Post session - Quick review

Local equity markets lost all their gains earned since June last year with the loss of the last trading session of the week as “risk aversion” which remained the theme of the session drove investor’s out of equities. The benchmark’s being a part of the global route were once again exposed to catastrophic fall owing to the weakening demand amidst bleak global outlook, indicating that the US economy is dipping back into recession coupled with the qualms relating to European lenders facing short-term funding strains. Dalal Street was also rattled by a strong earthquake with a preliminary magnitude of 6.8 which jolted northeastern Japan off Fukushima prefecture. A tsunami advisory was issued for the coastal areas of Fukushima and Miyagi prefectures that were severely damaged by the massive 11 March earthquake, even though it got lifted in a time span of 35 minutes but left its tremor impact on Dalal Street.

The sentiments earlier got pulverized at Dalal Street with slothful developments in the world’s largest economy US, which sent the stocks tumbling there down with a cut of over 4%. Manufacturing activity in the US mid-Atlantic region slumped to its lowest level since March 2009, according to data from the Philadelphia Federal Reserve Bank, which was seen as an early indicator of the state of manufacturing nationally. At the same time, sales in the US housing market fell unexpectedly and unemployment claims rose sharply.  Also encouraged sluggishness were the stocks of Asian region which were slammed in global sell off.  Meanwhile, adding to the investor’s disgust were the stocks of Europe which extending the previous session’s plunge sinked to a two year low.

Back home on the BSE Sectoral front, though entire space was hammered, the stocks of Information Technology, Capital Goods, TECk and Bankex pivotal were amongst the most troubled one’s, bucking the trend were the stocks of Realty counter which performing fabulously, stood tall amidst the sluggish trade.  Meanwhile, Anna factor too slowly crept into the market that was already jolted by a turbulent selling pressure as the popular crusade against India's endemic corruption led by activist Anna Hazare sparked questions among global investors on whether a nervous government will be in a position to push through policy reforms, thereby keeping them on the sidelines.

The 30 scrip sensitive index-Sensex-on Bombay Stock Exchange (BSE) crashing above 400 points appallingly dropped below the 16k level for a brief period, however, buying appeared at the support level taking the barometer index well above it. Similarly, the 50 share index on the National Stock Exchange (NSE)-Nifty-dipping to its 15 month low level breached its 4800 level. However, at closing, Sensex tanked over 300 points and settled over 16k mark, while Nifty shed close to 100 points and settled above the 4800 level. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 891:1956 while 113 scrips remained unchanged.

The BSE Sensex lost 324.78 points or 1.97% and settled at 16,145.01. The index touched a high and a low of 16,287.72 and 15,987.77 respectively. 9 stocks advanced against 21 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.05% while Small-cap index was down by 1.70%. (Provisional)

On the BSE Sectoral front, Realty up 1.12% was the only gainer.On the flip side, Capital Goods down 4.17%, IT down 4.07%, TECk down 3.47%, Bankex down 1.86% and FMCG down 1.64% were the top losers.

The gainers on the Sensex were JP Associates up 3.36%, DLF up 2.52%, Hero MotoCorp up 2.52%, Hindalco up 1.63% and Coal India up 1.07%. (Provisional)

On the flip side, Infosys down 5.68%, Tata Motors down 5.53%, L&T down 4.84%, BHEL down 4.70% and ICICI Bank down 3.21% were the top loser on the index. (Provisional)

Meanwhile, despite the increasing gold price in the international and domestic market, demand for the yellow metal has maintained its upward trend. In April-June 2011, India’s imports of gold increased by 60%. However, the demand for jewellery declined, which indicate that most of the imports have been done for investment purpose. 

In April-June 2011, the gold imports stood at 267 tonne, which increased by 100 tonnes from last year. This increase in the import of yellow metal was led by increase in demand for bars, coins and gold ETFs which increased by 78% or 108.5 tonne. On the other hand, the jewellery demand increased by 17% to 139.8 tonne as the average price of gold increased to Rs 22,200 per 10 gram from Rs 18,028 last year.   

Ajay Mitra, MD (India & Middle East), World Gold Council (WGC) said, 'A consumer can buy smaller denominations of coins or bars but can't buy a fraction of a bangle or a necklace, which attributed to the increase in gold demand despite the surge in the prices, consumers prefer gold over other products like television sets, refrigerators or even cars at the time of increasing cost of funds and high inflation. By adding further he said, 'instead, the investible amount is being used to buy gold, which has been yielding higher returns than bank deposits and using the returns to purchase consumer durables or automobiles when inflation slows down.'

Gold imports for the current year would exceed last year’s record of 958 tonne, depending on how the Q3 ending of September pans out. Jewellery demand during the first half of the current year accounted for over half of the previous year's jewellery consumption of 656 tonne and was expected to pick up in the second half which has more marriages and festivals lined up than the first half, Ajay Mitra pointed out. On the other hand, inflationary pressure is likely to continue along with volatility in the equity markets, which will make gold attractive for investors looking to diversify their portfolios and protect their wealth.

In April-June 2011, the scrap arrivals have halved to 10 tonne from last year. Ajay Mitra said rather than selling old gold ornaments to jewellers for meeting financial exigencies, people were pledging gold with NBFCs like Muthoot Finance and Manappuram Finance and redeeming it at a later date by paying back the loans. Following the global trend, the gold prices in the Mumbai touched to Rs 27,340 per 10 gram. It is reported that gold imports, which stood at 553 tonnes for the January-June period, could cross the 1,000 tonne mark this year amid strong demand.

India VIX, a gauge for market’s short term expectation of volatility gain 6.33% at 29.19 from its previous close of 27.45 on Thursday. (Provisional)

The S&P CNX Nifty lost 97.40 points or 1.97% to settle at 4,846.75. The index touched high and low of 4,893.60 and 4,796.10 respectively. 10 stocks advanced against 40 declining ones on the index. (Provisional)

The top gainers on the Nifty were JP Associates up 3.00%, DLF up 2.85%, Hero MotoCorp up 2.17%, Hindalco up 2.00%, and Reliance Infra up 1.20%. (Provisional)

On the other hand, Tata Motors down 5.58%, Infosys down 5.48%, L&T down 4.98%, BHEL down 4.71% and Dr. Reddy’s Lab down 3.53% were the top losers. (Provisional)

The European markets are trading in red, with the France's CAC 40 down 2.51%, Germany's DAX down 3.52% and FTSE 100 down 2.70%.

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.