Post session - Quick review

Local equity markets protracted their somber mood to the third consecutive session amidst fresh concerns over Greece defaulting on its debt after euro-zone finance ministers delayed the approval of a much-needed loan disbursement at a long-drawn-out meeting on Monday. At their meeting in Luxembourg, the ministers agreed that Greece could wait until mid-November for the next installment from the existing aid programme. Fears of a potential market-destabilizing Greek debt default routed Dalal Street, underpinning the key barometer indices to surrender away the long withheld psychological level. Further, lack of upside triggers coupled gloomy global leads across the equities around the world also prompted to a poignant closing of the Indian equity markets.  Overnight, US stocks slumped in heavy volume to a 13-month low on Monday as investors dumped bank shares on fears that Greece's worsening financial crisis could cause a large European lender to fail. Meanwhile, Asian shares which too tumbled to its lowest level for more than a year added to the disaster of the Indian equity markets. Faced with a darkening outlook for global growth, the Reserve Bank of Australia opened the door to rate cuts and backed down from its recent anti-inflation rhetoric, sending the Australian dollar to a fresh one-year low. However, even the European shares fell heavily on Tuesday morning, on escalating worries over Greek default sparking a banking crisis in Europe, which also led to Dexia plummeting to an all-time low. Dexia came under increasing market pressure over its exposure to Greece and a board meeting went on into the early hours of Tuesday in an effort to resolve its problems. Meanwhile, other banks to fall included BNP Paribas and Deutsche Bank, down 6.1 percent and 6.5 percent respectively.

Back Home, shares of some urea makers hogged substantial limelight on media reports that the Prime Minister’s Office has asked fertilizer ministry to expedite the proposed policy on urea decontrol.  Reacting to this, National Fertilizers enticed gains of over 2%, Chambal Fertilisers & Chemicals was trading up over 0.25%. The government on August 05 had approved the decontrol of urea prices and allowed fertilizer companies to increase the rate of the important agriculture input prices by up to 10% in the first year of policy. However, scrips of some Public Oil Marketing Companies (POMC) too enticed some traction in early trade as BPCL, OIL and HPCL gained substantial ground after prices of brent crude fell more than a dollar, below $101 a barrel, pressured by growing fears of a Greek default and a stronger dollar.  However the Interest sensitive banking stocks played the malice behind the downtrend of the markets as the stocks pummeled on worries that elevated interest rates would hurt borrowers' ability to repay loans and increase delinquencies. Banking major State Bank of India (SBI) slumped to 52-week low after Moody's Investors Service cut bank financial strength rating (BFSR), or stand-alone rating of SBI, to D+ from C-. Meanwhile, ICICI Bank and Axis Bank, too, hit 52-week lows.  Beside these, even auto stocks declined on worries that higher interest rates and a recent petrol price hike may adversely impact sales of cars and two-wheelers during the festive season.

Although selling was witnessed across the board, however, stocks that borne intense selling brunt besides banking and Auto included Public Sector Undertaking (PSU), Oil & Gas and Metal counters. Reversing the trend, Capital Goods putting up a tough fight in the face of global uncertainties ended above 0.50%. The 30 scrip sensitive index on Bombay Stock Exchange (BSE)-Sensex- shedding over 250 points settled sub 16000 level. Similarly, the 50 share index on National Stock Exchange (NSE) - Nifty-declining over 50 points  ended sub 4800 level. The broader indices too by the end of the trade enticed losses of over 1% each. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 975:1782 while 101 scrips remained unchanged.

The BSE Sensex lost 288.78 points or 1.79% and settled at 15,862.67. The index touched a high and a low of 16,202.38 and 15,745.43 respectively. 7 stocks advanced against 23 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.27% while Small-cap index was down by 1.09%. (Provisional)

On the BSE Sectoral front, Capital Goods up 0.59% was the only gainers while, Bankex down 3.09%, Auto down 1.95%, PSU down 1.83%, Oil & Gas down 1.73% and Metal down 1.47% were the top losers.

The top gainers on the Sensex were Maruti Suzuki up 2.73%, Wipro up 1.54%, L&T up 1.48%, Tata Steel up 0.48% and Hindalco up 0.44%.

