Blood bath continues at Dalal Street; Nifty sheds more than100 points

Local equity markets are witnessing a complete blood bath; the BSE Sensex has already shed more than 350 points and the NSE Nifty over 100 points in late afternoon session. The higher inflation and likely hike in key rates in upcoming RBI's policy meet could be reasons behind this consistent fall however some FII selling too is being witnessed. Meanwhile European markets and Dow futures too were not giving any encouraging sign as all the European markets were trading in red, Dow future was down by 45 points in the screen trade. European markets slipped quickly into the red after opening higher. Investors are likely to hold back as all eyes are on the US Non-Farm Payroll release later in the day, followed by a speech of Fed chief Ben Bernanke. On the other hand majority of the regional peers settled mixed. Back home, on the sectoral front, all the sectoral indices are trading in the negative territory and Metal segment is leading the pack followed by Auto, Consumer Durables and Technology counters. Index heavyweights such as Hindalco, Bharti and Tata motors have lost more than four percent in trade today. Besides large cap stocks, scores of midcap and small cap stocks too have declined sharply on selling pressure and BSE Mid-cap and Small-cap indices have lost around 2% each. The market breadth on the BSE is extremely negative; there were 2196 shares on the gaining side against 690 shares on the losing side, while 79 shares remain unchanged. ICICI Bank and Reliance Communications up 1.52% and 1.04 % are the only gainers on the Sensex.

The BSE Sensex tumbled 347.16 points or 1.72% at 19,837.58. The index touched a high and a low of 20,210.62 and 19,818.47 respectively.

The BSE Mid-cap and Small-cap indices shed 1.84% and 2.03%, respectively.

All the sectoral indices were trading in the negative territory.Auto down 3.16% , Metals down 3.10%, Consumer Durables(CD) down 2.85% ,TECk down 2.38% and IT down 2.21% were the major losers in the BSE sectoral space.

Hindalco Inds down 5.68%, Tata Motors down 4.77%, Bharti Airtel down 4.74%, M&M down 4.40% and TCS down 1.54%, were the top losers on the index.

While ICICI Bank up 1.52% and Reliance Communication  up 1.04% were the only gainers in the Sensex .

Global rating agency Fitch has downgraded the cement sector outlook to 'negative to stable' for the current calendar year in wake of continued margin pressures and potential over capacity staring at the industry. The industry which performed above expectations in last fiscal lost its way somewhat following the start of monsoon season in 2010 and has remained rather week since then.

The Fitch said that cement industry is likely to suffer from over capacity as the demand is expected to expand at around 10% in the year 2011 while the total capacity addition will be significantly higher in the same period. The industry already has a lot of spare capacity. As such, the agency concluded the 'overcapacity of 125.8 million tonne by 2013 in the cement sector, which will result in pricing and margin pressure.'

Margins of cement companies have been in pressure for quite some time owing to weaker prices and rising cost of production and Fitch expects that profitability will continue to remain under pressure in the year 2011. It expects little change in both prices and costs from current levels, which pre-empts any room for near term improvement. 'Fitch expects further pricing pressure in the wake of lower capacity utilization, and notes that regional variations will continue to play a significant role,' it said.

The widening demand-supply gap is expected to affect the capacity utilization levels of the cement companies further. Fitch expects continued pricing pressure in the wake of lower capacity utilization, and noted that regional variations will continue to play a significant role. The south region with a large demand/supply gap, which is expected to widen further, is likely to witness particularly heavy pricing pressure, followed by the west and east regions.

Cement dispatches had shown buoyant increase in October when growth reached close to 18%, raising hopes that industry may bottom-out soon. But growth slipped into negative zone again in November when dispatches contracted by 3% on annual basis and close to 20% on sequential basis, hitting the prospects of the cement companies. Most analysts feel that the industry will continue to face pressure in wake of oversupply as well as rising cost of production. 

The S&P CNX Nifty trimmed 102.70 points or 1.70% to 5945.55. The index touched a high and a low of 6051.20 and 5938.80, respectively. 

The top gainers on the Nifty were ICICI Bank up 1.76%, Reliance Communication up 1.29%, IDFC up 0.89%, Sunpharma  up 0.58% and GAIL was up 0.56%.

The regional peers settled mixed. Shanghai Composite gained 0.52%, KLSE Composite rose 0.24%, Nikkei 225 increased 0.11% and Seoul Composite added 0.41%.While, Hang Seng shed 0.42%, Jakarta Composite declined 2.81%, Straits Times decreased 0.71% and Taiwan Weighted trimmed 1.13%.

The European markets were trading in red. CAC-40 decreased 0.75%, FTSE 100 trimmed 0.58% and DAX declined 0.22%.

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