Benchmarks recover from intra-day’s low; Nifty heads close to 5750 psychological level

Indian equity markets after suffering an early jolt are now on the path of its recovery with  Nifty, significantly recovering from freak trade, which sent the widely followed 50 share index tumbling lower by over 900 points to a low of 4,888. According to the exchange, the market circuit filter that got triggered due to entry of 59 erroneous orders which resulted in multiple trades for an aggregate value of over Rs 650 crore, mainly was the reason behind the steep fall of the index. However, since the trade was not executed on BSE, losses on Sensex remained limited, which after recovering from a low of 18700 level, is currently oscillating above the 18800 psychological level. Furthermore, broader indices despite trimming their losses are currently trading with a cut of over a percentage points.

Positive global developments seem to be working for recovery of benchmark equity indices, which squandering a positive start, are currently wandering in the negative territory, as profit -booking post previous session’s spectacular rally, mainly has led to session of underperformance. On the global front, Asian pacific shares appear set for a positive close on account of persistent buying after the European Central Bank said it stands ready to buy bonds of troubled euro zone countries. Meanwhile, European shares too are expected to start higher as investors look positioned for a sentiment boost from key U.S. jobs data later in the day.

The BSE Sensex is currently trading at 18880.48, down by 177.67 points or 0.93% after trading in a range of 19137.29 and 18757.34. There were 5 stocks advancing against 25 declines on the index.

The overall market breadth on BSE is in the favour of declines which have outnumbered advances in the ratio of 1917:694, while 81 shares remained unchanged on the index.

Conversely, broader indices trimmed some losses; the BSE Mid cap and Small cap index indices were trading lower by 1.28% and 1.57% respectively.

The only gainers on the BSE sectoral space were, CD up by 0.44%, Auto up by 0.34% and FMCG up by 0.30. While, TecK down by 1.68%, IT down by 1.61%, Realty down by 1.48%, Bankex down by 1.34% and Health Care down by 1.14% were the top losers on the sectoral space.

The top gainers on the Sensex were Tata Motors up by 1.59%, Hindustan Unilever up by 1.42%, Coal India up by 1.38%, Mahindra & Mahindra up by 1.07% and ITC up by 0.07%. On the other hand, HDFC down by 4.10%, Wipro down by 2.15%, Bharti Airtel down by 1.74%, Infosys down by 1.65% and BHEL down by 1.52% were top losers on the Sensex.

Meanwhile, rating agency, CRISIL, has downgraded 484 companies in the first half (H1) of 2012-13, the highest for any six-month period, thereby underscoring a mounting pressure on corporates' credit quality amid slowing demand and pressure on liquidity. However, with pressure on profitability and on economic growth showing signs of abating, CRISIL is expecting the credit ratio to begin bottoming out. At the same time, the rating agency is forecasting the rating downgrades to continue outnumbering upgrades in the near term, although their severity and intensity may decline.

CRISIL in its report stated that, “having declined continuously for nine quarters, EBIDTA margins are now likely to increase. Also, the pressure on GDP growth seems to have eased. Together, these factors should ensure that the credit ratio does not decline materially from current levels” CRISIL’s credit ratio (ratio of upgrades to downgrades) declined to 0.66 in first half of 2012-13 from 0.91 in H2 of 2011-12, primarily on account of slowdown in economy. 

Of the 484 downgrades down by the rating agency, 183 were to ’default’ category, which were primarily from rating categories ‘CRISIL BB’ and lower, which are inherently more vulnerable to defaults. The rating upgrades, on the other hand, were supported by improved business performance due to stabilization of past capital expenditure (capex), and consequently, improved cash flows.

Among the downgrades, one third of the downgrades were down among the highly-indebted industries, including power, construction, textile and engineering & capital goods. The highest upgrades rates, on the other hand, were in retail consumption linked sectors, such as packaged foods and home furnishing.

 The S&P CNX Nifty is currently trading at 5,729.25, down by 58.35 points or 1.01% after trading in a range of 5,815.35 and 4,888.20. There were 5 stocks advancing against 44 declines, while 1 stock remained unchanged on the index.

The top gainers of the Nifty were, Tata Motors up by 1.57%, HUL up by 1.49%, Coal India up by 1.42%, M&M up by 1.35%, and GAIL up by 0.11%. While, HDFC down by 4.24%, JP Associates down by 3.35%, IDFC down by 3.13%, Reliance  Infra down by 3.02% and Wipro down by 2.36% were top losers on the index.

 All the Asian equity indices continued to trade comfortable in green, barring KLSE Composite; with Hang Seng adding 0.42%, Jakarta Composite soaring 0.87% Straits Times advancing 0.52%, Nikkei 225 gaining 0.44%, Kospi Composite rising 0.21% and Taiwan Weighted inching higher by 0.11%%. On the flip side, KLSE Composite down by 0.02% was the sole loser amongst the Asian pack. Meanwhile, financial markets in China remained closed.

European markets too have negotiated a positive start; with CAC 40 trading higher by 0.41% , DAX advancing by 0.28% and FTSE 100 gaining by 0.29%.