Post session - Quick review

Volatility duly crept in with the start of F&O expiry week in the Indian equity markets on Monday and markets after a making a ‘V’ shape recovery succumbed to the last hour profit booking and closed in red terrain. The start of the day was positive for the domestic markets despite the sluggishness in other regional peers but as the trade moved for the day the indices followed the other Asian markets and slipped into red, once the decline started there were no breaks in the intense selling till noon. Market men feared of the European crisis, took every opportunity to sell. Though, the European policymakers began working on new ways to stem the euro zone debt crisis and it was reported that French banks have enough capital to withstand possible losses from Greece-related risks. But the traders remained concerned in the region and the China’s stocks fell, dragging the benchmark index to the lowest level in more than 14 months. However, there was some recovery in the European markets after a soft start.

Back home, the markets made a positive start and it seemed that after a series of fall, the local markets will be able to buck the global trend but the enthusiasm was short lived and the markets slipped into red in the very early trade, resuming their declining trend with benchmarks coming near to their more than two year low of 15800 (Sensex) and 4750 (Nifty). There was across the board selling with none of the indices showing any sign of recovery till noon. Metal suffered large cuts, tailing their global peers as the weakness in global economic recovery will lead to a lower demand for commodity. On the same time the IT and other exporters were showing some restrain as the rupee further weakened against the dollar. It was in the noon trade that the European markets started showing some recovery, reversing earlier declines that supported the local markets and they too started gradually moving up from the lows of the day. In the final hours the markets finally entered in the green but faced extreme resistance at that levels and the traders once again started selling, in the last half an hour the indices pared some of their recovered ground and closed with a cut of about half a percent. Consumer durables were the worst affected and lost almost 5 percent on the BSE, closely followed by metal, down by about three percent while IT and technology managed to retain their gains of second half and closed up by about half a percent. The broader indices on the other hand remained under performer and lost around one and half a percent for the day.

The market breadth on the BSE ended extremely negative; advances and declining stocks were in a ratio of 782:1962 while 103 scrips remained unchanged.

The BSE Sensex lost 130.32 points or 0.81% and settled at 16,031.74. The index touched a high and a low of 16,209.19 and 15,801.01 respectively. 10 stocks advanced against 20 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.56% while Small-cap index was down by 1.70%. (Provisional)

On the BSE Sectoral front, TECk up 0.45% and IT up 0.44% were the only gainers while, Consumer Durables down 5.21%, Metal down 3.15%, PSU down  1.93%, FMCG down 1.73% and Power down 1.62% were the top losers.

The top gainers on the Sensex were JP Associates up 2.59%, DLF up 2.32%, Bharti Airtel up 1.15%, Cipla up 1.00% and ICICI Bank up 0.99%.

On the flip side, Coal India down 6.09%, Sterlite down 4.48%, Hindalco down 3.95%, Hero MotoCorp down 3.22% and Tata Power down 3.01% were the top loser on the index. (Provisional)

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. 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.

India VIX, a gauge for market’s short term expectation of volatility gained 0.76% at 35.43 from its previous close of 35.16 on Friday. (Provisional)

The S&P CNX Nifty lost 34.80 points or 0.71% to settle at 4,832.95. The index touched high and low of 4,879.80 and 4,758.85 respectively. 17 stocks advanced against 32 declining ones while 1 stock remained unchanged on the index. (Provisional)

The top gainer on the Nifty were, DLF up 3.52%, JP Associates up 3.34%, Ranbaxy up 2.18%, Ambuja Cement up 1.80% and Bharti Airtel up 1.33%.

On the other hand, Tata Power down 5.82%, Sterlite down 4.57%, SesaGoa down 4.37%, Reliance Capital down 4.20% and Hindalco down 4.07% were the top losers. (Provisional)

The European markets are trading in green, with France's CAC 40 up 2.11%, Germany's DAX up 2.40% and FTSE 100 up 0.65%.

All the Asian equity indices ended the day’s trade in the negative terrain on Monday as investors remained concerned over the euro-zone as leaders of the debt-troubled region struggle to find a plan to solve the crisis. The assurances by from G20 finance leaders that they would take strong, co-ordinated action to avoid another global financial crisis, unable to impress marketmen while, the reports that rating agency Moody’s downgraded ratings of eight Greek banks by two notches too dampened the sentiments in the region. Moreover, Seoul shares reached their lowest close in more than 15 months and ended the trade with a cut of over two and a half percent, with foreign investors extending their selling streak into a third session.