Indian equities slip to fresh lows as profit booking intensifies in noon trades

Indian markets are witnessing hefty bouts of profit booking and the benchmark indices have gone on to hit fresh low levels in the Thursday afternoon session. Position squaring intensified in the Metal, IT and the rate sensitive Banking counters which dragged the frontline indices around the psychological 5,200 (Nifty) and 17,300 (Sensex) levels. Investors’ morale took a hit after discouraging developments from global front surfaced. Marketmen lacked fervor amid mounting concerns that Greece would reject the rescue package and default on its debt which will trigger a potential departure of Greece from the European Union, sparking a fresh economic downturn. Back home, sentiments also got undermined after government released weekly inflation numbers which showed that India's food inflation spurted to 12.21% during the week ended October 22, the highest level in nine months. Furthermore, India’s service sector PMI moderated for the third successive month in October since new business grew at its slowest pace since May 2009 on the back of slowdown in the global economy and monetary policy tightening. On the BSE sectoral front, Metal index remained the top laggard in the space as it traded with cuts of over one and half a percent followed by the IT and rate sensitive Banking pockets which traded with over a percent losses. On the flipside, only the Power sector managed to keep its head above the water and trade in the positive territory with gains of around half a percent.

Moreover, the broader markets too traded on a pessimistic note with cuts of around half a percent but managed to outclass their larger peers. The bourses plunged on volumes of over Rs 0.50 lakh core while the market breadth on BSE was in favor of declines in the ratio of 1469:1019 while 118 scrips remained unchanged.

The BSE Sensex is currently trading at 17,295.28 down by 169.57 points or 0.97% after trading as high as 17,447.32 and as low as 17,293.34. There were 7 stocks advancing against 23 declines on the index.

The broader indices were trading in the red terrain; the BSE Mid cap index shed 0.45% and Small cap slipped 0.31%.

On the BSE sectoral space Power up 0.40% was the only gainer while Metal down 1.60%, IT down 1.53%, Bankex down 1.19%, TECk down 0.95% and Auto down 0.86% were the major losers in the space.

BHEL up 2.44%, Tata Power up 1.08%, Cipla up 0.73%, Bharti Airtel up 0.60% and Maruti Suzuki up 0.35% were the major gainers on the Sensex, while Sterlite down 2.64%, Tata Steel down 2.57%, HUL down 2.19%, HDFC Bank down 2.08% and Tata Motors down 1.95% were the major losers on the index.

Meanwhile, India’s service sector Purchasing Managers’ Index (PMI) moderated for the second successive month in October, as new business grew at its slowest pace since May 2009, on the back of slowdown in the global economy and tight monetary policy. The seasonally adjusted HSBC Markit Business Activity Index declined to 49.1 in October from 49.8 in September. October’s reading is the lowest reading in last two and half years and below the 50-mark which separates growth from contraction. On the other hand, manufacturing output improved slightly from September’s 30-month low. 

Commenting on India services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, ‘the momentum in the services sector eased further in October with business activity declining sequentially and new orders expanding at a slower clip. This reflects the lagged impact of the monetary policy tightening undertaken so far, although partly also reported strike action. By sector, the deceleration was led by financial services, renting and business services, and the broader 'other services' category.

The Reserve Bank of India (RBI), in order to control inflation, increased its key policy rates by 350 basis points or 3.5% since March 2010, which has increased the interest rates hence the cost of capital. However, headline inflation measured by Wholesale Price Index (WPI) has been hovering around two digit mark, for September inflation stood at 9.72% compared to 9.78% in August. 

‘On the inflation front, there was some relief with both prices charged and input costs rising less rapidly, although the former are still climbing fast by historical standards. The numbers confirm some re-balancing between growth and inflation risks, supporting RBI's decision to signal a pause in the near term,’ Leif Eskesen said.

However, banks have been slow on passing the interest rate increase to borrowers, in a bid to help businesses which is worried that the debt crises in Europe which is one of the important export destination.  However, in spite of slowdown in western economies, the survey showed that Indian service providers were more optimistic regarding coming year than last month as business expectations saw a rebound. 

The S&P CNX Nifty is currently trading at 5,209.80, lower by 48.65 points or 0.93% after trading as high as 5,253.25 and as low as 5,205.35. There were 15 stocks advancing against 35 declines on the index.

The top gainers on the Nifty were BHEL up 2.52%, Tata Power up 1.32%, R Com up 1.22%, Bharti Airtel up 0.74% and Power Grid up 0.63%.

IDFC down 3.55%, SAIL down 2.93%, Sterlite down 2.64%, Tata Steel down 2.40% and Tata Motors down 2.08% were the major losers on the index.

Asian markets traded on a negative note, Hang Seng plummeted 2.13%, Jakarta Composite plunged 1.63% KLSE Composite sank 1.01%, Straits Times garnered 0.87%, Seoul Composite sank 0.61% and Taiwan Weighted shed 0.31%.

On the flipside, Shanghai Composite gained 0.34%.

Stock markets in Japan remained shut in observance of a national holiday.