Sustained selling on weak global cues

Mon, 11 Jul Closing

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Indian stock market had a weak outing today, with profit booking in the major heavy weights. In the final trading hour, selling pressure took its toll and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 137 points (0.7%), the NSE-Nifty closed lower by around 44 points. The BSE-Midcap and BSE-Small cap, also faced selling pressure and closed 0.3-0.4% lower. While gains were seen in FMCG and consumer durables stocks, realty and IT were at the receiving end.

As regards global markets, Asian indices closed in the negative today while European indices have also opened deep in the red. The rupee was trading at Rs 44.47 to the dollar at the time of writing.

Metal stocks have been under selling pressure today, with Hindalco closing as one of the top losers for the day. This was probably on the back of Environment Minister, Jairam Ramesh refusing to give forest clearances to the Mahan coal block, in the Singrauli field (Madhya Pradesh). This coal block was meant for the use of Essar and Hindalco's power plants. His main point of contention was that the coal field would only provide power requirements for only 14 years. As coal linkages were not available for the next 10-15 years, he felt that it would be a waste to lose good quality forest cover over an incomplete fuel requirement.

But, Mr Ramesh has not put his foot down completely, but rather he has thrown the ball into the court of a group of ministers to make a final decision. However, he has recommended that an alternative coal linkage in the Sohagpur coalfields be provided.

There is now some evidence of a slowdown in the auto industry in India. Domestic passenger car sales grew by a mere 1.6% to 143,370 units in June 2011, from 141,087 units in the same month last year. However, motorcycle sales grew by 15% in the same period. Sales of commercial vehicles however saw a decent growth of 17.8% to 62,009 units in June 2011 from 52,627 units in the year-ago period according to data from the Society of Indian Automobile Manufacturers (SIAM).

According to SIAM president, Pawan Goenka, the India's automobile industry is expected to grow between 11-13% in the financial year 2011-12 (FY12). Passenger car sales are expected to grow from 10-12%, down from an earlier forecast of 16-18%. This growth is less than half of the 30% growth levels recorded in FY11. Higher interest rates and fuel price hikes have dampened buyer sentiment.