Markets nosedive to the day’s low; index heavyweights drag

Local equity markets dived to the day's low on major slump in index heavyweights. Both the benchmark indices, Nifty and Sensex, are trading around their intraday low levels. Index heavyweights like RIL, ICICI Bank, L&T and ITC are trading at their day's lowest level, dragging the markets further southwards. Meanwhile, global equity markets are also trading with deep cuts with all other Asian markets ending the day in red and major European indices also trading in the negative zone. Back home, all the sectoral indices were trading in the negative territory led by Capital Goods index, which saw cuts of more than two and half-a-percent. Midcap and Smallcap index too traded lower. Volumes have been on the higher side today at Rs 1,50,000 crore level at this point of time. With no positive news coming in, benchmark indices are expected to end the day with hefty losses. The market breadth on the BSE was extremely negative in the ratio of 2174:690 while 67 scrips remained unchanged.

The BSE Sensex plummeted 335.62 points or 1.70% at 19,356.19. The index touched a high and a low of 19,720.43 and 19,308.70, respectively.

The BSE Mid-cap and Small-cap indices dived 1.78% and 2.14%, respectively.

All the sectoral indices were trading in the negative territory. Capital Goods (CG) down 2.84%, Consumer Durables (CD) down 2.52%, Bankex down 2.49%, Realty down 2.18% and Power down 2.15% were the major losers in the BSE sectoral space.

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.

The top gainers on the Sensex were Bharti Airtel up 1%, Infosys up 1% and Tata Motors up 0.44%.

HDFC Bank down 4.72%, BHEL down 3.82%, HDFC down 3.50%, ICICI Bank down 3.44% and L&T down 3.23%, were the top losers on the index.

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 trimmed 104.95 points or 1.78% to 5,799.65. The index touched a high and a low of 5,907.25 and 5,785.65, respectively. 

The top gainers on the Nifty were ACC up 1.57%, Infosys up 1.36%, Bharti Airtel up 1.18%, Tata Motors up 0.82% and Ambuja Cement was up 0.50%.

The top losers on the index were HDFC Bank down 4.73%, Hero Honda down 4.46%, BHEL down 4.24%, GAIL down 4.20% and Bajaj Auto down 4.17%.

The regional peers were trading in the red zone with Shanghai Composite losing 1.64%, KLSE Composite shed 0.55%, Seoul Composite fell 0.26%, Hang Seng shed 0.67%, Jakarta Composite plunged 4.21%, Strait Times decreased 0.98% while Taiwan Weighted remained the only gainer in the space with 0.40% gains.

The European markets were trading in red. CAC-40 decreased 1.03%, FTSE 100 trimmed 0.45% and DAX declined 0.49%.

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