Bloodbath on Dalal Street continues; Sensex slips below 23,000 mark

Thursday’s session turned out to be a disaster for the Indian benchmarks which crumbled like a ‘house of cards’ and went on to breach various key technical levels in the over three percent freefall. The frontline indices which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session’s close. Sentiments got undermined after US Federal Reserve chair Janet Yellen in a testimony to Congress stated that global economic turmoil and massive sell-off in global equity markets could spook the US economy, but showed faith in the US economy, rekindling hopes that there will be further rate hikes during the rest of the year. On the domestic front, sentiments remained somber with the report that foreign institutional investors’ (FIIs) shareholding in Indian companies dropped to lowest level in nearly three years at the end of December quarter. Percentage of FII holding in 1,000-odd companies listed on the NSE stood at 18.67%, lowest since March 2013. Besides, decline in the rupee coupled with a slide in the crude oil prices also dented the sentiments. Indian rupee again breached the 68-mark as it fell by 17 paise to 68.02 against the American currency, as the demand for dollar from banks and importers gathered pace, while Oil prices slid as record US crude inventories and worries about a global economic slowdown. Meanwhile, cautiousness ahead of the release of Industrial production figures for the month of December and Retail inflation data for the month of January, also kept market-participants on the tenterhooks.

On the global front, European markets made an awful start with CAC, DAX and FTSE trading with a cut of around three percent as a sell-off in global bond markets led investors to trim their risk exposure. Asian markets ended mostly in the red as investors weighed a warning from Federal Reserve chair Janet Yellen that global financial market turbulence could hurt US growth. Overnight, US stocks ended lower, leaving the benchmark indexes with their longest stretch of consecutive losses in months.

Back home, the benchmark got off to a weak start and the indices breached the psychological 7,200 and 23,600 levels in the early moments of trade since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the opening of European markets in the noon trades, as one negative report after another from the continent kept creating havoc for the local bourses. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session’s close after suffering gargantuan losses.  Finally the NSE’s 50-share broadly followed index Nifty, suffered a nasty two hundred point laceration to settle below the crucial 7,000 support level, while Bombay Stock Exchange’s Sensitive Index Sensex got obliterated by over eight hundred points and closed just below the psychological 23,000 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of over three percent. On the sectoral front, the high beta sectors like Realty, Power and PSU witnessed brutal assaults as they got clobbered by 5.94%, 4.81% and 3.90% respectively. While counters like metal and oil & gas too suffered severe pounding. The market breadth remained pessimistic as there were 324 shares on the gainers side against 2359 shares on the losers side, while 96 shares remained unchanged.

Finally, the BSE Sensex slumped by 807.07 points or 3.40% to 22951.83, while the CNX Nifty plunged by 239.35 points or 3.32% to 6,976.35. 

The BSE Sensex touched a high and a low 23758.46 and 22909.12, respectively. The broader indices too made dismal closing; the BSE Mid cap index ended down by 3.27%, while Small cap index ended down by 4.64%

The top losing sectoral indices on the BSE were Realty down by 5.94%, Power down by 4.81%, PSU down by 3.90%, Oil & Gas down by 3.82% and Metal down by 3.81%, while there were no gainers on BSE sectoral space.

The top gainers on the Sensex were Cipla up by 0.40% and Dr. Reddys Lab up by 0.01%. On the flip side, Adani Ports &Special down by 6.94%, BHEL down by 6.01%, Tata Motors down by 5.55%, ONGC down by 5.23% and Mahindra & Mahindra down by 4.93% were the top losers.

Meanwhile, Minister of State for finance Jayant Sinha has said that in order to push strategic stake sales in state-run companies, the government will set up a Disinvestment Commission and will offload 20-26% in IDBI Bank through a qualified institutional placement (QIP). Disinvestment Commission is once again being created so that the government can go ahead and do strategic disinvestments.

Disinvestment Commission was first set up in the year 1992 and two subsequent panels recommended strategic sales in some state-run companies and helped cut delays in resolving inter ministerial issues. The panel was wound up in 2004. Strategic sales in state-run companies are expected to be the big theme in 2016-17. A strategic sale is the transfer of shares to an institution with management control. QIP is a fund-raising process through issue of securities to institutional buyers.

Sinha said the government's stake can drop below 49% in IDBI Bank as there is no need to amend any act as it comes under the Companies Act. In order to go forward with the transformation of IDBI Bank, Sinha said that the government has undertaken QIP somewhere between 20%-26%. The government owns over 80% in IDBI Bank and will retain 50% after the QIP. In 2015-16, the government though planned to push the strategic sales but due to the policy hurdles the idea was dropped out. Now the government seems determined to push the strategic sales.

Meanwhile, talking about the strategic sales in state run hotels, he said the government would want to get the valuation right before proceeding on the issue as the people want to be able to get a reasonable valuation for them.

The CNX Nifty touched a high and low 7,208.65 and 6,959.95 respectively. 

The few gainers on Nifty were Cipla up by 0.82%, Bharti Airtel up by 0.22% and Dr. Reddys Lab up by 0.10%. On the flip side, Vedanta down by 7.36%, Tata Motors down by 6.95%, BHEL down by 6.72%, Adani Ports and Special Economic Zone down by 6.33% and ONGC down by 5.64% were the top losers.

European markets were trading in red; Germany’s DAX tumbled 295.76 points or 3.28% to 8,721.53, UK’s FTSE 100 decreased 164.52 points or 2.9% to 5,507.78 and France’s CAC was down by 163.2 points or 4.02% to 3,898.00.

Asian markets ended mostly lower on Thursday, led by sharp drops in Hong Kong and South Korea, which were catching up to global market turmoil after being shut for Lunar New Year holidays. Investor sentiment remained shaky as the oil price recovery proved short lived and Federal Reserve Chair Janet Yellen warned the US economy is facing risks from tightening domestic financial conditions as well as global economic turmoil. She was non-committal on taking a pause in plans to raise interest rates despite emerging headwinds. The markets in China and Taiwan remain closed for the Lunar New Year holiday, while Japan was shut for the National Foundation Day.