Barometer gauges nose dive in red; broader indices too suffer with intensive cuts of over a percent

Barometer gauges after resuming the trade on weaker note post a day’s break on Friday have magnified their losses as the cautious sentiment prevailing ahead of the release of September IIP data; have put wary investor’s at the bay who expect September numbers to show weaker growth due to sharp increases in interest rates and slowing spending.  The street expectation is that India's industrial output growth probably slowed to an annual rate of 3.5 percent in September, weighed down by slower growth in infrastructure output and higher borrowing.

However, the sentiment at Dalal Street in early trade was also spooked by the result of India’s biggest steel producer-Tata Steel- which reported 89% drop in fiscal second-quarter group profit at Rs 212.43 crore as compared to Rs 1978.81 crore for Q2FY11 on the back of waning demand, foreign-exchange losses and higher raw material costs at its European operations.  Meanwhile, shares of airline Kingfisher Airlines also rattled Dalal Street as the stocks of the Airline Company dropped more than 17% after media reports stated that 130 of company’s pilots had resigned after the cash-strapped carrier cancelled over 35% of its scheduled flights on Thursday. Additionally, Investors also dumped DLF, India's largest listed real estate developer, after the company reported an 11% fall in profit for the quarter to end-September.

On the global front, the US equity markets saw some buying on Thursday after Italian yields moved down on reports that ECB is buying Italian and Spanish bonds.  European Central Bank bought Italian’s debt and the nation sold entire 5 billion euros ($6.8 billion) of one-year bills in auction at 6.1%. Meanwhile, sentiment also improved after US jobless claims fell to lowest in seven months. Jobless claims fell by 10,000 to 390,000 in the week ended November 5, against expected 400,000. Asian stock markets were mostly higher in choppy trade on Friday, rebounding a bit after the recent global selloff as investors watched for further developments in the euro-zone debt crisis. Meanwhile, investors were also encouraged by Greece naming former European Central Bank Vice President Lucas Papademos as its next prime minister. The US future indices were showing a downtick in the screen trade.

Back home, on the BSE Sectoral front, stocks from Auto,  Healthcare were the only defensive one’s, while stocks from Metal, Bankex and  Realty counters plummeting the most, dragged the 30 share barometer indices lower over a century of points. The widely followed 50 share index- Nifty- on NSE plummeting over 50 points was trading sub 5200 mark. The broader indices too dived into the sea of red. The overall market breadth on BSE was in the favour of declines which thrashed advances in the ratio of 1521:726, while 98 shares remained unchanged.

Indian equity benchmarks may lose some ground as investors digest September IIP numbers which indicate Industrial growth has deteriorated further, resulting in a definite slowdown in India. Industrial output grew just at 1.98% in September as against 4.1% in August. Manufacturing, basic goods, consumer goods, consumer durables goods sectors showed less growth in the September as compared to a year ago period.

The BSE Sensex after plunging by 198.67 points or 1.14% is currently trading at 17,163.43. The index has touched a high and low of 17,279.23 and 17,139.10 respectively.  There were 8 stocks advancing against 22 declining one’s the index.

The broader indices too dived into the sea of red; the BSE Mid cap and Small cap index declined by 1.22% and 1.35% respectively. 

The only gaining sectoral indices on the BSE were, Auto up by 0.08% and HC up by 0.06%. On the flip side, Metal down by 2.47%, Bankex down by 2.41%, Realty down by 2.36%, CG down by 2.21% and Power down by 1.49% were the top losers on the index.

The top gainers on the Sensex were Sun Pharma up by 1.92%, Hero Motocorp up by 1.47%, Bajaj Auto up by 0.97%, TCS up by 0.62% and Wipro up by 0.42%.

On the flip side, Tata Steel down by 5.09%, ICICI Bank down by 4.54%, Hindalco down by 4.46%, L&T down by 3.27% and DLF down by 3.27% were the top losers on the index.

Meanwhile, after the petrol price hike, the power tariff across the country is also expected to increase on the back of shortage of coal in the domestic market and dependence of power companies on imported coals. Pramod Deo Chairman of Central Electricity Regulatory Commission (CERC), said 'since there is shortage of coal in the domestic market, companies will have to depend on imported coal, which is very costly. If fuel cost goes up, the tariff hike is inevitable.'

As per the latest data of the Central Electricity Authority (CEA) around 38 coal-base projects from 98 coal-base projects were running with supercritical fuel stock to run for less than 4 days, and another 11 projects have coal to operate for less than 7 days against the requirement of 22 days.

On the other hand, the international thermal coal prices have increased by almost 20% to $120 a tonne and Coal India, the largest coal producer, has failed to meet the demand from domestic power firms. The increased cost of fuel is reflected in Fuel Adjustment Charge (FAC), which has to pass on to the consumers in the form of increased tariffs.

'We understand that consumers will be burdened with the increase in tariff. But if there is shortage of fuel and it has to be procured at higher cost, then it will have to be passed on,' Deo added. By adding further he said, ‘under the ultra mega power projects, state governments have done long term contracts for 25 to 30 years with many power firms. However, with the uncertainty in the coal availability and increase in prices, the state government should also consider at medium term contract of around 8-10 years.’

The S&P CNX Nifty opened is currently trading at 5,159.10, down by 61.95 points or 1.19%. The index has touched a high and low of 5,198.60 and 5,153.75 respectively. There were 13 stocks advancing against 37 declines on the index.

The top gainers of the Nifty were Sun Pharma up by 2.06%, Hero MotoCorp up by 1.17%, Dr Reddy up by 0.99%, Bajaj Auto up by 0.81% and Power Grid Corporation up by 0.77%.

Tata Steel down by 4.56%, ICICI Bank down by 4.46%, Hindalco down by 3.49%, Axis Bank down by 3.19% and BHEL down by 2.99% were the major losers on the index.

Meanwhile, all the Asian markets were trading in the green; Shanghai Composite gained 0.44%, Hang Seng surged 1.14%, Jakarta Composite inched up by 0.02%, KLSE Composite added 0.25%, Nikkei 225 surged 2.50% and Taiwan Weighted was trading higher by 0.74%.