Volatility plagues Indian indices

Mon, 16 Jul Closing

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Indian equity markets had a rather volatile trading session today. The indices began on a weak note and oscillated to either side of Friday's close throughout the morning session. Selling activity intensified post noon and pushed the indices well into the red. There was no respite in the final trading hour either and the indices closed below the dotted line. While the Sensex today closed lower by around 110 points, the NSE-Nifty today closed lower by 30 points. The BSE Mid Cap and the BSE Small Cap, were not spared either as they closed lower by 1% each. Barring healthcare and consumer durables stocks, losses were seen across sectors.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 55.24 to the dollar at the time of writing.

Auto stocks closed mixed today. While Maruti Suzuki and Hero Motocorp found favour Tata Motors and TVS Motors closed into the red. As per a leading business daily, Tata Motors has announced consolidated sales volumes for June 2012. Global sales, including Jaguar Land Rover (JLR), were up 6% YoY. Growth was largely led by JLR whose volumes were up 39% YoY as growth in the domestic market slowed down. In this, it was Land Rover which was the star performer as Jaguar sales were down 5% YoY. Further, Tata passenger vehicles witnessed a 21% YoY decline in sales. It must be noted that in FY12 too consolidated revenues increased by 36% YoY led by the 42% YoY growth in the JLR business. The passenger vehicles volumes during the year grew by a tepid 4% YoY while commercial vehicles did better to register a 16% YoY growth. Like other players in the auto industry, the company was hampered by higher interest costs and fuel prices which dampened demand. Increased competition in the passenger vehicles space in the domestic market also took its toll on the company.

As per a leading business daily, inflation number for June 2012 came in lower at 7.25%. This was also lower than the 7.55% recorded in May. However, whether it is enough for the Reserve Bank of India (RBI) to lower interest rates remains to be seen. This is because monsoons this year have been disappointing so far. Plus, food inflation continues to be an area of concern at 10.81% in June. India's GDP had slowed down in the March 2012 quarter as the impact of high interest rates and petrol prices took its toll. But because of inflation concerns, the RBI does not have much headroom to lower interest rates. Hence, the onus is now on the government to cut down unproductive spending and bring down its deficit besides improving supply side bottlenecks.