Gloomy global leads torment Indian benchmarks to 14 month lows

A day after witnessing the dead cat bounce, it turned out to be bloodshed across the Dalal Street on Thursday as marketmen grew increasingly pessimistic about the market outlook amid growing evidence over slowing global economy. A slew of reports from the global front dragged the benchmarks to the levels last seen over fourteen months ago in June 2010. Reports including the downbeat Japanese export data, British retail sales figures, muted sales outlook from a US technology bellwether Dell Inc., fiscal tightening pressure in China and global growth downgrades stoked fears amongst traders and renewed worries over the state of the global economy, hitting the already fragile confidence in stock markets. Apprehensions over the economic growth prospects for the euro zone were highlighted after European Central Bank Governing Council member said that he was more concerned about entering a phase of slow growth and low inflation than the risks posed by high inflation. Investors also took profits off the table ahead of a flurry of US economic data including initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles that are scheduled to be released later in the day, which will help them gauging the strength of the US economic recovery. On the domestic front, the weekly inflation numbers showed that India's food price index moderated to 9.03% in week ended August 6 against 9.90% in the previous week but the ease in food inflation numbers failed to provide any kind of support to the domestic sentiments as despite the moderation inflation reading was way beyond RBI’s comfort zone, heightening concerns that the central bank will tighten monetary policy further. Moreover, making matters worse were the reading of the fuel price index which climbed 13.13% in the period against 12.19% last week. Investors also overlooked encouraging reports that rain deficit in India as a whole during the monsoon season thus far has been reduced to one percent. This came on the back of active monsoon conditions prevailing over parts of northwest and east and northeast India, with more rains being forecast later this week. Meanwhile, Indian finance minister remained hopeful that government policies will boost domestic supply of essential commodities and a good monsoon will help bring down inflationary pressure on the economy, especially in the food space.

Earlier on Dalal Street, the benchmark got off to a flat opening with a positive bias but soon the index slipped into the negative territory and commenced a southbound journey which ended with the closing bell only. The frontline indices witnessed a freefall in the session finding absolutely no support at any crucial levels and eventually settled around the lowest point in the session. Finally the NSE’s 50-share broadly followed index Nifty, took a nasty triple digit laceration to settle below the crucial 4,950 support level while Bombay Stock Exchange’s Sensitive Index Sensex got butchered by close to four hundred points and ended just above the psychological 16,450 mark. The broader markets showed little resilience and once again suffered severe pounding amid volatile trades, performing in tandem with their larger peers. In the BSE sectoral space, technology and software shares languished at the bottom of the table, after being annihilated by four percent amid relentless position squaring from the counter after Dell's disappointing outlook overnight fueled concerns about a slow down in global economy. The rate sensitive counters like Banking and Automobile plummeted amid fears that another rate hike by RBI would be inevitable as the stubborn inflation has not shown any significant signs of moderation in recent readings. Though there were no sectoral gainers on the BSE, there was some short covering evident in stocks of DLF and Jaiprakash Associates after the clobbering they went through in recent days. The markets got obliterated on large volumes of over Rs 1.63 lakh crore while the turnover for NSE F&O segment remained on the higher side compared to Wednesday at over 1.51 lakh crore. The market breadth too remained abysmal as there were 679 shares on the gaining side against 2180 shares on the losing side while 104 shares remained unchanged.

Finally, the BSE Sensex got pulverized by 371.01 points or 2.20% to settle at 16,469.79, while the S&P CNX Nifty plummeted by 112.45 points or 2.22% to close at 4,944.15.

The BSE Sensex touched a high and a low of 16,916.81 and 16,433.31 respectively. The BSE Mid cap and Small cap indices got battered by 2.05% and 2.62% respectively.

The gainers on the Sensex were DLF up 2.70%, Hero Motors up by 0.67%, HUL up by 0.41% and Jaiprakash Associates up by 0.26%.

On the flip side, ICICI Bank down 5.03%, Wipro down 4.72%, SBI down 4.47%, Sterlite Industries down 4.28% and TCS down 4.23% were the top losers on the index.

There were no gainers on the BSE sectoral space while IT down 3.99%, Bankex down 3.51%, TECk down 3.15%, Consumer durables (CD) down 3.15% and Metal down 2.54% were the top losers on the BSE sectoral space.

Meanwhile, the Ministry of Finance has decided to impose anti-dumping duty of up to $515.94 per tonne on imports of Sodium Nitrite, chemical from China, which are used in the industries such as pharmaceuticals and dyeing, for five years in order to protect domestic industry. In 2006, government has imposed anti-dumping duty on Sodium Nitrite, mainly used in meat processing and textile industry.

'The anti-dumping duty imposed shall be levied for a period of five years (unless revoked, superseded or amended earlier)...,' the department of revenue under the ministry of finance, said in notification.

The decision comes following a review carried out by the government on continuation of duty on Sodium Nitrite. The commerce ministry had recommended continuation of the duty. The anti-dumping duty was originally imposed after it was found that the shipments were exported to India from China at below the normal price. As per the finding, it was concluded that the domestic industry had suffered a material injury due to dumping of the chemical at a predatory price.

Anti dumping duties are different from safeguard duties, they vary from product to product and from country to country. Countries started anti-dumping duties probes to find whether domestic industry has been hurt due to increase in cheap imports. Since it is a counter measure, countries impose it in the multilateral WTO regime. Anti-dumping measures are taken to protect domestic players and to ensure fair trade. It is not a measure to restrict imports or reason for unfair increase in the cost of production.

Dumping occurs when the export price of goods imported into India is less than the normal value of like articles sold in the domestic market of the exporter. Imports at cheap or low prices do not per se indicate dumping. Anti-dumping action can be taken only when there is an Indian industry which produces “like articles” when compared to the allegedly dumped imported goods. The Indian industry must be able to show that dumped imports are causing or are threatening to cause material injury to the Indian ‘domestic industry’. Material retardation to the establishment of an industry is also regarded as injury.

The S&P CNX Nifty touched high and low of 5,078.60 and 4,932.15, respectively.

The top gainers of the Nifty were DLF up 3.02%, RCom up 1%, JP Associates up 0.78%, Hero Moto up 0.67% and HUL up 0.38%.

On the flip side, R Infra down 7.44%, HCL Tech down 6.92%, Wipro down 5.61%, RCapital down 5.57% and IDFC down 5.56% were the top losers on the index.

The European markets were trading with colossal losses. France's CAC 40 shaved off 2.54%, Britain's FTSE 100 plummeted 2.03% and Germany's DAX got slaughtered by 3.47%.

Most of the Asian equity indices finished the day’s trade in the negative terrain on Thursday as global economic uncertainty shook confidence and Japan’s strong yen continued to bite. Japanese Nikkei dropped over a percent as yen’s strength hurts Japanese exporters by making their products more expensive abroad and reducing their repatriated overseas earnings. Meanwhile, the Country’s exports fell for a fifth straight month in July. Exports were down 3.3 per cent from a year ago to 5.78 trillion yen ($75.4 billion). Moreover, Seoul Composite declined over one and a half percent led by technology stocks which pulled market down amid persistent concerns over the lack of demand for microchips and liquid crystal display units. Samsung Electronics was down 6% and Hynix was 10.5% lower.