Global growth worries drag benchmarks lower; Nifty below 5,700 mark

Stock markets in India, after witnessing cut of over half a percent due to flash crash, continued their south-bound journey for second day in a row with frontline indices settling below their crucial 5,700 (Nifty) and 18,750 (Sensex) levels with a butchery of over 1.20 percent amid weakness in global markets. Key domestic indices, after a flat start, tried to stick near their pre-close levels but, what happened in second half was one way slide of the markets to the lowest levels on the back of selling pressure visible in the heavyweight pockets. Shares of Reliance Industries (RIL) remained under pressure after Morgan Stanley cut its rating to ‘underweight’ from ‘equal-weight’, citing lack of near-term triggers, expectations for weaker refining margins and valuation. The US investment bank also cited concerns about RIL’s investments into businesses that offer ‘low’ return-on-equity, as well as a subdued outlook on petrochemicals.

The selling got intensified in late trade following weakness in European counters, which fell in early deals as investors looked towards a meeting of euro-zone finance ministers for further clues as to whether Spain will request a bailout, while worries about Greece’s next aid tranche also weighed. At the same time, concerns about global growth undermined sentiment, after the World Bank cut its forecasts for economic expansion in developing East Asia and warned that a major crisis in the euro zone has the potential to wipe over two percentage points off growth next year. While, all the Asian markets exhibited dreary trade as concerns over the euro-zone debt crisis overshadowed surprisingly good US jobs data, which showed unemployment close to a four-year low. Meanwhile, China’s GDP growth is estimated to fall to 7.7 percent this year because of weak exports and lower investment growth.

Back home, Finance Minister P Chidambaram tried to soothe the investors’ worries about passing of different FDI bills and said that he will approach the opposition for the same. Some support also came in from telecom space as stocks like, Bharti Airtel, Idea Cellular and RCom edged higher after the EGoM, headed by Finance Minister P Chidambaram considering levy of a one-time spectrum fee, decided to send all its recommendations to the Cabinet, which is expected to take up the matter on October 16. It was also decided that one-time fee will be charged from all telecom companies having spectrum beyond 4.4 MHz. Moreover, housing finance firms like Dewan Housing Finance, HDFC, LIC Housing Finance and GIC Housing Finance rallied after the Securities and Exchange Board of India raised the ceiling for investment in debt securities of housing finance companies by debt-oriented mutual funds.

But, all these were overshadowed by depreciation in Indian rupee, which dampened the sentiments as it declined by 46 paise to Rs 52.31 per dollar at the time of equity market closing on Monday, weighed down by dollar’s gains overseas. Moreover, selling intensified as Realty counter tumbled three and half percent, led by over seven percent fall in DLF as social activist Arvind Kejriwal accused the company for favoring Robert Vadra, son-in-law of Congress chief and the UPA Chairperson Sonia Gandhi with easy loans for some undue gains. Oil and Gas space also declined by over two and a half percent, dragged down by RIL, which fell over four and half a percent on downgrade by a global mortgage firm and as petroleum ministry rejected its plea of any immediate revision in gas price before April 2014.

The NSE’s 50-share broadly followed index Nifty fell by over seventy points to end below the psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by about two hundred and thirty points to finish below the psychological 18,750 mark. The broader markets however, traded in the green for first half but intense selling in second half dragged the gauges in the red. 

The overall volumes stood at over Rs 1.31 lakh crore, which remained on the lower side as compared to that on Friday. The market breadth remained in favor of declines as there were 1,383 shares on the gaining side against 1,515 shares on the losing side while 115 shares remain unchanged.

Finally, the BSE Sensex shaved off 229.48 points or 1.21% to settle at 18708.98 while the S&P CNX Nifty plunged by 70.95 points or 1.23% to end at 5,676.00.

The BSE Sensex touched a high and a low of 18969.19 and 18684.40, respectively. The BSE Mid-cap and Small-cap indices declined by 0.44% and 0.16%, respectively.

Sun Pharma up 3.67%, Bharti Airtel up 1.62%, Cipla up 0.87%, Jindal Steel up 0.79% and ITC up 0.65% were the major gainers on the Sensex. On the flip side, Reliance down 4.51%, Hindalco down 3.52%, BHEL down 3.44%, L&T down 3.09%, and SBI down 2.97% were the major losers on the index.

The main losers in the BSE sectoral space were Realty down 3.50%, Oil & Gas down 2.77%, Capital Goods (CG) down 2.70%, Consumer Durables (CD) down 1.56% and IT down 1.40%, while Health Care (HC) up 1.20% was the only gainers on the BSE sectoral space.

Meanwhile, the second meeting of the Group of Ministers (GoM) headed by agriculture minister Sharad Pawar on the land acquisition bill is likely to be held on Oct 8, to clear out the differences among the ministers on the contentious issues, including the clause of prospectivity in the Bill and the question of rehabilitation and resettlement package on par with the land acquisition bill for the affected parties in the mineral-rich forest areas.

The last GoM meeting was held on September 27, where a strong view on having a window of retrospectivity had cropped up with members feeling that the Bill should apply prospectively only. However, considering the protests, the Rural Development Ministry has said that necessary changes has been made in the controversial clause, in a way that the Bill shall apply prospectively only, i.e. for new acquisition only, and not retrospectively.

As per this clause, Bill would be applicable to all cases of land acquisition before the date of commencement of the Act if the award under the 1894 Act has not been made.  

The S&P CNX Nifty touched a high and a low of 5,751.85 and 5,666.20, respectively.

The top gainers on the Nifty were Sun Pharma up 3.73%, Asian Paints up 2.33%, Ultra Cement up 1.62%, Bharti Airtel up 1.56% and Cairn up 1.33%. The top losers on the index were DLF down 7.46%, Reliance Infra down 4.82%, Reliance down 4.76%, Hindalco down 3.96% and BHEL down 3.75%.

European markets were trading mixed. France’s CAC 40 down by 1.21%, Germany’s DAX down 1.33% and Britain’s FTSE 100 surged by 0.04%.

Asian stocks ended weak on Monday as World Bank slashed its growth forecasts for East Asia, emphasizing worries over the global economic outlook, and caution set in about the coming corporate earnings season. An underwhelming return for Shanghai after a week-long holiday added to the negative stand of the day. Investors traded cautiously ahead of Europe’s finance ministers meet in Luxembourg to discuss closer banking cooperation. Hang Seng Index ended lower amid decline in retailers and telecoms companies. Meanwhile, Market volumes were lower than usual, with Japan shut for a public holiday.