Benchmarks continue to trade in red

Indian equities added losses to continue its weak trade in the late afternoon session hovering near the lowest point of the day on account of selling in frontline counters and taking cues from European counterparts. Investors turned cautious after global credit rating agency Standard & Poor’s stating that there is significant chance that it will cut India’s credit rating to junk in future. Traders are also eyeing the meeting of Bahujan Samaj Party (BSP), which is scheduled for today i.e. October 10, 2012 where a final call will be taken on whether to continue its support to the UPA government or not. Traders were seen selling in Realty, Power and Capital Goods sector. Auto stocks witnessed hectic activity after industry-body, SIAM, too reasoning ‘high interest rates and slowing economic growth’, lowered forecast of car sales in India to 1-3% from 9-11% earlier. Further, industry body has also 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%.

In the scrip specific development, DLF fell for the third day in a row after IAC renewed its attack on the company stating that it had received large favours from the Congress-ruled Haryana state government. Polaris Financial Technology were trading in red after SEBI accused the software services firm’s Chief Executive Officer for insider trading and barred him from participating in the securities markets for two years. Indiabulls group company - Indiabulls Real Estate, Indiabulls Power, Indiabulls Securities, Indiabulls Infrastructure and Power, Indiabulls Financial Services and Indiabulls Wholesale Services were trading under pressure after anti-corruption activist Arvind Kejriwal in a press conference held on October 09, 2012, named the group for its political linkages.

On the global front, Asian markets were trading in red barring Shanghai Composite while the European markets were trading on pessimistic note. The ECB President Draghi estimated weak economic activity in the euro zone in a presentation to the European Parliament and suggested that there is no alternative to austerity measures in the Southern European region. Separately, German manufacturing turnover remain unchanged and French deficit widened in August. On the other hand, Greek inflation eased in September. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,700 and 18,700 levels respectively. The market breadth on BSE was negative in the ratio of 923:1816 while 144 scrips remain unchanged.

The BSE Sensex, offloading 134.96 points or 0.72%, is currently trading at 18658.40. The index, so far has touched a high and low 18740.63 and 18645.16. There were 6 stocks advancing against 24 declines on the index.

The broader indices were too trading in red; the BSE Mid and Small cap indices were trading lower by 1.09% and 1.13% respectively.

There were no gainers on the BSE sectoral space while, Realty down by 3.99%, Power down by 1.76%, Capital Goods down by 1.41%, Bankex down by 1.19% and PSU down by 1.11% were top losers on the sectoral space.

The top gainers on the Sensex were Hero MotoCorp up by 1.24%, Tata Steel up by 0.69%, Sun Pharma up by 0.36%, RIL up by 0.13% and ITC up by 0.13%. On the other hand, BHEL down by 2.36%, SBI down by 1.86%, NTPC down by 1.79%, Tata Power down by 1.66% and Gail India down by 1.65% were top losers on the Sensex. 

Meanwhile, Indian government’s all recent reform measures that were said to be aimed to avert any rating downgrade might get a jolt, as the ratings agency Standard & Poor's (S&P) has warned that India still faces a one-in-three chance of a credit rating downgrade within the next 24 months despite a new drive for economic reform. Reiterating its earlier stance, the rating agency has said that if growth prospects and external position worsen, or fiscal reforms slow, there is significant chance of downgrading India's credit rating.

In a report released on Oct 10, it said that ‘a downgrade is likely if the country's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow.'

S&P had downgraded India's rating outlook to negative from stable in April, which presently stands at BBB-, one notch above junk grade and the lowest investment rating in the BRIC economies. However, it said that India's outlook can be revised back to stable, if the government goes ahead with steps to reduce structural fiscal deficits, improve the investment climate, and increase growth prospects.

The rating agency further projects the current account deficit for the financial year to be 3.5 percent of GDP, below last year's 4.5 percent, given the inflow of foreign direct investment, and portfolio investments. However, S&P expects the government's fiscal deficit to be higher than the government's budgeted estimate, at 6 percent of GDP for the financial year ending in March.

The S&P CNX Nifty is currently trading at 5,658.95, down by 45.65 points or 0.80% after trading in a range of 5,686.50 and 5,658.05. There were 10 stocks advancing against 40 declines on the index.

The top gainers of the Nifty were HCL Tech up by 1.50%, Hero MotoCorp up by 1.28%, JP Associates up by 1.11%, Punjab National Bank up by 0.66% and Tata Steel up by 0.49%. While, DLF down by 4.26%, Siemens down by 3.55%, IDFC down by 2.43%, Reliance Infrastructure down by 2.32% and BHEL down by 2.28% were top losers on the index

Most of the Asian equity indices were trading in the red; Straits Times declined 0.83%, Kospi Composite plunged 1.56%, Nikkei 225 plummeted 1.98%, Jakarta Composite skid 0.28%, Hang Seng slid 0.08% and KLSE Composite edged lower by 0.15% while Shanghai Composite up by 0.22% was the lone gainer. Taiwan Weighted remained closed for trading on account of National Day.

The European markets were trading in red, France’s CAC 40 lost 0.19%, Germany’s DAX inched lower 0.01% and the United Kingdom’s FTSE 100 descended 0.23%.