Political uncertainty trumps inflation cheer at Dalal Street; nosedives by over 2%

Indian stock markets went through a tumultuous session on Thursday as the benchmark indices got bludgeoned by over two percent on a day when all the European counterparts exhibited optimistic trends. The benchmark indices succumbed to across the board selling pressure and tanked way below their important psychological bastions. The markets kept treading southwards through the session in search of a bottom as disappointing developments from the domestic front continued to pummel investors’ morale. Indian government’s inability to fix out problems, get reform process going, to take decisions, and put the economy ahead of politics are the factors that pummeled investors’ confidence. RBI deputy governor Subir Gokarn comments that RBI may not cut the cash reserve ratio since inflationary pressures are still high, also dissuaded marketmen. In addition, reports showed that according to initial estimates, India’s industrial output contracted by 7% in October, dragged down by a fall in the capital goods sector. Meanwhile, investors also overlooked the encouraging weekly inflation numbers which showed that food inflation extended its declining streak for the fourth straight week and eased to its slowest rate in more than two years to 6.6% for the week ended November 26. On the global front, pessimistic sentiments prevailed across the Asian region however, the European peers bucked the pessimistic trend and traded on a positive note on hopes that the European Central Bank may announce measures to support the economy and later in the day may cut its key rates for the second time in as many months.

Earlier on Dalal Street, the benchmark got off to a sluggish beginning, tracking the weak Asian markets as investors chose to take profits off the table ahead of the key meetings in Europe. After trading in a narrow range in early trades, the selling pressure aggravated which dragged the key indices to lower levels. The frontline indices made some attempts to pare the huge losses in noon trades but investors took every rise as an opportunity to square off positions and take profits off the table, eventually leading the bourses to snap the session around day’s lows. The NSE’s 50-share broadly followed index - Nifty, suffered a nasty triple digit cut to settle below the crucial 4,950 support level while Bombay Stock Exchange’s Sensitive Index - Sensex got pulverized by close to four hundred points and closed below the psychological 16,500 mark. Moreover, the broader markets too settled on a pessimistic note with large cuts of over one and half a percent but outperformed their larger peers. On the BSE sectoral space, the Capital Goods counter bore the maximum brunt and nosedived by around four and half a percent, being the top laggard in the space followed by the high beta Realty pocket that sank close to four percent. Though there appeared no gainer in the sectoral space, some individual names including Wipro and Sun Pharma went home in the positive terrain. The markets advanced on larger volumes of over Rs 1.4 lakh crore while the turnover for NSE F&O segment too remained on the higher side as compared to Wednesday at over 1.2 lakh crore. The market breadth remained pessimistic as there were 842 shares on the gaining side against 1910 shares on the losing side while 116 shares remained unchanged.

Finally, the BSE Sensex plummeted by 388.82 points or 2.30% to settle at 16,488.24, while the S&P CNX Nifty shaved off 118.95 points or 2.35% to close at 4,943.65.

The BSE Sensex touched a high and a low of 16,847.82 and 16,421.55 respectively. The BSE Mid cap and Small cap index were down by 1.77% and 1.61% respectively.

The top gainers on the Sensex were Wipro up 2.35%, Sun Pharma up 1.49%, Cipla up 0.88%, Tata Power up 0.61% and Bajaj Auto up 0.29%. While, Jaiprakash Associates down 5.41%, BHEL down 5.28%, L&T down 5.11%, Hindalco Industries down 5.02% and Sterlite Industries down 4.38% were the top losers on the index.

The top losers on the BSE sectoral space were, Capital Goods (CG) down 4.40%, Realty down 3.80%, Metal down 3.15%, Power down 3.02% and Oil & Gas down 2.98%, while there was no gainer on the BSE sectoral space. 

Meanwhile, giving a major relief to the government, facing heat over the spiraling price rise, food inflation has shown a sharp decline for the week ended November 26, reflecting a decline in prices of essential items like vegetables, onions, potatoes and wheat. The annual rate of inflation, calculated on point to point basis, stood at 6.92% (Provisional) for the week ended November 26 as compared to 7.74% (Provisional) for the previous week November 19.

As per the government data, the index for ‘Food Articles’ group declined by 1.0% to 193.8 (Provisional) from 195.7 (Provisional) for the previous week due to lower prices of fish-inland and jowar (3% each), fruits and vegetables, condiments and spices, masur and urad (2% each) and fish-marine, poultry chicken, barley and moong (1% each).  However, other food products grew more expensive on an annual basis, led by protein-based items. The prices of ragi moved up by 3%, pork by 2% and gram, mutton, maize, egg and arhar by 1% each.

The index for ‘Non-Food Articles’ group rose by 0.6% to 177.7 (Provisional) from 176.7 (Provisional) for the previous week due to higher prices of flowers (15%), gaur seed and sunflower (4 % each), gingelly seed (3%), copra (2%) and fodder, linseed, rape and mustard seed, raw silk and soyabean (1% each).  However, the prices of raw jute (4%), coir fibre (3%), raw cotton (2%) and cotton seed and castor seed (1% each) declined. The non-food segment inflation was recorded at 1.37% during the week under review, as against 2.14% in the week ended November 19.

Inflation in the overall primary articles category stood at 6.92% during the week ended November 26, as against 7.74% in the previous week. However, the index for Fuel & Power having weight of 14.91%, remained unchanged at its previous week’s level of 171.8 (Provisional) and 15.53 percent (Provisional) for the week.

The S&P CNX Nifty touched a high and low of 5,049.05 and 4,921.45 respectively.

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 flip side, 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 on the index.

The European markets were trading mixed. France's CAC 40 lost 0.44%, Britain's FTSE 100 up by 0.20% and Germany's DAX up by 0.42%.

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.