Post session - Quick review

Indian equity markets snapped the week and the last trading day of the September quarter with colossal losses as fears of a spiraling European debt crisis amidst conflicting reports on the health of the US economy caused investors to slash their bets on risky assets. Local bourses brushing aside the slew of positive reports were more concerned over health of the US economy which did not appeared in pink of its health after fresh data from the government showed that the US economy was barely keeping its head above water, with a growth rate that's just too weak to help the 14 million American workers who can’t find a job.  However, overnight, on Wall Street, stocks ended mostly higher in a volatile session on Thursday as better-than-expected economic data and German approval of a stronger euro-zone crisis fund soothed fears hanging over the market. Lawmakers in Europe's largest economy voted overwhelmingly in favour of expanding the powers of the eurozone's bailout fund. The vote strengthened Chancellor Angela Merkel's centre-right coalition, which had struggled to win support from a bloc of rebellious members, and could bolster her ability to negotiate new European crisis measures. Meanwhile, besides this the US GDP data which showed that the economy grew at a 1.3 percent pace in the second quarter, faster than previously estimated, along with the Jobs data which signaled that applications for jobless benefits dropped by a more-than forecast 37,000 to 391,000, too failed to bolster the spirit at equities across the world.

However, Asian shares which ended mixed as trader’s preferred to be on the sidelines ahead of the China's September PMI data to gauge how the world's export powerhouse is holding up in the face of a slowing global economy, failed to provide any cues to the Indian equity markets. Official Chinese data to be released on Saturday may show a pickup in factory activity though input prices will be closely watched for inflationary pressures at a time when officials have declared that fighting inflation was a top objective. Meanwhile, the European shares which opened lower on Friday appeared on track to record their worst quarterly performance since late 2008, as markets grappled with slowing global growth and a long-running euro zone sovereign debt crisis.

Back home, the downfall of the bourses was also led by the rate-sensitive sectors which came under pressure after the government raised its borrowing target for this financial year, triggering concerns that credit costs could rise for the private sector. On Thursday, the government said it plans to borrow 2.2 trillion rupees ($44.9 billion) in the second half of the fiscal year that ends in March, significantly higher than expected. The announcement clearly indicated that government's disinvestment plans had fallen behind, while its tax collection was below estimates, thereby highlighting the slowdown in the general economy. Meanwhile, Anil Dhirubhai Ambani Group's stocks like Reliance Communications, Reliance Capital and Reliance Infrastructure extended their losses quite sharply and plunged in the range of 7-9%. Also contributed to losses of the bourses was the approval of the new mining bill which sent the stocks of  Coal India, Sterlite Inds, NMDC, Sesa Goa, JSW Steel lower as the new bill called for coal miners to share a maximum 26% of their profits with local communities and for other miners an amount equivalent to royalties.

Although selling was witnessed across the board, however, stocks from Consumer Durable remained the only that fighter as the index stood up with gains of over 1%. The 30 share sensitive index- Sensex- surrendering over 200 points ended below the 16500 level. Similarly, the 50 share index - Nifty-too giving up over 70 points ended below the 5000 mark. The broader indices which floated in green for a long while, too gave up their gains by closing to end the trade with loss of over 0.50%. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1011:1729 while 120 scrips remained unchanged.

The BSE Sensex lost 252.94 points or 1.51% and settled at 16,445.13. The index touched a high and a low of 16,745.16 and 16,404.78 respectively. Just 2 stocks advanced against 28 declining ones on the index (Provisional)

The BSE Mid-cap index lost 0.56% while Small-cap index was down by 0.90%. (Provisional)

On the BSE Sectoral front, Consumer Durables up 1.06% was the only gainers while, Metal down 2.76%, Realty down 2.01%, Bankex down 1.99%, Auto down 1.71% and PSU down 1.64% were the only losers.

The top gainers on the Sensex were Bharti Airtel up 0.41% and Bajaj Auto up 0.02%.

