Post session - Quick review

A day high on expectation’s ended in disillusionment as reports of discord at the European Union summit prompted investor’s a “flight of safety” off Dalal Street. Barometer indices after surging in previous week, snapped this week with gigantic loss of over 3%. However, the movement at Dalal Street, for today’s session was largely driven by two key events-the European Summit and mid-year economic review.

European leaders, at much awaited crucial EU Summit, today failed to agree on a treaty change among all 27 member states and decided to cap the euro zone's permanent bailout fund, by agreeing for not opting for a banking license that could have increased its firepower, as this would mean inability to borrow from the European Central Bank (ECB). In a historic rift over building a fiscal union to preserve the euro, twenty-three of the 27 leaders agreed to pursue tighter integration with stricter budget rules for the single currency area, however, Britain after failing to secure concessions for itself, said it could not accept proposed amendments to the EU treaty.

The downbeat outlook for the euro zone also outweighed positive news from China, which said that inflation was at its lowest level for more than a year, raising the prospect of fresh monetary easing by Beijing. China's annual inflation rate tumbled in November to 4.2% compared to a 5.5% rise in October.

However, even Asia pacific markets joining the global gut ended abysmally low. China's industrial output growth hit its slowest pace in more than two years. A batch of November data largely showed that growth in the world's second-largest economy was slowing down further as it felt the chill of the euro zone debt crisis, although retail sales were stronger than expected. The data showed that industrial output growth slowed to 12.4 percent in November, below expectations for 12.8 percent and its weakest pace since August 2009. Meanwhile, European shares, which extending a decline into a fourth session, drifted lower in early deals also squelched the already fragile sentiment at Dalal Street.

Back home, losses at Dalal Street exacerbated after Finance minister, while presenting the mid-year economic review in parliament, slashed the economic growth forecast for the fiscal year ending March 2012 to 7.5%, from 9% earlier.  Sentiment also took a hit after Finance minister said that weak rupee would inflate the cost of oil imports and could pose an upside risk to the country's budgeted fiscal deficit target of 4.6 percent of gross domestic product.

Further adding to the investor’s woes, the government said Rs 40, 000 crore stakes sale target in state-run companies would be hard to achieve this fiscal year, while tax receipts would suffer from the impact of the global slowdown.

Meanwhile, investors also overlooked the reports that domestic car sales registered a growth of 7% in November, after seeing negative sales growth for four consecutive months on worries that the automakers will miss out even on the modest growth forecast of 2-4% this fiscal. It were majorily shares from Capital Goods, Auto and Oil & Gas that plummeted the most, however, none of the index pivotal were spared.

Thus, the day full of dramatic action ended on an absolute sedate note, 30 share barometer index-Sensex-on BSE-tanking over 250 points ended near day’s low below the crucial 16300 level, market participants refraining the outcome of the crucial EU Summit preferred reducing their long held position. Similarly, 50 share index-Nifty- on NSE too plunging over 50 points ended sub 4900 level. However, broader indices suffered lesser loss in comparison to the frontline indices. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1007:1690 while 136 scrips remained unchanged.

The BSE Sensex lost 297.52 points or 1.80% and settled at 16,190.72. The index touched a high and a low of 16,382.57 and 16,142.32 respectively. 5 stocks advanced against 25 declining ones on the index (Provisional)

The BSE Mid-cap index lost 0.91% while Small-cap index was down by 0.94%. (Provisional)

On the BSE Sectoral front, there were no gainers while Capital Goods down 2.68%, Auto down 2.34%, Oil & Gas down 2.17%, Power down 1.98% and TECk down 1.36% were the top losers.

The top gainers on the Sensex were Coal India up 1.17%, Maruti Suzuki up 0.86%, Hindalco up 0.54%, Jindal Steel up 0.20% and NTPC up 0.09%.

On the flip side, JP Associates down 4.67%, Tata Power down 3.97%, M&M down 3.69%, BHEL down 3.67% and Bajaj Auto down 3.40% were the top losers on the index. (Provisional)

Meanwhile, the significant financial sector reforms are getting delayed despite the finance minister Pranab Mukherjee’s request to political parties to help government is passing legislations for the sector.

On December 8, the Parliament’s standing committee on finance rejected a clause in the Insurance Bill to raise Foreign Direct Investment (FDI) limit in private firms from current 26% to 49%. The change in the insurance law on FDI was introduced by Ex-Finance Minister Chidambaram in 2004-05, during the first 5-year term of UPA government.

The standing committee also rejected the clause of banking bill, which was tabled earlier this year to increase the limit on voting rights of single shareholder in public sector banks to 10% from existing 1% and in other banks from exiting 10% to a level proportionate to the stake. The banking bill which seeks to make it mandatory for any shareholder who acquires 5% or more stakes in a bank to get prior approval from the Reserve Bank of India. The Banking Bill also seeks to take away the power of scrutinizing mergers and acquisitions in the banking sector from the Competition Commission of India.

The standing committee also turned down the government’s suggestion to reduce the minimum paid-up capital in health insurance to Rs 50 crore from the present Rs 100 crore. The committee recommended retaining the current norms.

The government can brush aside these suggestions, provided it amasses crucial numbers of opposition parties to pass these bills. Earlier, the standing committee, on the pension reform bill, had rejected government’s desire to keep the FDI out of the purview of legislation.

These bills are vital from the policy reform point of view, as these sectors are expected to be the next growth drivers of Indian economy. However, these vital policy reforms have been getting delayed over political disagreement

India VIX, a gauge for market’s short term expectation of volatility gained 3.32% at 29.53 from its previous close of 28.58 on Thursday. (Provisional)

The S&P CNX Nifty lost 80.35 points or 1.63% to settle at 4,863.30. The index touched high and low of 4,918.35 and 4,841.75 respectively. 10 stocks advanced against 40 declining ones on the index. (Provisional)

The top gainers on the Nifty were Reliance Power up 1.26%, Hindalco up 1.23%, Kotak Bank up 1.22%, Dr. Reddys up 1.09% and Jindal Steel up 0.94%.

On the other hand, SAIL down 5.65%, JP Associates down 4.89%, Siemens down 4.18%, M&M down 3.80% and Tata Power down 3.77% were the top losers. (Provisional)

The European markets are trading on a mix note, with France's CAC 40 up 0.12%, Germany's DAX down 0.03% and FTSE 100 down 0.22%.

Sentiments remained bearish in Asian region and all the regional indices butchered on fears that Europe’s leaders will not agree a deal to tackle their debt crisis as the first day of a crucial summit broke up with plans for a full treaty change in tatters. With the mood already soured by the European Central Bank (ECB) saying it would not indefinitely buy the bonds of debt-wracked countries, news of the split within the 27-nation bloc left investors' nerves on edge.

Chinese benchmark declined over half a percent after country’s lower-than-expected inflation data failed to provide much of a sentiment boost around the region, despite hopes for further policy loosening, as it also spurred concerns over growth in the world’s second-largest economy. China’s consumer price index for November was up 4.2% on-year, compared with expectations for 4.4% and October's 5.5%. While, Nikkei fell about one and a half percent on Friday and tested key support at its 25-day moving average after steps by the European Central Bank to help Europe.