Sensex sheds 2.2% on euro-zone debt worries

The key benchmark indices slumped as stocks fell across the world on concerns over Ireland's debt and on fears of further monetary tightening in China. Worries that US funds will close positions in emerging market stocks ahead of the year-end to cash in on recent gains, also added to the decline. The barometer index BSE Sensex fell below the psychological 20,000 mark and the 50-unit S&P CNX Nifty fell below the psychological 6,000 mark.



Selling was broad-based as all the sectoral indices on BSE were negative and the market breadth was weak. Realty, Metal and Capital Goods shares witnessed major selling pressure, while Healthcare stocks fell to a lesser extent. The BSE 30-share Sensex plunged 444.55 points or 2.19%, up close to 33 points from the day's low and off close to 515 points from the day's high.

The Sensex has lost 1139.82 points or 5.42% from a record closing high of 21,004.96 on 5 November 2010.

The market edged lower in early trade as most Asian stocks fell. The market moved in a narrow range in the negative zone in morning trade. The key benchmark indices weakened once again after recouping most of the initial losses in mid-morning trade as weak Asian stocks dampened investor sentiment. The market slumped in early afternoon trade as Chinese stocks tumbled. Bargain hunting emerged in afternoon trade that lifted the key benchmark indices from the day's lows. The market hit a fresh intraday low in mid-afternoon trade. Stocks hovered near the day's lows in late trade.

The stock market remains closed tomorrow, 17 November 2010, on account of Bakri-Id.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 4.34% at 21.13. The index had lost 6.38% to 20.25 on Monday, 15 November 2010, a day after Friday's (12 November 2010) sharp surge. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

European shares retreated on Tuesday, led lower by miners, on concerns about Ireland's debt ahead of a key meeting of euro zone finance ministers and renewed talk of further policy tightening in China.. The key benchmark indices in France, Germany and UK fell by between 0.45% to 1.30%.

Euro zone finance ministers will try to find a way to end Ireland's debt crisis on Tuesday, with Dublin resisting pressure to seek a state bailout by signalling that only its banks may need help. European Union officials are saying its fund facility is ready, but Ireland hasn't come forward, saying it's fully funded until the middle of 2011 and can also dip into its EUR25 billion pension reserve.

Asian stocks were mostly lower Tuesday as an interest rate hike in South Korea added to speculation China will also tighten monetary policy to cool inflation. China's Shanghai Composite slumped 3.98%, leading the fall. Any slowdown in the Chinese economy, the world's second-largest and fastest growing, would likely reduce its demand for oil, metals, grains and other imports and be felt around the world.

South Korea's Kospi fell 0.77% after the Bank of Korea raised its key interest rate for the second time in four months to 2.5% from 2.25%.

The key benchmark indices in Singapore, Indonesia, Hong Kong and Japan fell by between 0.31% to 1.39%. But, Taiwan's Taiwan Weighted rose 0.87%.

New York stocks had a mixed finish Monday, 15 November 2010, as the dollar posted its second day of gains over concerns that Europe is on the edge of another bailout.

Sales at US retailers posted their strongest gain in seven months during October, adding to signs the economy was regaining strength after hitting a soft patch in the summer. The generally upbeat report was tempered somewhat by news that a manufacturing gauge in New York state fell this month to its lowest level since April 2009.

Trading in US index futures indicated that the Dow could fall 60 points at the opening bell on Tuesday, 16 November 2010.

Back home, India's exports in October 2010 rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.

The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.

Industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.

The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.

While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at $28.53 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.

Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3243 firms surged 45.5% to Rs 104504 crore on 19.9% growth in sales to Rs 930662 crore in Q2 September 2010 over Q2 September 2009.

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.

The BSE 30-share Sensex fell 444.55 points or 2.19% to 19,865.14. The Sensex slumped 477.47 points at the day's low of 19,832.22 in mid-afternoon trade. The Sensex rose 70.41 points at the day's high of 20,380.10 in early trade.

The S&P CNX Nifty fell 132.90 points or 2.17% to 5,988.70. The Nifty hit a low of 5,970.60.

The BSE Mid-Cap index outperformed the Sensex, falling 2.15%. The BSE Small-Cap index fell 2.92% and underperformed the Sensex.

BSE clocked turnover of Rs 4656 crore, higher than Rs 4635.05 crore on Monday, 15 November 2010.

The market breadth, indicating the health of the market, was weak in complete contrast with a strong breadth earlier in the day. On BSE, 2433 shares fell while 598 shares rose. A total of 93 shares remained unchanged.

