Post session - Quick review

Joining global tumult, Indian equity markets for the second straight session fell prey to the profit booking at higher levels as investor’s once again preferred locking gains post Germany doused expectations of a breakthrough in Europe’s debt crisis at this weekend’s summit. However, local equities this time around swayed to global tunes as the markets plunged in sync with that of the Asian and European markets which lost all its recent earned gains as German Chancellor Angela Merkel’s yesterday knocked down what it called “dreams” - the last word in taming the crisis will be reached in an October 23 summit.  Meanwhile, besides this what was seen as dilemma was- China’s GDP which grew at its slowest pace in past two years. China's GDP for the 3rd quarter came in weaker than expected, posting an annualized reading of 9.1%, compared to 9.3% forecast, and 9.5% in the 2nd quarter, thereby confirming the fears that tightening campaign by the central bank meant to tame inflation caused the economy to cool.
However, the trade at Dalal Street was stained since inception post India’s largest information technology unveiled its Q2 numbers. TCS’ missed investors’ expectations on all counts - revenues, margins and net profits - in the second, or July-to-September quarter, as hedging losses and higher wage costs pulled down numbers. The company’s net profit after tax for the quarter under review rose by 75.83% at Rs 3187.11 crore as compared to Rs 1812.65 crore for the quarter ended September 30, 2010.

However, nothing came in as positive to the equity markets as out of slew of earning reported today, most of them came as disappointment to the street. HCL Technologies, India's fourth largest software services firm, on Tuesday posted a 50 percent jump in quarterly profit, but shares fell as much as 7% on a cloudy outlook for the sector amid slowing global growth. Meanwhile, IndusInd Bank lost over 2% post reporting its Q2 numbers. Private sector lender’s net profit for the quarter ended September 30, 2011 has surged by 45.02% at Rs 193.09 crore as compared to Rs 133.15 crore for the quarter ended September 30, 2010. Bank’s Gross NPA for the September quarter of the current fiscal stood at 1.09%, while the same was at 1.21% for the corresponding quarter of the previous Fiscal. Meanwhile, bank’s Net NPA stood at 0.31% as compared to 0.36% in the same quarter of the previous year. 

Also, largest private player in the Indian urea sector by production capacity - Chambal Fertilizers & Chemicals tanked 15 odd percent on reporting its Q2 numbers. The company’s net profit after tax for the quarter surged 6.50% at Rs 91.65 crore as compared to Rs 86.06 crore for the quarter ended September 30, 2010.However, stocks of Patni Computer clearly steered away as the software and services provider surged over 15% post reporting a less-than-expected decline. The company’s net profit for the declined by 38.60% at Rs 91.04 crore as compared to Rs 148.22 crore for the quarter ended September 30, 2010.

Selling witnessed across the markets was the broad-based as all the 13 index pivotals on BSE were knocked down in red. However, stocks from Information Technology, TECk and Realty featured in the list of “worst performers”.  Market men who were wary to take any position ahead of the RBI’s mid quarterly review in next week also contributed the downfall of the session. The Reserve Bank of India (RBI), which has raised rates a dozen times since mid-March 2010, is set to review policy on October 25 and the possibility of another increase has gained momentum after inflation remained high in September.

30 share barometer index on Bombay Stock Exchange (BSE) - Sensex- drowning over 250 points settled above the 16700 mark. Similarly, 50 share index on National Stock Exchange (NSE)-Nifty- tanking over 75 points settled above 5000 mark. The broader indices with no exception too ended in red with loss of over (Midcap Index) and close to 1% ( Smallcap Index)  respectively. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 915:1844 while 103 scrips remained unchanged.

The BSE Sensex lost 255.64 points or 1.50% and settled at 16,769.45. The index touched a high and a low of 16,824.76 and 16,669.04 respectively. 4 stocks advanced against 25 declining ones while 1 stock remained unchanged on the index (Provisional)

The BSE Mid-cap index lost 1.17% while Small-cap index was down 0.97%. (Provisional)

On the BSE Sectoral front, there were no gainers while IT down 3.49%, TECk down 3.00%, Realty down 2.36%, Capital Goods down 1.88% and Auto down 1.67%.

The top gainers on the Sensex were Coal India up 2.74%, HDFC Bank up 0.38%, Tata Power up 0.20% and HDFC up 0.05%.

On the flip side, TCS down 7.47%, Tata Motors down 3.70%, Hindalco down 3.61%, Sterlite down 3.14% and Wipro down 2.97% were the top losers on the index. (Provisional)
Meanwhile, the limit on foreign institutional investment (FII) in Government Securities (G-Sec) could soon be raised, as the current cap of $10 billion for the entire fiscal year has almost exhausted. If the limit is raised further, more money would be available with the domestic financial institutions to lend to the corporate sector. This move will open up more possibility of interest rates stabilizing or even going down. With the government’s additional borrowing plan of Rs 52,872 crore during October-April 2011-12, there was apprehension that the private sector would get packed out of the market.

On this, a finance ministry official said, ‘we would soon look at it. We need more money. We first have to see if FII net inflow is good, then a decision could be taken.’ During January 1-October 17, 2011 the net FII investment (both equity and debt) dropped to $4,309.30 million from $33,726.10 million a year ago.

The market will keenly watch the amount by which the limit is raised. In case the limit is raised by more than $5 billion, it will definitely improve market sentiment, although it may not necessarily lead to any reversal in the interest rate direction.

Also efforts are on to rationalize the Securities Transaction Tax (STT), a tax levied on sale and purchase of equity, and a decision in this regard could be taken in the 2012 Budget. Reduction in this tax will bring down the cost of buying or selling shares. STT ranges from 0.0125% to 0.025% on sale and purchase of equity. The government collects about Rs 7,500 crore per annum from STT. Market players have been demanding withdrawal of STT ever since it was introduced in 2004. It is argued that STT accounts for 51% of the transaction cost. The removal of which, would boost volumes on stock markets.

India VIX, a gauge for market’s short term expectation of volatility gained 1.84% at 25.90 from its previous close of 25.43 on Monday. (Provisional)

The S&P CNX Nifty lost 70.30 points or 1.37% to settle at 5,047.95. The index touched high and low of 5,057.50 and 5,011.05 respectively. 10 stocks advanced against 39 declining ones while 1 stock remained unchanged on the index. (Provisional)

The top gainer on the Nifty were, Coal India up 2.76%, BPCL up 2.18%, Ranbaxy up  1.93%, GAIL up 1.34%  and Power Grid up 0.77%.

 On the other hand, HCL Tech down 9.10%, TCS down 7.43%, Hindalco down 3.88%, Tata Motors down 3.83% and RCOM down 3.32% were the top losers. (Provisional)

The European markets are trading in red, with France's CAC 40 down 1.66%, Germany's DAX down 0.32% and FTSE 100 down 0.95%.

All the Asian equity indices witnessed blood bath and snapped the day’s trade with a huge cut on Tuesday after China posted lower-than-expected economic growth and German leaders warned that a comprehensive solution to Europe’s debt crisis may not be near. While, ratings agency Moody’s warned France it may lower its credit rating amid growing euro-zone debt worries too dampened the sentiments. Meanwhile, the Shanghai Composite declined over two percent on Tuesday as some investors locked in profits after data showed China’s economy expanded at its slowest in two years, prompting a selloff in riskier sectors, such as materials. Moreover, Hong Kong benchmark remained the top loser among the Asian peers down by over four percent, led by Chinese financial, property and materials names as a bout of short covering fizzled out, with more downside seen in the near term as short-term investors looked to take out chart levels.