Markets at day’s low; Nifty below 4,800 mark

The Indian equity markets extending its losses, currently trading at day’s low in late-morning trades. Weakness has increased in the Indian market as global cues worsened. The Sensex is now below the 16,000 mark while Nifty has breached the 4,800 mark. Likely recession in European continent triggered panic selling from investors. On sectoral front, all indices were trading negative. Consumer durables, metal, oil, FMCG and capital goods stocks declined sharply. Realty and automobile stocks, which found some support early on in the session, were drifting down, posting notable losses in the process. Several stocks from bank, healthcare and power sectors too were down with marked losses. Information technology stocks are off their gains after a fairly decent start. On the global front, Asian markets were trading red on heavy sell-off in markets amid mounting worries about the global economic outlook. Back home, the market breadth favoring the negative trend; there were 461 shares on the gaining side against 2,003 shares on the losing side while 74 shares remained unchanged.

The BSE Sensex is currently trading at 15,877.70, down by 284.36 points or 1.76%. The index has touched a high and low of 16,209.19 and 15,801.01 respectively. There were just 1 stock advancing against 29 declines on the index.

The broader indices too were in red; the BSE Mid cap and Small cap indices were down by 2.43% and 2.35% respectively.

None of the sectoral gauges were in green while, CD down by 5.31%, Metal down by 4.05%, Realty down by 2.82%, Oil & Gas down by 2.42% and CG down by 2.41% were the top losers on the index.

The only gainer on the Sensex was Wipro up by 0.21%. On the flip side Hindalco down by 6.19%, Sterlite Industries down by 6.07%, Coal India down by 5.24%, Bajaj Auto down by 3.34% and HDFC Bank down by 3.31% were the top losers on the index.

Meanwhile, the depreciating value of rupee has raised concern over the profitability of the Indian Inc, which has tapped abroad loan in US dollar, and the bottom lines this year are expected to take a hit by more than $2 billion this year. Because of the increased cost of capital in domestic market, the Indian companies have been increasingly tapping overseas loans mostly in US dollar. However, the recent fall in Indian rupee has negated the benefits of the cheap overseas funds. The Indian Rupee has depreciated by more than12% to close to Rs 50 per dollar mark from close to Rs 44 per dollar in the start of August.

The Indian rupee has been the worst performer among the major Asian currencies, which declined by a 5% in the past week and this declining trend increase the difficulties for companies who are looking for funds abroad. From January-July 2011, the Indian Inc has borrowed around $21 billion in the foreign currencies through ECB (External Commercial Borrowing) window compared to $18 billion in entire 2010. As per the Reserve Bank of India (RBI) data, Indian companies like Reliance Industries, NTPC, Mundra Port and SEZ, Indian Oil, Bharat Aluminium, Vodafone Essar, Air India, GAIL, Adani Power, JSW Steel, Aircel, Tata Tele, Idea Cellular, Suzlon, IDFC, RCOM, REC, Indian Railway Finance Corp, M&M and BPCL, have raise funds from overseas.

In July, around 100 domestic firms tapped abroad loans totaling around $4 billion, which includes Mukesh Ambani-led RIL raising $1.09 billion for refinancing its old loans, Mundra Port raised $150 million for ports business and Indian Oil raised $500 million for import of capital goods. Additionally, a number of domestic telecom firms have raised overseas loans in recent months to refinance earlier loans for payment of their 3G spectrum fees. Experts are of the view that the liquidity deficit and relative higher interest rates in domestic market were encouraging Indian Inc to explore cheap dollar loans for financing their domestic business activities, imports, overseas acquisitions and refinancing of the existing rupee loans.

However, the recent depreciation in the rupee has changed the situation drastically as many Indian firms do not hedge against the currency fluctuations because rupee was stable compared to present time. Hence, many Indian companies may have to book mark-to-market losses on their books for this year if the rupee reverses its downward trend. Last week, Finance Minister Pranab Mukherjee met the RBI governor D Subbarao to discuss the depreciation in rupee and RBI intervention in currency market. Finance Minister said that intervention in the currency market would be considered at an appropriate stage.

The S&P CNX Nifty is currently trading at 4,781.25, down by 86.50 points or 1.78%. The index has touched a high and low of 4,879.80 and 4,758.85 respectively. There were just 2 stocks advancing against 48 declines on the index.

The gainers of the Nifty were Wipro up by 0.35% and Bharti Airtel up by 0.07%.

On the other hand, Hindalco down by 5.97%, Sterlite Industries down by 5.91%, Sesa Goa down by 5.02%, Cairn down by 4.89% and Axis Bank down by 3.88% were the major losers on the index.

All the other Asian indices too were trading in the red; Shanghai Composite was down by 1.00%, Hang Seng was down by 2.90%, Jakarta Composite plunged by 4.01%, KLSE Composite was down by 2.84%, Straits Times was down by 2.39%, Seoul Composite was down by 2.73% and Taiwan Weighted was down by 2.40%.