Market crashes below crucial levels after Monday’s dead cat bounce

A day after witnessing the dead cat bounce, it turned out to be carnage across the Dalal Street on Tuesday as marketmen grew increasingly pessimistic amid increasing uncertainty over the market outlook. Indian stock markets went through a volatile trading session as the benchmark equity indices slipped below the psychological 16,550 (Sensex) and 5,000 (Nifty) levels by the end.

The frontline indices gained steam in late morning trades and pared most of their losses to come in close proximity with the previous closing levels. However, nervous market participants resorted to ruthless across the board profit booking following the disappointing start for European stock markets as the uncertainty over European debt trouble was far from over since Greek leaders were busy in cross-party talks to form a government, and with slim chances for a coalition, a new set of elections is likely.

The Asian markets too failed to prop up sentiments in the domestic markets as after last session’s brutal rout, stock markets in the Asian region showed modest recuperation but investors lacked conviction to take large bests following the overnight consolidation on Wall Street. Back home, marketmen again turned jittery as the anemic rupee slipped back to 53 against the US dollar despite the Finance Minister deferring GAAR by a year and the central bank’s surprise open market operation (OMO) purchase auction of bonds for Rs 12,000 crore on Monday.

Eventually, the downslide in frontline gauges, which logged their fourth negative close in last five sessions, only ended with the close of trade after suffering a nasty laceration of over two percent. Meanwhile, the gas related stocks like GAIL (India), Indraprastha Gas and Gujarat Gas surged in the session as nearly a month after the conflict between utility firm Indraprastha Gas and the regulator Petroleum and Natural Gas Regulatory Board (PNGRB), the Delhi High Court is expected to deliver its final verdict later in the day.

However, the heavyweight software and technology exporters like Infosys, TCS, HCL Tech and Wipro traded on a somber note pressuring the frontline gauges after Cognizant announced its quarterly earnings and stunned the markets by lowering its 2012 revenue guidance by 3% to 20% at $7.34 billion from an earlier 23%, citing drop in demand for its services, and pointing to a lack of improvement in discretionary spending. Though there appeared no sectoral gainer, index heavyweight Hindalco Industries managed to settle on a positive note with gains of over a percent post announcing better than expected quarterly earnings.

The NSE’s 50-share broadly followed index Nifty got pounded by over two percent to settle just below the psychological 5,000 support level while Bombay Stock Exchange’s Sensitive Index - Sensex got obliterated by over three hundred sixty points to finish below the crucial 16,550 mark. Moreover, the broader markets too finished on a negative note but managed to outperform their larger peers.

The markets plummeted on larger volumes of over Rs 1.70 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Monday, at over Rs 1.30 lakh crore. The market breadth turned pessimistic by the end as there were 1052 shares on the gaining side against 1688 shares on the losing side while 132 shares remained unchanged.

The BSE Sensex touched a high and a low of 16,918.31 and 16,502.91 respectively. The BSE Mid cap and Small cap indices plunged by 1.28% and 0.87% respectively.

The major gainers on the Sensex were Coal India up by 2.04%, GAIL India up by 1.63%, Hindalco up by 1.16%, HUL up by 0.29%, and DLF up by 0.16% while TCS down by 5.77%, BHEL down by 4.86%, ITC down by 3.97%, Tata Motors down by 3.88% and L&T down by 3.70% were the major losers on the index.

There were no gainers on the BSE sectoral space while Capital Goods down by 3.44%, IT down by 3.09%, Bankex down 2.84%, Power down by 2.52% and FMCG down by 2.45% were major losers on the BSE sectoral space.

Meanwhile, Indian government is taking copious numbers of incentives and action for promoting the exports of agricultural products including fruits and vegetables under Plan schemes of the Commodity Boards and Export Promotion Councils etc. These schemes are likely to benefit the entire horticulture industry.

Under the administrative control of the Department of Commerce, the Agricultural and Processed Food Products Export Development Authority (APEDA) is also putting various Schemes into practice to expand financial assistance to the eligible exporters; namely schemes for market development; infrastructure development; quality development; research & development and transport assistance. Besides these measures, the Ministry of Commerce & Industry has put in place various schemes namely MDA, MAI, ASIDE, Vishesh Krishi and Gram Upaj Yojana, Focus Product Scheme, Focus Market Scheme, Town of Export Excellence, etc. to encourage exports.

The government also provides assistance under Centrally Sponsored Scheme on National Horticulture Mission (NHM) for various interventions aimed at increasing production and productivity of horticultural crops for the holistic development of horticulture in the country. Production related activities include development of planting material through nurseries, area expansion, rejuvenation, integrated pest management, integrated nutrient management and creation of water resources. Besides, assistance is also being included for creating infrastructure for post harvest management and marketing.

Export of fruits and vegetables are allowed without any constraint under the Foreign Trade Policy (FTP).  The government keeps close and steady eyes on the accessibility of all agriculture products at reasonable price in domestic market and imposes restrictions on their exports as and when required.

The S&P CNX Nifty touched a high and low of 5,119.95 and 4,983.60 respectively.

The top gainers on the Nifty were Hindalco up by 1.51%, Coal India up by 1.42%, GAIL up by 1.32%, SAIL up by 0.70% and HUL up by 0.29%.

On the flip side, JP Associates down by 8.77%, TCS down by 5.75%, BHEL down by 5.51%, R Infra down by 5.38%, and HCL Tech down by 5.27% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down by 1.88%, Britain’s FTSE 100 down 0.34%, while Germany's DAX was down by 0.99%.

After witnessing subdued close in previous session, most of the Asian equity indices showed rebound on Tuesday’s trade. Barring Shanghai and Hang Seng all the Asian counters ended the day’s trade in the positive terrain as investors kept themselves busy in buying battered down fundamentally strong stocks. Meanwhile, Japan’s Nikkei share average rose from a three-month low as investors reassessed the immediate impact of French and Greek poll results, although they remained wary of further flare up in the crisis-hit euro zone.

Meanwhile, Taiwan stocks closed flat on Tuesday, though DRAM maker Nanya Technology gained by the 7-percent daily limit after its technology partner Micron won the right to negotiate exclusively to buy bankrupt Japanese maker Elpida Memory. However, Hong Kong shares suffered a fourth consecutive loss as weakness in Chinese property developers helped reverse early gains in the face of stiff chart resistance formed after Monday's slump.