget deficit.



Fitch maintained its ‘AAA’ rating on the US but lowered its outlook to negative.

The BSE Sensex ended at 16,008, down 158 points over the previous close. It had earlier touched a day’s low of 15,952 after opening at a day’s high of 16,210.

The NSE Nifty finished at 4,805, down 46 points over the previous close. It earlier touched a day’s low of 4,787 and a day’s high of 4,866. It opened at 4,864.

The two benchmarks opened lower and stayed down for the morning trade before hitting day’s high in early afternoon. However, the recovery proved to be short-lived. The indices turned lower again and touched session lows before closing off day’s lows.

The broader indices held their own initially before giving into the selling pressure in the afternoon. The BSE Small-Cap index and the BSE Mid-Cap index fell ~0.2% and ~0.5%, respectively.

In terms of sectors, Pharma, FMCG and Auto managed to buck the negative trend. The Realty sector was the top loser, down 2.3%. Banking and Oil & Gas indices were the other big losers, down 1.9% and 1.8%, respectively. Consumer Durables, Metals, PSU and Teck indices dropped 1% or more each.

Shares of retail companies were down for the second successive session as pressure mounted on the Government to rollback the decision on allowing up to 51% FDI in multi-brand retail trade. Pantaloon, Shoppers Stop, Trent, Provogue, Vishal Retail and Koutons all finished lower.

The Parliament has hardly done any business of significance in six sittings during the ongoing Winter Session. It may not function normally until the FDI in retail issue is settled.

The Prime Minister had called an all-party meet on the sensitive matter. However, the ruling partly could not assuage the concerns of various political parties. The political rumblings are likely to have some effect on the markets.

Meanwhile, reports suggested that India's GDP was likely to fall sharply in the second quarter ended September 30, 2011. Some economists even fear a dip below 7%. The data will be released by the Government tomorrow. India's Q1 GDP grew by 7.7%, weakest in six quarters.

For the day, global investors will have to contend with reports on US consumer confidence, US housing prices and EU consumer confidence.

Watch out for statistics on manufacturing PMI, services PMI, exports and auto sales scheduled to be released later in the week. China's manufacturing PMIs and US' monthly jobs report will be among the other important data points to keep an eye on for the week.

Asian markets closed higher for second day in a row on growing speculation that European leaders are making progress in addressing the region’s credit crisis.

European stocks recovered from a weak opening as investors awaited the outcome of euro-zone finance ministers’ meeting in Brussels later in the day. The eurozone finance chiefs are slated to consider draft operational rules for the region's bailout fund.