On the flip side, Coal India down 5.00%, Sterlite down 4.34%, Tata Steel down 4.05%, Jindal Steel down 3.25% and Tata Motors down 3.04% were the top loser on the index. (Provisional)

Meanwhile, the finance ministry on September 29, said the government in the second half of the current financial year would borrow an additional Rs 52,800 crore from the market, more than the budget estimate, sending bond yields higher. However, the government is hopeful that this additional borrowing will not affect the government’s fiscal deficit target of 4.6% of the GDP in 2011-12.

After the meeting the Reserve Bank of India’s officers, the Economic Affairs Secretary R Gopalan, said, the government was increasing the gross borrowings by Rs 52,800 crore for the second half. ‘The reason is a dip in the small savings collection.’ Because of the increase in government borrowing in second half of the fiscal year, triggered an increase in the yields on the ten-year benchmark government bond by 10 basis points. It closed at 8.44% due to the extra borrowing from government was much higher than market expectations.

Actually, the additional borrowings are more than Rs 40,000 crore. The government is targeting to achieve this from the disinvestment of public sector units (PSUs). However, because of the present sluggish situation, meeting the disinvestment target would be difficult. Though, the government is hopeful of meeting this difficult target. 

For the current financial year, originally, the government was about to borrow Rs 4.17 lakh crore, but now it will borrow around Rs 4.7 lakh crore, this Rs 53,000 crore increase is due to lower cash balance and decline in collections from small savings schemes due to better interest rate offered by the banks to depositors. The budget calculations were made with an estimate of Rs 24,000 in the National Small Saving Funds (NSSF), however, it declined by Rs 35,000 crore.

In the first six months of current financial year, the government borrowed around Rs 2.5 lakh crore via dated securities, which is 60% of the total estimate made in budget. In next six months the government is scheduled to borrow around Rs 2.2 lakh crore from the market. The net borrowing will be around Rs 4 lakh crore for 2011-12. During 2010-11, the government had borrowed around Rs 4.37 lakh crore.

Giving stress on the increased need to go for dated securities on the place of depending on small saving, Gopalan said, ‘there is a switch taking place from the NSSF into dated securities. Also we need to work to shore up the cash balance. It has nothing to do with fiscal deficit computation. The target of fiscal deficit remains unchanged.’ By adding further he said, ‘the borrowing calendar has been programmed in such a way that there is enough credit for the private sector.’ Finance Minister Pranab Mukherjee earlier this year had said that the borrowing in the year would not expand the target, and the government would ensure that the private sector was not elbowed out of the market.

However, because of increase in the international energy prices, the government’s expenditure has increased, while the revenue generation has been declined significantly, due to slowdown in growth. The government has raised only Rs 1,144 crore from the target of Rs 40,000 via disinvestment, as of now. And the advance tax collection also declined in the second quarter, it grew by 9% in July-September 2011, from 19% in April-June 2011.

To reduce government expenditure, the government has taken number of steps. It had issued instruction to all government departments to reduce all unavoidable expenditures, containing seminars and conferences at five star hotels or abroad, purchase of new vehicles, foreign travel, and appointment of consultants and reduce of new government posts.  India VIX, a gauge for market’s short term expectation of volatility gained 2.80% at 31.94 from its previous close of 31.07 on Thursday. (Provisional)

The S&P CNX Nifty lost 75.70 points or 1.51% to settle at 4,939.75. The index touched high and low of 5,025.55 and 4,924.30 respectively. 8 stocks advanced against 42 declining ones on the index. (Provisional)

The top gainer on the Nifty were, Sesa Goa up 4.60%, Ranbaxy up 2.73%, Power Grid up 1.59%, Grasim up 1.16% and Ambuja Cement up 1.16%.

On the other hand, Reliance Capital down 13.17%, RCOM down 7.99%, Reliance Infra down 7.27%, Sterlite down 4.72% and Tata Steel down 4.30% were the top losers. (Provisional)

The European markets are trading in red, with France's CAC 40 down 1.83%, Germany's DAX down 2.74% and FTSE 100 down 1.65%.