On the flip side, Coal India down 5.48%, Tata Motors down 4.32%, ICICI Bank down 4.30%, M&M down 3.98% and SBI down 3.79% were the top loser on the index. (Provisional)

Despite the surge in the Aviation Turbine Fuel (ATF) prices, the Indian aviation sector registered healthy growth in passenger traffic, it increased by 18.6% compared to last month. As per Directorate General of Civil Aviation (DGCA) data, the airlines carried 4.8 million passengers in August 2011 from 3.989 million passengers in the same period of last year. During the first eight months of current calendar year, the passenger traffic grew by 20% to 39.7 million passengers compared to the period of last calendar year.

However, the surge in the passenger load factors was in sharp contrast with the seat factor of the aviation industry, which declined on the month-on-month basis. The seat factor calculates the capacity utilization and refers to number of occupied seats. As per the DGCA data, the top airlines experienced sharp decline in the seat factors. Kingfisher and Jet seat factors declined to 76% and 73% respectively, which is a decline of 4% and 3% respectively on a month-on-month basis. The DGCA data also showed the increase in the available seat kilometers (ASKM) compared to the required sear kilometers (RSKM), this numbers shows the arability of seats against the demand.

During August 2010, the ASKM was just around 8% compared to the RSKM of more than 10%. In August 2011, the situation has been reversed, for August 2011 the ASKM stood at 17% against the requirement of barely 15%, which shows the excess capacity in the aviation industry. Despite the surge in passenger traffic, the sector is going through hard time, as the increasing cost of ATF and deprecation in the Indian rupee, have prompted, domestic carriers to increase the air fares.

The average price of ATF is presently around Rs 60,000 per kilo litre. The surge in the ATF prices and depreciation in the rupee have made, Aviation Ministry to exert pressure on the state governments to reduce the sales taxes on aviation fuel. Except for Chhattisgarh, which charges only 4% sale duty of aviation fuel, other states are not ready to reduce the sales taxes, which is around 15%

Industry experts are of the view that the aviation firms will be under financial pressure in the immediate future, unless the fuel prices are not reduced, which account for 40% of an airlines operation expenditure. Followed by the cost of services lease rentals, as most of the airlines are operating either on leased aircraft or with fleet acquired on foreign loans. The depreciation in rupee has increased the cost of foreign loans as well.

However, only carriers that would be in a position to somewhat absorb the shocks of exchange rate depreciation would be those with international operations, where foreign currency earnings act as a natural hedge against currency volatility.   
India VIX, a gauge for market’s short term expectation of volatility gained 6.04% at 37.19 from its previous close of 35.07 on Monday. (Provisional)

The S&P CNX Nifty lost 77.25 points or 1.59% to settle at 4,772.25. The index touched high and low of 4,869.75 and 4,728.30 respectively. 13 stocks advanced against 37 declining ones on the index. (Provisional)

The top gainer on the Nifty were, Maruti up 2.57%, L&T up 2.11%, Wipro up 1.97%, BHEL up 0.78% and Siemens up 0.78%.

 On the other hand, Tata Motors down 4.85%, ICICI Bank down 4.43%, M&M down 4.31%, SBI down 3.63% and Jindal Steel down 3.48% were the top losers. (Provisional)

The European markets are trading in red, with France's CAC 40 down 2.25%, Germany's DAX down 3.04% and FTSE 100 down 2.23%.

All the Asian equity indices barring Taiwan Weighted finished the day’s trade in the negative terrain on Tuesday as fears grow that Greece will default and the euro-zone debt crisis will spread. Euro-zone finance ministers late Monday said they would once again delay releasing a much-needed eight billion euros to Greece to help it meet its debt obligations. Hong Kong shares tumbled for a third straight session and the index snapped the trade with a cut of about three and a half percent as weakness in mainland oil producers and property names dragged the Hang Seng Index to a 2-1/2 year low ahead of a public holiday on Wednesday, moreover, the Nikkei stock average dropped to a six and a half month low as a sell-off in commodities pushed trading houses lower and the financial sector was pressured by fears that Europe's debt crisis is spreading. However, stock markets in China remained closed on Tuesday in observance of a public holiday and the country's markets will be shut throughout the week for holidays.