Benchmarks clobbered out of shape; Sensex bleeds 467 points

Indian markets finished a terrible first day of a new week as the blood bath continued for the fifth straight day of trade taking the benchmark indices way below the psychological levels. Markets saw relentless selling pressure across the counters as rate hike fears and weak opening of European markets dragged the frontline indices, which at one point of time tumbled to near one-month lows in today's session. The NSE's 50-share broadly followed index, Nifty got clobbered around two and half a percent to settle a tad above the psychological 5,762.85 level while the Bombay Stock Exchange's Sensitive Index, or Sensex shaved-off over four hundred fifty points to close around the crucial 19,200 mark. The broader markets too have continued their horrible run of underperformance after they once again witnessed tremendous selling pressure pulling the BSE's midcap and smallcap indices to close in the negative zone for the fifth consecutive day. Real estate stocks plunged over three and half a percent today as investors exerted maximum selling pressure over HDIL and Sobha Developers which trimmed 8.06% and 5.63% respectively. While IT bellwether Infosys Technologies and Telecom major Bharti Airtel remained only gainers among the heavyweights as bears continued their party mood. Banking pack too got clobbered by three percent points with majors like HDFC Bank and ICICI Bank sulking 5% and 3.22% respectively. While no sectoral index managed to settle in the green terrain, only a few stocks managed to close in the positive territory with few cements stocks including ACC and Ultratech Cement settling with 1.73% and 0.34% gains.

On the global front, cues remained subdued right from the start of trade today as Asian equity indices got dragged on the back of worse than expected US jobs report released late last week which dragged US markets lower. All key benchmark indices in Europe are trading in the negative region with CAC 40 being the biggest laggard in the space after shedding over one and half a percent point. The screen trading for US index futures also indicates that the Dow could open in the red at the opening bell.

Earlier on the Dalal Street, the index got off to a very unstable start tracking Asian markets which were trading with a negative bias. The frontline indices remained choppy and failed to script any kind of recovery as interest rate hike concerns weighed on sentiments. The benchmarks kept on tumbling through the day's trade even as it tested the crucial 19,200 and 5,750 levels. The slaughter in the late hours ensured that the bourses went home with massive losses and close around the low point of the day. Volumes saw substantial pick up today to around Rs 1.89 lakh crore while the turnover for NSE F&O segment too remained on the higher side compared to Friday at over Rs 1.72 lakh crore. The market breadth on the BSE too was dreadfully negative as there were merely 648 shares on the gaining side against a considerable 2233 shares on the losing side while 122 shares remained unchanged.

Finally, the BSE Sensex doused 467.69 points or 2.38% to settle at 19,224.12 while the S&P CNX Nifty dived 141.75 points or 2.40% to end at 5762.85.

The BSE Sensex touched a high and a low of 19,720.43 and 19,158.43, respectively. HDFC Bank down 5%, BHEL down 4.76%, HDFC down 4.44%, Hindalco Inds down 4.44% and Jaiprakash Associates down 4.18% were the major laggards on the Sensex.

On the other hand, Infosys up 0.90% and Bharti Airtel up 0.04% were the only gainers on the index.

The BSE Mid-cap and Small-cap indices dropped 2.34% and 2.83%, respectively.

Meanwhile, Union Finance minister Pranab Mukherjee said on Saturday that the sticky inflation seen in the Indian economy over last one year or so was attributable to many things including the fast growth in economy itself, a high fiscal deficit and a sharp rise in global commodity prices. He stressed that the government must return to a path of fiscal consolidation in order to control the situation.

"Economic expansion leads to fiscal deficit. It is leading to the problem of unstable price regime," Mukherjee said, adding that high deficit had to be borne because of the global economic crisis. "India had to take a series of steps to protect the domestic economy from the contagion of the global credit crisis in 2008," he said explaining the surge in deficit that is partially responsible for inflation.

