Benchmarks collapse on political upheaval; Nifty tumbles below 5,750 mark

Tuesday turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey for third consecutive day and gave up around one and a half percentage points. The frontline gauges after a positive start witnessed steep fall after M Karunanidhi led DMK Party decided to withdraw support to the UPA government over the Sri Lankan Tamil issue. However, market got some support near their crucial 19,000 (Sensex) and 5,750 (Nifty) levels after the Finance Minister assured that the ruling UPA government has absolute majority despite the DMK party withdrawing support.

The disappointment also crept in after apex bank, in its effort to prop up the sagging growth of the economy, slashed repo rate by much anticipated 25 basis points to 7.5 per cent, but left CRR, key liquidity tool unchanged at 4%, which in turn led to sell-off in rate sensitive sectors. Sentiments also got dampen after RBI said that risks on account of the CAD remain significant notwithstanding likely improvement in Q4 over an expected sharp deterioration in Q3 of 2012-13. Accordingly, even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited.

Sentiments also remain dampened after European counters fell for a second day on Tuesday as investors worried about the uncertainty over a bailout for Cyprus aimed at preventing a debt default and banking collapse. However, most of the Asian equity indices ended the session in the green with Japanese Nikkei leading the pack as exporters gained after the yen weakened against the dollar, boosting their earnings outlook. Meanwhile, China’s benchmark rebounded from multi-week lows, led by property developers as policy uncertainty eased on report that the capital Beijing may introduce new home sales curbs targeted at the secondary market by end-March.

Back home, selling in banking stocks too dampened the sentiments after the central bank stated that the headroom for further monetary reduction remains quite restricted. Meanwhile, the private sector banks remained under pressure as widening its probe into alleged money laundering by banks, the RBI has included sale of gold coins and wealth management operations in its scrutiny. Additionally, share price of sugar stocks like Balrampur Chini, Shree Renuka Sugar, Bajaj Hindusthan and Triveni Engineering all gone through the floor after the Cabinet Committee on Economic Affairs deferred the sugar decontrol proposal in absence of Finance Minister P Chidambaram, Defence Minister AK Antony and Health Minister Ghulam Nabi Azad.

The NSE’s 50-share broadly followed index Nifty, plunged by about ninety to settle below the psychological 5,750 support level while Bombay Stock Exchange’s Sensitive Index - Sensex sank by over two hundred and eighty points to finish below the crucial 19,050 mark. Moreover, the broader markets too finished on a bleak note with cuts of around a percent in tandem with their larger peers.

The markets rose on overall volumes of over Rs 3.00 lakh crore, which remained on the higher side as compared to that on Monday. Moreover, the market breadth remained in favor of declines as there were 890 shares on the gaining side against 1,968 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex shaved off 285.10 points or 1.48% to settle at 19,008.10, while the CNX Nifty plunged by 89.30 points or 1.53% to end at 5,745.95.

The BSE Sensex touched a high and a low of 19,378.61 and 18,939.47, respectively. The BSE Mid cap index down by 1.37% and Small cap index was down by 1.57%.

The top gainers on the Sensex were, Gail India up by 1.96%, Bajaj India up 1.17%, Sun Pharma up 0.74%, ITC up 0.44% and Maruti Suzuki up 0.16%, while BHEL down by 5.05%, Bharti Airtel down by 4.74%, Sterlite Industries down by 4.15%, Jindal Steel down 3.96% and Mahindra & Mahindra down by 3.45% were the top losers on the index.

There was no gainer on the BSE Sectoral front, while Realty down by 3.63%, Capital Goods down 2.69%, Metal down 2.59%, PSU down 2.08% and Power down 1.99% were the top losers on the sectoral space.

Meanwhile, warning the corporate promoters against willful defaults, Finance Minister P Chidambaram said it is the duty of the promoter to bring in additional capital if company gets into trouble. The statement comes in reference to the collapse of Kingfisher Airlines owned by Vijay Mallya, where banks are stuck with nearly Rs 7,000 crore worth of loans they had advanced to the grounded airline.

After a meeting with the heads of state-run banks to review mounting non-performing assets of banks in the wake of the economic downturn as well as large number of stalled projects, Chidambaram said, ‘it was not a full-scale review. The agenda was limited to recovery of bad loans, and development and issues in stalled and new projects.’

By adding further, he said, the banks have been asked to take firm steps to recover loans as the country cannot afford to have affluent promoters and sick companies. The government has also directed banks to constitute a board-level committee for monitoring loan recoveries, and sought review of NPAs worth Rs 1 crore and above by the board of directors. The finance ministry will also start holding sectoral meetings with state governments and promoters to move things forward.

As of December 2012, gross nonperforming assets of public sector banks have risen from Rs 71,080 crore in March 2011 to Rs 1.55 lakh crore. Further, as many as 215 projects with investments of Rs 7 lakh crore are currently stalled, and banks have disbursed about Rs 54,000-crore loans towards these projects. Moreover, stalled projects, mainly due to coal linkage, environment clearances and land acquisition problems in sectors like power, coal, iron, steel and road transport have further added to the problem of bad loans.

The CNX Nifty touched a high and a low of 5,863.60 and 5,724.30 respectively. 

The top gainers on the Nifty were, GAIL up by 2.65%, Bajaj Auto up 1.59%, Ranbaxy up 1.37%, Lupin up 0.94% and Sun Pharma up by 0.67%.

On the flip side, the top losers of the index were, BHEL down by 5.06%, Bharti Airtel down by 4.39%, DLF down by 4.09%, Reliance Infra down by 3.91% and Sesa Goa down by 3.77%.

The European markets were trading in red, France’s CAC 40 down by 0.90%, Germany’s DAX down by 0.55% and the United Kingdom’s FTSE 100 down by 0.35%.

Asian markets recovered from earlier session’s steep falls and ended mostly higher on Monday. However, investors remained cautious ahead of US Federal Reserve's two-day policy-setting meeting starting on Wednesday and the change of leadership at the Bank of Japan this week. Japan's Nikkei went home with strong gains snapping previous sessions’ losses, as Japanese tech exporters benefited from the dollar’s rebound against the yen. Chinese mainland market closed higher, with gains from the volatile property sector, while South Korean market ended in green zone with gains in heavyweight consumer-electronics producer Samsung Electronics’ shares.