Sensex recovers in late trade…Metals down; Defensives up

Frontline Indian stock indices managed to claw their back from the intraday lows in late afternoon trade but closed marginally lower, notwithstanding weakness in global markets and concerns about the eurozone debt crisis. Still, market participants used weakness across global markets to pare some of their bullish bets in Large-Cap stocks after the recent rally to 14-month highs. The BSE Sensex and the NSE Nifty closed about a third of a percent down each on a provisional basis. The BSE Sensex ended at 18,632, down 62 points over the previous close. It had earlier touched a day's high of 18,670 and a day's low of 18,573. It opened at 18,644. The NSE Nifty was quoting at 5,663, down 10 points over the previous close. It earlier touched a day’s high of 5,672 and a day’s low of 5,638. It opened at 5,653. Traders were cautious ahead of Thursday's F&O expiry. In addition, investors were bracing for the upcoming results season that will kick off from the second week of October. Defensives such as FMCG, Pharma and Consumer Durables held their own in a lackluster market. On the other hand, Metals, Teck, Capital Goods, Power and PSU indices were among the notable laggards. Realty, Auto, Banking and IT indices were subdued or marginally lower. The broader indices held on to modest gains, but the overall market breadth was still negative. The BSE Small-Cap index and the BSE Mid-Cap index were up 0.6% and 0.2%, respectively. The INDIA VIX on the NSE was down ~0.5%. European indices slid, with stocks in Spain leading the fall, as anti-austerity protests in Spain served as a reminder of impediments faced by the region's leaders in quelling the debt crisis. In addition, Federal Reserve Bank of Philadelphia President Charles Plosser said that the third round of bond buying (popularly known as Quantitative Easing-3) may fail to stimulate growth in the world's largest economy. The single currency lost 0.3% to US$1.2863, having dipped to US$1.2856 at one point, its lowest level in two weeks. The global "risk-on" rally showed some signs of petering out amid worries that political differences are hampering attempts to resolve Europe’s three-year-old debt crisis. Artur Mas, the president of Catalonia, called early elections and said that Spain’s richest region should seek “self-determination.” Protesters in Spain clashed with police on Tuesday ahead of the release of the 2013 budget which is expected to include additional austerity measures. Borrowing costs for Italy and Spain were also rising sharply after Italian Prime Minister Mario Monti said that he would not run in an election due next year. Spain's Prime Minister Mariano Rajoy said that he would seek an international rescue package - but only if debt financing costs remained too high for too long. Concerns over Catalonia's future escalated after the Spanish region announced a snap election, which could lead to independence for the country's most economically important region, media reports said. Greece also grabbed investors' attention, as ECB executive board member Joerg Asmussen said the central bank will not take part in any potential debt restructuring of the debt-laden country. Greeks held a general strike as ministers sought to renegotiate the terms of the emergency international bailout. Separately, in a speech prepared for delivery in Philadelphia, Federal Reserve Bank of Philadelphia President Plosser said that the central bank’s latest round of monetary easing was unlikely to help growth. “We are unlikely to see much benefit to growth or to employment from further asset purchases,” Plosser said. Meanwhile, Chinese shares fell to their lowest level in more than 43 months today amid worries about the health of the world's second largest economy. The Shanghai Composite barely held on to the 2000-points level. The index briefly traded below 2000 but managed to close above it in the final minutes of trading. The last time the index touched that level was in February 2009. Back home, the RBI Governor D. Subbarao said on Tuesday that inflation is still at an unacceptable level and efforts should be made to rein in prices further to provide relief to people, especially, the poor. "In the last two years, we have been able to bring down the rate of inflation but I admit inflation is still high and it should come down further," he said. "Inflation should be brought down to provide relief to people (especially) to poor," Subbarao said while addressing a gathering at the central bank's 'Outreach Programme' to make people aware of banking services. Meanwhile, Chief economic adviser Raghuram Rajan was quoted as saying on Tuesday that the Indian economy is likely to grow by 5.5-6.5% in the current fiscal year. An 8-9% GDP growth rate is still a few years away as slowing investments will lead to a much slower-than-expected growth revival, he said.