S&P’s rating downgrade warning drag benchmarks lower

Key domestic benchmarks resumed their southward journey, after a session of halt, on Wednesday as investors opted to take profit off the table amid slew of negative triggers from global as well as from domestic front. The NSE’s Nifty barely managed to end tad above its psychological 5,650 level while, BSE’s Sensex lost its crucial 18,650 mark as investors offloaded their positions after global ratings agency Standard & Poor’s (S&P) warned of a significant chance of downgrading India’s debt rating in the future. The rating agency underscored that downgrade was likely if growth prospects dimmed, external position deteriorated; political climate worsened or pace of fiscal reforms slowed. It also said that it sees India’s FY13 fiscal deficit at 6 percent of GDP as against the government’s projection of 5.1 percent. In April this year, S&P slashed India's sovereign outlook to ‘negative’, putting at risk the country's current rating of ‘BBB-’, the lowest investment-grade rating.

The sentiments also remain dampened after Auto industry body SIAM slashed the FY13 car sales growth forecast from its previous estimate of 9-11 percent growth, citing high interest rates and slowing economic growth. SIAM also cut its motorcycle sales growth for FY13 to 5-7% from 11-13% earlier, and commercial vehicles sales growth to 3-5%, from 6-8% earlier. The traders also remained sidelines on concern of IMF revising India’s growth forecast down to 4.9 percent in 2012, along with the global downgrade. Depreciating rupee too spread misery into the markets as it touched 53.15 against the dollar in the afternoon trade as demand for the American currency by importers persisted.

The global cues too deteriorated the sentiments as European counters traded in the green in early deals amid concerns about the outlook for global growth, while Spain's bond yields crept higher as the country continues to resist a bailout. Moreover, most of the Asian peers snapped the day’s trade in the negative terrain as investors reacted to losses on Wall Street after the IMF cut its global growth forecast, predicting the slowest rate in three years.

Back home, the major blow came in from the realty space, which tumbled over four and half a percent after Arvind Kejriwal released more evidence of links between DLF, Haryana government and Robert Vadra. The social activist-turned-politician has also named two other realty players - Indiabulls and BPTP - for having close links with politicians. Metal sector also crashed about a percent after US aluminum major Alcoa Inc. on October 9, 2012, cut its forecast for global consumption of the metal by 1% on slowing Chinese demand. Telecom stocks like Idea Cellular, Bharti Airtel, Reliance Communication and MTNL extended yesterday’s losses triggered by the Empowered Group of Ministers’ decision on October 8, 2012, to impose a one-time fee on existing telecom operators. 

The NSE’s 50-share broadly followed index Nifty fell by over fifty points but, managed to end tad above its psychological 5,650 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by over one hundred and sixty points to finish below the psychological 18,650 mark. The broader markets too hammered badly and ended the session with a cut of over a percentage point. 

The overall volumes stood at over Rs 1.50 lakh crore, which remained on the higher side as compared to that on Tuesday. The market breadth remained in favor of declines as there were 985 shares on the gaining side against 1,923 shares on the losing side while 212 shares remain unchanged.

Finally, the BSE Sensex lost 162.26 points or 0.86% to settle at 18,631.10 while the S&P CNX Nifty declined by 52.45 points or 0.92% to end at 5,652.15.

The BSE Sensex touched a high and a low of 18,740.63 and 18,614.37, respectively. The BSE Mid-cap and Small-cap indices were down by 1.29% and 1.53%, respectively.

ITC up 0.36%, Hero MotoCorp up 0.33% and Reliance up 0.09% were the major gainers on the Sensex. On the flip side, SBI down 2.32%, Tata Power down 2.25%, Hindalco down 2.11%, BHEL down 2.04% and NTPC down 1.82% were the major losers on the index.

The only gainer on the BSE sectoral space was FMCG up 0.04%, while Realty down 4.61%, Power down 2.17%, Bankex down 1.31%, PSU down 1.30% and Capital Goods (CG) down 1.23% were top losers on the BSE sectoral space.

Meanwhile, on account of higher petrol prices, total domestic sale of vehicles across categories registered a dip of 9.43% to 1418,134 units last month against 1565,757 units in September 2011. Out of which, domestic passenger car sales witnessed a fall of 5.36% to 157,536 units in September 2012 compared with 166,464 units in the same month last year.

Further, according to the data released by the Society of Indian Automobile Manufacturers (SIAM), motorcycle sales last month too skid by 18.85% to 7,53,693 units from 9,28,716 units in the same month previous year. Total two-wheeler sales decreased 12.92% to 1069,069 units from 1227,662.

On the flip side, total sales of commercial vehicles have registered a marginal growth of 0.04% at 70,683 units last month from 70,658 units in the year-ago period. Additionally, domestic sales of total passenger vehicles rose by 4.88% from 218,166 units in September last year to 228,806 units for the month under review. While light commercial vehicles went up 11.67%, medium and heavy commercial vehicles witnessed de-growth of 14.8%. Furthermore, three-wheelers clocked marginal growth of 0.62% at 49,576 units during the month.

Reasoning ‘high interest rates and slowing economic growth’, industry body, SIAM, has lowered forecast of Car sales in India to 1-3% from 9-11% earlier. Further, industry body has slashed its motorcycle sales growth for the year to 5-7 percent from 11-13%, and commercial vehicle sales growth to 3-5%, from 6-8%.

The S&P CNX Nifty touched a high and a low of 5,686.50 and 5,647.05, respectively.

The top gainers on the Nifty were JP Associates up 2.87%, HCL Tech up 1.11%, PNB up 0.86%, Hero MotoCorp up 0.64% and ITC up 0.48%.

The top losers on the index were DLF down 5.40%, Siemens down 3.98%, IDFC down 3.43%, Reliance Infra down 2.94% and SBI down 2.70%.

European markets were trading in red. France’s CAC 40 declined 0.34%, Germany’s DAX declined 0.28% and Britain’s FTSE 100 declined by 0.41%.

Most Asian markets ended with red mark tracking losses on Wall Street after the IMF cut its global growth forecast, anticipating the slowest rate in three years. Japanese Nikkei ended with sharp losses by the strengthening yen, with selling fuelled by report that the country's leading carmakers sales in China declined in September because of diplomatic squabble between Tokyo and Beijing. However, markets in mainland China went home with green mark after posting big gains on expectation that Chinese authorities will take important steps to help reverse the decline in growth in the world's second-largest economy. Taiwan Weighted remained closed for trading on account of National Day.