Post session - Quick review

Indian equity indices relinquished all the gains post two sessions of consolidation on Thursday as qualms that a summit to save the euro zone crisis might fail to deliver a knockout blow to the region's two-year sovereign debt crisis, crept into the mind of cautious investor’s dissuading them from placing large bets. Local equity indices replicating style and pattern of Asian peers contracted in trade, after economic data from Japan and Australia signaled, the global economy is slowing and washed out the lingering optimism over European leaders approving aggressive plans by the end of the week for rescuing the debt ridden region from crisis.  In Australia, unemployment rate rose to a higher-than-expected 5.3% in November from 5.2% in October and the number of employed fell 6,300.

Amid gloomy global leads, Indian investor’s overlooked the surprisingly lower food inflation data, which slumped to 6.92% for the week ended November 26 as compared to 7.74% for the previous week ended on November 19. Market participants also failed to drawn any positive leads from European markets, which rose amidst optimism of potential interest rate cut by ECB.

Back home, although hammering was witnessed across the board, however, infrastructure stocks along with rate sensitive’s witnessed a complete wash out as profit booking emerged after recent gains, which were triggered by hopes of a slowing economy prompting Reserve Bank of India (RBI) to pause on rate increases this month. Joining the trail, power stocks too made a lackluster close after reports stated that rating agency such as Crisil, Care Ratings and ICRA were set to downgrade more power companies this fiscal.  Meanwhile, stocks of Metal gauge too lost all their sheen to end with loss of over 3%  after LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.63% on Wednesday, 7 December 2011. Sterlite Industries, SAIL, Jindal Steel & Power, JSW Steel, Tata Steel, Hindalco Industries, Hindustan Zinc and Nalco shed between 0.75% to 4.94%.

Additionally, retail stocks like Vishal Retail, Koutons Retail, Pantaloon Retail (India) and CESC, after taking a breather in the previous session again pummeled under intensive selling pressure after Finance Minister Pranab Mukharjee suspended the move of allowing FDI in retail, in order to avoid 'pre-mature elections”.

By the end, 30 share barometer index -Sensex- on BSE, plummeted over 400 points and settled sub 16500 level. Similarly, 50 share index-Nifty-on NSE tanking over 100 points ended sub 5000 mark. Meanwhile, the broader indices too went home with loss of over 1%. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 925:1808 while 135 scrips remained unchanged.

The BSE Sensex lost 429.40 points or 2.54% and settled at 16,447.66. The index touched a high and a low of 16,847.82 and 16,421.55 respectively. 4 stocks advanced against 26 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.80% while Small-cap index was down by 1.53%. (Provisional)

On the BSE Sectoral front, there were no gainers while Capital Goods down 4.42%, Realty down 3.86%, Power down 3.35%, Metal down 3.33% and Oil & Gas down 3.18% were the top losers.

The top gainers on the Sensex were Wipro up 2.34%, Sun Pharma up 1.47%, Cipla up 1.14% and Baja Auto up 0.37%.

On the flip side, JP Associates down 5.98%, BHEL down 5.42%, L&T down 5.03%, Hindalco down 4.83% and Sterlite down 4.52% were the top losers on the index. (Provisional)

Meanwhile, the Reserve Bank of India (RBI) is mulling a cut in cash reserve ratio (CRR), among other things, in the midst of tight liquidity in the money market and rising demand for easing of monetary conditions to face economic slowdown. The RBI deputy governor Subir Gokarn said, ‘there is a lot of debate over CRR cut. It's under consideration. Excessive borrowing through liquidity adjustment facility (LAF) is beyond our comfort level. We do think excessive withdrawal from LAF may be stressful for banks even if it may not strain the system as a whole.’

The demand for monetary action by the RBI is gaining impetus despite the central bank's stated anti-inflation stand. With economic growth slowing and a possible risk of contagion from euro-zone increasing, it is believed that there could be some monetary action by the central bank. Further, the liquidity condition in the system is also under pressure with banks borrowing considerably more from the LAF, of RBI than what it desires.

Banks have been withdrawing an average of Rs 1 lakh crore on a daily basis from the central bank since November 24, 2011 using the LAF window at 8.5% repo rate. However, the regulator's comfort level is 1% of net demand and time liabilities (NDTL), which is about Rs 60,000 crore. The above average borrowing has fuelled speculation that the apex bank may cut CRR by 50 basis points from 6% to inject liquidity into the system. Moreover, the RBI’s mid-quarter policy review is scheduled on December 16.

Though, Gokarn retained that CRR is a monetary tool - intended to display its stance on direction of interest rate, rather than one to manage the liquidity in the system. He said, ‘whether using an instrument that is part of monetary toolkit to address liquidity issue is certainly a debate, which we have to engage in.’

However, analyst are of the view that a repose in the reserve ratio may not be used, as inflation is still quite high and there are no signs of moderation, although food prices have started showing signs of a decline after 38 months. On this Gokarn said, the RBI will persist to do more open market operations to infuse liquidity and the third one is lined up on December 08 to release Rs 10,000 crore in the system.

India VIX, a gauge for market’s short term expectation of volatility gained 8.01% at 28.58 from its previous close of 26.46 on Wednesday. (Provisional)

The S&P CNX Nifty lost 131.95 points or 2.61% to settle at 4,930.65. The index touched high and low of 5,049.05 and 4,921.45 respectively. 8 stocks advanced against 42 declining ones on the index. (Provisional)

The top gainers on the Nifty were Wipro up 2.20%, Sun Pharma up 1.88%, PNB up 1.63%, Cipla up 1.52% and SAIL up 0.63%.

On the other hand, RCOM down 6.54%, JP Associates down 6.03%, BHEL down 5.95%, Sesa Goa down 5.84% and L&T down 5.39% were the top losers. (Provisional)

The European markets are trading in green, with France's CAC 40 up 0.37%, Germany's DAX up 0.69% and FTSE 100 up 0.27%.

Asian equity indices witnessed blood bath on Thursday after a huge rally in the previous session ahead of a European summit on the region’s sovereign debt crisis, and after economic data from Japan and Australia signaled the global economy is slowing. Investors adopted a cautious stance ahead of the European Central Bank and European Union meetings later in the day and Chinese economic data due Friday. However, the European Central Bank (ECB) is widely expected to cut its policy rate and deliver other supportive measures, while the summit is being watched for the emergence of a common strategy to prevent a full-blown fiscal and banking crisis in the region.

Japanese Nikkei dropped over half a percent as Tokyo-listed major machinery exporters lost ground after the country’s core machinery orders for October fell 6.9% from a month earlier, compared with a 0.1% rise tipped in a poll by Dow Jones and Nikkei. Okuma fell 1.8% and Makino Milling Machine shed 0.7%. While, Hong Kong shares fell by 0.70 percent, with large caps leading the Hang Seng Index off a three-week high in weak turnover.