Sensex slips in sluggish session…Nifty @ 4750

The topsy-turvy ride of the Indian market continued even as MPs traded barbs in Parliament on the New Lokpal Bill and Anna Hazare kicked off his three-day stir. Traded volumes remained light, notwithstanding the fact that the F&O expiry is just two days away. Essentially, the main indices never got going like they did on Monday amid lack of broad-based participation. The BSE Sensex and the NSE Nifty lacked sense of direction. The broader market too was more or less subdued.

The undercurrent was cautious as a strong report on the infrastructure output was countered by concerns about the Government’s fiscal profligacy and tight liquidity. The fact that most global markets are in festival mood hasn’t helped matters either. Most market participants are on ‘wait-and-watch’ mode right now amid lingering worries about the worsening domestic economic situation and problems plaguing the world economy.



FII flows haven’t been great this year and may not pick up unless there is material change in the prospects for the Indian economy. That in turn can only happen if the Government gets its act together and clears a few important reform measures. But with elections scheduled across five states in the coming three months, one is not sure if the Centre will take that risk. So, brace for more uncertain times and more volatility.

Coming back to the markets today, the BSE Sensex closed at 15,873, down 97 points or 0.6% from the last close. It touched a day’s high of 16,049 and a low of 15,799 after opening at 15,983.

The NSE Nifty shut shop at 4,750, down 28 points or 0.6% over the previous close. It touched a day’s high of 4,800 and a day’s low of 4,723 after starting at 4,780.

The BSE Small-Cap index and the BSE Mid-Cap index fell by 0.35% and 0.7%, respectively.

The market breadth was negative on the BSE with 1,184 shares rising and 1,480 shares declining. The total market turnover stood at Rs. 1.35 lakh crores.

Realty, Metals, Banking, PSU and Power indices were the biggest losers. Auto, Oil & Gas and IT indices lost ~0.5% each. The remaining sectoral indices fell by less than 0.5%. The Consumer Durables index managed to eke out slim gain of 0.15%.

Markets struggled for direction initially before hitting day’s high in mid morning. The indices soon lost steam and turned lower, touching day’s low in late afternoon trade.

Overall, investors have decided to stay on the sidelines with only few trading sessions left in the year. The broader indices too have fallen from day's high, leading to a drop in the market breadth. Trading volumes have been tepid of late but could pick up in the run up to the F&O expiry on Thursday.

Shares of Reliance Industries and ADAG companies were in focus amid media reports of growing warmth in the relations between the two Ambani brothers. Reports said that the two siblings are meeting in Chorwad, Gujarat to mark Dhirubhai Ambani's birth anniversary.

Bharti Shipyard shares rose after the company said late on Monday that its Board had approved a proposal to restructure the company's high debt. The Board approved the proposal for restructuring of Term/Working Capital Debt of Rs. 28.54bn out of a total debt of Rs. 32.5bn.

Apollo Hospitals shares also advanced after a newspaper reported that an arm of Malaysian sovereign fund Khazanah Nasional Bhd has converted global depositary receipts (GDRs) worth Rs. 2.13bn into equity shares.

Meanwhile, the political heat escalated today as the showdown between Team Anna and the Government continued. Anna Hazare began his three-day agitation in Mumbai. The Parliament also resumed the winter session to debate the New Lokpal Bill.

The Centre could find it tough to pass the Bill given the opposition to several clauses. Also, it doesn’t seem to have the requisite numbers in the Rajya Sabha. A host of Opposition amendments await the Government as it seeks to get the Lokpal Bill passed in Parliament over the next three days.

The good news is that the infrastructure growth picked up pace in November after a dismal October. India's infrastructure sector growth stood at 6.8% in November 2011 versus 3.7% in the same month a year earlier, the Government said on Monday.

For the November IIP data, which is expected to be better, one will have to wait till January 12. The latest WPI inflation report will also be very important ahead of the RBI policy meeting in late January.

The benchmark 10-year government bond yield, which closed at 8.49% on Monday before the auction announcement, climbed to 8.53% today.

The Government will sell Rs. 150bn of bonds on December 30 in an unscheduled auction to partially offset a Rs. 40bn auction cancelled last month and to fund an emerging cash requirement, the finance ministry said on Monday. The move could unsettle markets amid growing concerns about the bloated fiscal deficit.

The Government is widely expected to miss its target of paring its deficit to 4.6% of GDP in the year ending March.

Liquidity in the banking system remained tight on Monday with banks borrowing ~Rs 1.43 trillion from the RBI's repo window, significantly more than the central bank's comfort level of around Rs. 600bn.

The Indian rupee lost some ground today against the US dollar. The rupee was dragged down by dollar demand from local oil refiners and bunched-up outflows as US financial markets resume after an extended Christmas holiday.

Equity markets open for trading in Asia closed mostly lower amid low trading volumes as many traders stayed away from action on account of extended Christmas holidays.

South Korean stocks briefly slid more than 2% in choppy trade before recovering some ground, while Chinese shares dropped further on lingering worries about the economic outlook.

The Shanghai Composite index in China was down 1% while the Kospi in South Korea fell 0.8%. The Nikkei in Japan dropped 0.5%.

Markets across Europe and the US were shut on Monday.

Markets in Australia, New Zealand and Hong Kong were closed today.

French and German stocks led gains in Europe today as stock markets in the region returned to action after the long Christmas-holiday weekend. Traded volumes were expected to remain thin.

The Stoxx Europe 600 index was marginally positive at 242.62. The index closed last week up 3.5% on the back of upbeat US economic data.

London markets remained closed on Tuesday.

US markets will reopen later today. Watch out for data on consumer confidence, home prices and Richmond Fed Manufacturing index.