Tuesday phenomenon ends...Sensex snaps 5-day rally

After five weeks, the Tuesday phenomenon has come to an end. The Indian equity indices ended with modest losses as traders preferred to book some profits following the recent rally.

The main benchmarks retreated from their intraday highs in the afternoon trade after the Government's advance estimate for FY12 showed that GDP is likely to grow by less than 7%. Although the numbers are not surprising, they certainly gave market players an excuse to step back after a five-week winning streak.

The Government today released it's advance GDP estimate for the year ending on March 31, 2012. India's GDP is expected to expand by 6.9% in FY12 as against a healthy 8.4% in the last two years. The Indian economy had expanded by a modest 6.7% in FY09 in the wake of the global financial crisis.



The sentiment was also edgy today amid concerns about Greece's ability to secure a second bailout package from the international lenders to avert a default.

The BSE Sensex ended at 17,622, down 85 points over the previous close. It had earlier touched a day’s high of 17,832 and aday’s low of 17,582. It opened at 17,813.

The NSE Nifty closed at 5,335, down 26 points over the previous close. It earlier touched a day’s high of 5,413 and a day’s low of 5,322. It opened at 5,412.

The market breadth was negative. The Small-Cap index was down ~0.4% while the Mid-Cap index was lower by ~0.8%.

In terms of sectors, Capital Goods and Realty indices were the biggest losers, down ~2% each. The Power index was also down almost 2%.

Metals, Teck and Auto indices also lost more than 1% each. IT and PSU indices also finished in the red. Oil & Gas, Consumer Durables, Banking and FMCG indices gained modestly.

Shares of Reliance Industries (RIL) edged higher after Goldman Sachs upgraded the index bellwether to a 'Buy' from 'Neutral', citing a potential gain in margins on increased refining and recovering oil demand. Goldman raised its target prices for the oil and gas major to Rs. 970 from Rs. 960 previously.

Shares of Hindustan Unilever Ltd. (HUL) were down today, a day after the FMCG giant posted better-than-expected Q3 net profit on rising prices and volume growth. However, HUL did warn about headwinds from an uncertain global environment.

HUL said that it could have to deal with challenges arising from inflation and currency volatility. However, it vowed to maintain relentless focus on cost management and execution to contain these threats.

Shares of Manappuram Finance tumbled after the RBI banned the gold loan company and an unlisted group company from taking public deposits.

The RBI said that acceptance of deposits either by Manappuram Finance or Manappuram Agro Farms (Magro) is punishable with imprisonment.

Manappuram Finance became a non-deposit taking non-banking finance company (NBFC) from March 22, 2011.

The main indices opened higher and went on to hit the day's high in late morning. But, they could not hang onto those gains and gradually started dipping before touching a day's low towards the close of trade. Market breadth was also weak today as the broader indices too declined after the recent advance.

Technically, the market does appear to be overbought. So, traders should be cautious at this juncture and wait to see if the Sensex and the Nifty sustain above their 200-DMA.

Aviation shares like Kingfisher Airlines, Jet Airways and Spicejet rallied today after a Group of Ministers recommended allowing the domestic carriers to directly import jet fuel. ATF accounts for 40-50% of an airlines total costs in India. The GoM suggestion will need an approval from the Union Cabinet.

On the issue of foreign direct investment (FDI), Ajit Singh said today that a Cabinet Note has been prepared and it will be sent to the Commerce Ministry after which the Cabinet will take a call on it.

Most Asian markets were down today amid growing tensions over the fate of Greece as the debt-ridden eurozone nation's leaders failed to adhere to the Monday's timeline for accepting the terms of the second round of bailout. European indices were also down after a positive start.

The market is divided over whether the wrangling over Greece's debt restructuring talks would eventually be resolved or trigger contagion across other vulnerable eurozone countries.

US stocks finished flat on Monday as Greek political parties failed to agree on terms for a new bailout package.

European stocks declined on Monday as talks between Greece and various other stakeholders drag on amid rising threat of a default. Willy-nilly, Greece has become a test case for the eurozone as it struggles to rein in a long-running debt crisis.

Other events to watch out for today include: interest rate decision in Australia, industrial production in Germany and Federal Reserve Chairman Ben Bernanke’s testimony

"The release of the advance GDP estimate for FY12 probably reminded investors that the Indian economy is still suffering from multiple problems. Although the RBI has stopped hiking rates and inflation has moderated slightly, there are concerns about the Government's fiscal profligacy and the eurozone debt crisis.

Liquidity has been strong this year so far as most big central banks are running ultra-loose monetary policy to support their economies. Some of that money is finding its way into risky assets like emerging market equities. How long this trend continues remains to be seen. So, we would urge some caution at this stage.

On the domestic front, markets will be keenly watching events like the Uttar Pradesh state elections and the Union Budget over the next few weeks. One must also bear in mind that quite a few top sectors of the economy are facing acute headwinds.