The BSE PSU index (down 2.19%), Auto index (down 2.22%), Consumer Durables index (down 2.58%), Capital Goods index (down 2.78%), Metal index (down 3.11%), Realty index (down 3.55%), underperformed the Sensex. The BSE Healthcare index (down 0.66%), IT index (down 1.78%), Oil & Gas index (down 1.93%), the BSE banking sector index Bankex (down 2%), FMCG index (down 2.06%), Power index (down 2.10%), outperformed the Sensex.

From 30 share Sensex pack, 29 fell and just one rose.

India's largest listed telecom operator by sales Bharti Airtel rose 1.16%. It was the only Sensex gainer.

Index heavyweight Reliance Industries (RIL) fell 2.24%. The stock fell for the sixth straight day.

Metal stocks fell on worries over monetary tightening in China, the world's biggest consumer of consumer of copper and aluminium. Jindal Steel & Power, Tata Steel, NMDC, National Aluminum Company, Hindustan Zinc, Steel Authority of India, Jindal Saw, JSW Steel, Hindalco Industries and Sterlite Industries fell by between 1.13% to 5.40%.

India's largest realty player by sales DLF fell 2.45%, extending last three days' sharp losses on weak Q2 results. Among other realty stocks, Sobha Developers, Parsvnath Developers, Ackruti City, Peninsula Land, Phoenix Mills, Omaxe, HDIL, Ansal Properties, Mahindra LifeSpace Developers, Anant Raj Industries, Indiabulls Real Estate, Orbit Corporation and Unitech fell by between 0.06% to 6.42%.

Capital goods stocks fell on profit taking. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 3.53%. A consortium led by L&T has bagged its largest overseas EPC order worth $764 million for the design and development of the New Salalah International Airport in Oman. The project is in consortium with Oman-based Galfar Engineering & Contracting SAOG. L&T's size of the order is pegged at $500 million, to be completed in 30 months. Upon completion, the airport will have a capacity to handle two million passengers per annum.

Among other capital goods stocks, Punj Lloyd, Jyoti Structures, Bharat Heavy Electricals, Bharat Bijlee, Havells India, ABB, Siemens, Crompton Greaves, Alstom Projects, Praj Industries, SKF India, Bharat Electronics and Areva T&D (India) were down by 0.02% to 3.53%.

Consumer durables stocks reversed initial gains. Blue Star, VIP Industries, Bajaj Electricals, Videocon Industries, Titan Industries, Gitanjali Gems and Rajesh Exports fell by 0.01% to 5.70%.

Bank stocks fell on profit taking. India's largest bank by branch network and net profit State Bank of India (SBI) fell 2.61%. The stock had jumped 4.41% on Monday, 15 November 2010, on reports the state-run bank is eyeing acquisition of a bank in Indonesia in an all cash deal not exceeding $100 million to expand its operations in Southeast Asia. Meanwhile, bank will start a road show next week for its planned euro bond issue, Chairman O.P. Bhatt said on Monday, 15 November 2010. Bhatt had said last week SBI was planning to launch a benchmark-size 5-year euro bond issue.

The bank reported lower than expected Q2 result last week. On a consolidated basis, SBI's net profit fell 22.52% to Rs 2363.95 crore on 14.57% increase in total income to Rs 37925.44 crore in Q2 September 2010 over Q2 September 2009. As State Bank of Indore was merged with SBI with effect from 26 August 2010, the Q2 September 2010 are not comparable with the corresponding period of the previous year. The bank announced Q2 result after market hours on 8 November 2010.

India's second largest private sector bank by net profit HDFC Bank fell 0.67%. India's largest private sector bank by net profit ICICI Bank fell 1.71%.

Shares of Gravita India settled at Rs 210.40 on BSE, a steep 68.32% premium over the initial public offer price (IPO) of Rs 125. The stock debuted at Rs 218.75, a 75% premium over the issue price. The stock hit a high of Rs 255 and a low of Rs 205. The counter clocked volume of 2.53 crore shares on BSE.

Gravita India clocked a highest turnover of Rs 586.60 crore on BSE. State Bank of India (Rs 286.94 crore), Tata Steel (Rs 122.58 crore), SKS Microfinance (Rs 98.65 crore) and Coal India (Rs 90.13 crore), were the other turnover toppers on BSE in that order.

Cals Refineries reported a highest volume of 3.91 crore shares on BSE. Gravita India (2.53 crore shares), Alok Industries (1.21 crore shares), Mahindra Satyam (1.03 crore shares) and Himachal Futuristic Communication (75.54 lakh shares), were the other volume toppers on BSE in that order.