Weakness tightens its grip at Dalal Street; broader indices too imitate

Extending their weakness in bear market, Indian equity indices have slipped deeper in red, as fears that Europe's debt crisis is worsening prompted investors to dump riskier assets and huddle in the safety of the dollar and treasuries.

Sentiment across Asia pacific markets were pounded after Japanese business confidence dropped and higher borrowing costs for Italy sparked worries over the ability of European governments to get a grip on their ever-burgeoning debts. Meanwhile, after the third consecutive session fall of US markets overnight, US future indices too were pointing at negative start of Wall Street on Thursday.

Back home, investor’s also scurried away from riskier equities after mounting worries about the health of Asia's No. 3 economy amidst fears that weakening currency would raise overseas borrowing costs for companies, prompted risk aversion.

Meanwhile, market participants also stayed on the sidelines eyeing Q3 advance tax payments, which would held them to gauge the performance of the companies in Q3 of the current fiscal. Further, with the mid-quarterly monetary policy review around the corner, the milieu remained highly vigilant.

Stocks from Capital Goods, Capital Durable and metal counters, were the worst performers of 30 share index- Sensex- which plunging over 200 points had breached 15700 mark. Similarly, broadly followed 50 share index- Nifty-declining over 50 points was trading sub 4700 level. The broader indices too had enticed substantial weakness and were trading lower with a cut of over 1.50% each. The overall market breadth on BSE was in the favour of declines which thrashed advances in the ratio of 1594:453, while 90 shares remained unchanged.

The BSE Sensex is currently trading at 15,661.96, down by 219.18 points or 1.38%. The index has touched a high and low of 15,795.84 and 15,655.64 respectively.  There were just 4 stocks advancing against 25 declining one’s the index, while 1 stock remained unchanged.

The broader indices too extended its southbound journey; the BSE Mid cap and Small cap indices were down by 1.59% and 1.74% respectively.

CG down by 2.60%, CD down by 2.40%, Metal down by 2.30%, Auto down by 1.90% and TECk down by 1.83% were the top losers on the index. While, there were no gainer on the index.

Bharti Airtel down by 4.64%, Hindalco down by 3.46%, Sterlite Industries down by 3.03%, Maruti Suzuki down by 3.00% and L&T down by 2.89% were the top losers on the index.

While, Sun Pharma up by 0.48%, HDFC up by 0.47%, Cipla up by 0.40% and HUL up by 0.12% remained the top gainers on the index.

Meanwhile, just before of the Reserve Bank of India’s monetary policy review, Finance Minister Pranab Mukherjee said, our own fight against inflation has taken toll on investments by our corporations. The RBI, in order to control headline inflation, which has been hovering near by two digit mark from 12 months, has increased its key policy rates by 13 times. However, this non-stop increase in interest rate has increased the cost of capital, which has resulted in slowdown in investment rates.  Mukherjee said, 'we must turn our attention now to reviving growth as quickly as possible.’ Our monthly industrial growth has slowed down sharply. This is partly a reflection of global trends, but the fight against inflation has affected the investments scenario by our corporations.'

The government's efforts to wipe out the opposition’s perception that there's a policy paralysis is suffering blow after blow. After forcing the government to discard its plans to allow 51% foreign investment in multi-brand retail, an Opposition-headed parliamentary panel further rejected raising FDI limit in insurance. Now, the government, which is disillusioned by the opposition parties, seems to be leaning on RBI. The chief economic advisor to the FM Kaushik Basu said, 'we need to pull out of the industrial slowdown as soon as possible.'

Incompatible policies on mining, fuel allocation, environment goals and subsidies have put off entrepreneurs. Industrial growth contracted more than 5%, the worst since the credit crisis. However, the RBI is in difficult situation as it has to control high inflation, which for the month of November fell to 9.11% from 9.72% in last month, still above RBI’s comfort zone.

With RBI’s calculations gone wrong in the past, it is determined to bring down the rate of price rise to 7% by maintaining high interest rates. However, it also indicated that it may not increase the interest rates on December 16, the chance of cutting rates are less as other central banks have begun to fight the slowdown induced by the European sovereign crisis by reducing rates.   

The S&P CNX Nifty is currently trading at 4,698.85, down by 64.40 points or 1.35%. The index has touched a high and low of 4,732.75 and 4,691.80 respectively.  There were just 6 stocks advancing against 44 declining one’s on the index.

The top gainers of the Nifty were BPCL up by 3.56%, HDFC up by 0.58%, Sun Pharma up by 0.44% and Cipla up by 0.34% and HUL up by 0.27%.

Sesa Goa down by 4.21%, Bharti Airtel down by 4.04%, RCom down by 4.02%, Cairn India down by 3.88% and Reliance Power down by 3.74% were the major losers on the index.

All the Asian equity indices were trading in the red; Shanghai Composite plunged 1.12%, Hang Seng and Jakarta Composite slid by 1.85%, Nikkei 225 lost 1.17%, Straits Times was down by 1.38%, Seoul Composite  and Taiwan Weighted plummeted by 1.97%.