The Indian market fell for a third consecutive session Wednesday, as reports about a possible Rs.3 per litre hike in diesel prices and sustained selling in Reliance Industries and State Bank of India spooked investors.
With under-recoveries of oil marketing companies still remaining high, the government is likely to raise diesel prices by Rs.3-5/litre, while those of kerosene and LPG will be raised by Rs.2-3/litre and Rs.25/50/cylinder, respectively, media reports said.
The imminent hike in fuel prices possibly next week will make it very difficult for the central bank to rein in inflation, which is hovering below 9 percent, nearly double the Reserve Bank of India's medium-term target of 4-5 percent.
The benchmark 30-share Sensex exhibited sideways movement before ending down 51 points or 0.28 percent at 18,086, while the broader 50-share Nifty fell by 18 points or 0.34 percent to 5,421. Second-line stocks underperformed, with the BSE mid-cap and small-cap indexes ending down 0.61 percent and 0.80 percent, respectively.
Sector-wise, oil/gas, healthcare, auto, realty and banking stocks bore the brunt of the selling while IT and FMCG stocks witnessed stock-specific buying.
State-run lender SBI fell to a one-month low of Rs.2,331 before ending 2.4 percent lower at 2,356 on brokerage downgrades after posting disappointing quarterly earnings.
Heavyweight Reliance Industries lost a little over 2 percent after the oil ministry and its technical arm DGH reportedly ordered the company to raise gas output at its KG-D6 fields. State-run explorer ONGC shed 1.3 percent, extending Tuesday's 7 percent slide.
Bajaj Auto shed 1.7 percent after a one-time gain of Rs.827 crore due to surplus on prepayment of sales tax helped the company post a 165 percent jump in fourth-quarter net profit.
Among the other prominent decliners, Tata Steel, ICICI Bank, Jindal Steel, Jaiprakash Associates, Reliance Communication, Tata Motors and Reliance Infrastructure closed down between 0.5 percent and 4.10 percent.
On the other hand, Hero Honda Motors, which has reportedly applied for a name change to Hero Moto, closed up nearly 5 percent. ITC rose 0.7 percent and Hindustan Unilever added marginally on defensive buying. Larsen & Toubro posted a modest 0.1 percent gain on winning a Rs.1,450-crore contract from Gujarat State Petroleum Corporation.
HDFC rose 2.3 percent and TCS gained 0.8 percent after they have been named as India's best managed companies in an annual poll conducted by Finance Asia magazine. Maruti Suzuki (up 1.8 percent), Tata Power (up 1.6 percent), Wipro (up 1.5 percent), Hindalco (up 1.3 percent), DLF (up 0.9 percent), BHEL (up 0.6 percent), HDFC Bank (up 0.5 percent) and Bharti Airtel (up 0.3 percent) were the other gainers in the Sensex pack.
Coal India, the world's largest coal miner, plunged 5.6 percent on a report that power generation companies have requested the Centre to halt the spot sales of coal by the state-run giant to address supply constraints.
Mphasis slumped 5.5 percent after its U.S. parent HP lowered the profit outlook on falling computer sales. Shalimar Paints hit a new 52-week high of Rs.450 before paring gains and ending 3 percent lower at Rs.396 on profit taking. Sagar Cements climbed 4 percent on posting robust Q4 earnings.
State-run oil marketing companies such as BPCL, HPCL and IOC fell by 3-4 percent as crude futures rose above $98 barrel in late Singapore trading amid a weaker dollar and data showing a decline in gasoline inventories. The Energy Department's Energy Information Administration reports its weekly supply data later in the global day.
Meanwhile, the finance ministry would not extend the Duty Entitlement Pass Book (DEPB) scheme for exporters beyond June 30, revenue secretary Sunil Mitra said on Wednesday. The tax incentive scheme, which is causing an estimated annual loss of 80 billion rupees ($1.77 billion) to the government, will be phased out on June 30 as the economy is doing well and needed no incentives, Mitra said.
Cipla, which said it would see a marginal impact on earnings due to the withdrawal of the scheme, ended down 0.2 percent. Glenmark, Sun Pharma, Dr Reddy's, Piramal Health and Biocon ended down by 2-3 percent.
On the global front, the other Asian markets rose notably on Wednesday, with gains ranging between 0.2 percent and 1.6 percent, as bargain hunting emerged despite data showing weaker U.S. housing starts data and the lingering European debt worries.
A rebound in commodities such as copper, zinc, nickel and crude on a weaker dollar ahead of the BOE and FOMC minutes of interest rate meeting due today also helped lift sentiment to a certain extent.
European markets were broadly higher in early trading, with positive corporate news and a strong rebound in commodity prices boosting sentiment. Trading in the U.S. index futures suggested that the Dow could rise 29 points at the opening bell on Wednesday after ending down about half a percent overnight.
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