Economists have been saying that high fiscal deficit being run by the government had created extra money supply in the economy, resulting in increased demand for goods and services. Also, the schemes like national employment guarantee act were raising the income of marginal section of society which generally tends to spend large chunk of income of food goods, thus increasing the overall demand for food commodities in the economy.

Mukherjee accepted that it was not possible to completely insulate the economy from rising fuel prices, even as he hoped that steps taken so far will help bring pace of rising prices down. "There is no way we can completely insulate ourselves from the adverse impact of the rising fuel prices, particularly diesel prices. It has its impact on the economy," he said here.

All the sectoral indices were trading in the negative territory. Realty down 3.55%, Capital Goods (CG) down 3.52%, Consumer Durables (CD) down 3.26%, Bankex down 3%, and Oil & Gas down 2.99% were the major losers in the BSE sectoral space.

Both India and Iran expect that an amicable solution to the payments for crude oil imported by the former from the latter will be found during a visit of Indian oil and finance sector officials to Tehran later this week. The two sides reiterated that there has been no gaps in oil supply to India.

'Iran payment is very important for the ministry of petroleum and natural gas and oil companies, including private companies. We would require payments to be channelised through alternative banks which will be suggested by National Iranian Oil Company," Union Oil Secretary S. Sundareshan said on Monday. 'We have on table some banks which have been suggested. We will probably work through them,' he added.

The problem came to forefront when the Reserve Bank of India (RBI) said on December 23 that oil companies will have to settle current account and trade transactions with Iran outside the Asian Clearing Union (ACU), a regional payment arrangement including India as well as Iran. Participants in the ACU settle transactions in either the US dollar or Euro. So far the oil companies on both the sides have failed to find a way out.

Earlier, a temporary solution was proposed by the Iran. It asked India to pay for Iranian crude oil in euros through a German bank based in Hamburg. National Iranian Oil Company (NIOC) has a euro account with that bank (Europaisch-Iranische Handelsbank  - EIH Bank). However, since that bank is also facing sanctions of the US government, Indian oil companies and banks were not very interested in the solution, though it is being kept as a last resort for now. 

Later this week, a delegation comprising officials from the finance and oil ministries as well as the Reserve Bank of India (RBI) and representatives of oil companies will be visiting Tehran where both the sides will try to work out a solution that is acceptable to Iran and does not put Indian companies at risk of facing US sanctions either. Though a difficult situation, analysts feel there are some ways and the two sides will try to choose the most sustainable way.

The S&P CNX Nifty touched a high and a low of 5907.25 and 5740.95, respectively.

The top losers on the Nifty were Kotak Mahindra Bank down 6.48%, HDFC Bank down 5.05%, Hindalco Inds down 4.99%, BHEL down 4.46% and HDFC down 4.37%.

On the other hand, ACC up 1.77%, Infosys up 0.50% and Bharti Airtel up 0.15% were the only gainers on the index.

European markets were trading in the red on Monday. France's CAC 40 plunged 1.55%, Germany's DAX slipped 0.98% and Britain's FTSE 100 shed 0.64%.

All the Asian equity indices barring Taiwan Weighted finished the day's trade in the negative terrain on Monday on speculation that central banks in China, India and Indonesia will raise rates to curb inflation. The sentiments in the region also weighed as worse than expected US jobs report released late last week which dragged US markets lower. However, Taiwan stocks rose about half a percent in trade, with financial shares higher as the sector rebounded from a correction last week and received support from a view that interest rates would continue to rise. While, Stock markets in Japan remained closed today on account of a national holiday.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,792.38	-46.42	-1.64
Hang Seng	23,527.26	-159.37	-0.67
Jakarta Composite	3,478.55	-152.90	-4.21
KLSE Composite	1,563.52	-8.69	-0.55
Nikkei 225*	10,541.04	11.28	0.11
Straits Times	3,229.27	-32.08	-0.98
Seoul Composite	2,080.81	-5.39	-0.26
Taiwan Weighted	8,817.88	35.16	0.40

* The Japanese Nikkei showed the data for January 7, 2011 as trade remained closed in Japan on account of a national holiday.

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