Markets plummet on nervousness with a series of negative news

The Indian stock markets are tottering under intense selling pressure and Bears seems to have taken complete control of the market. The Asian cues are also not supportive, as all the regional counterparts are trading in the red with an exception of Taiwan Weighted. Back home, all the sectoral indices were trading in the negative territory. Capital Goods segment was leading the pack of losers followed by Consumer Durables, Power and Public Sector Undertakings. Further, the cuts on the local indices amplified with a series of negative news which includes rate hike fears in view of rising inflation and the widening current account deficit. News of delay of much awaited indirect tax reform, i.e., the launch of goods and services tax (GST) also weighed on the investor's sentiment. Meanwhile, Index heavyweight Infosys is trading in the green ahead of its quarterly results, slated for this week, though the result may not bring any great surprises as the IT sector is under pressure due to the rupee's appreciation against the dollar and the pound. The broader markets were also lackluster and are mirroring their larger counterparts, trading with losses of around 1.28% and 1.71%, respectively. The market breadth on the BSE was extremely negative in the ratio of 2052:686 while 80 scrips remained unchanged.

The BSE Sensex plummeted 258.50 points or 1.31% at 19,433.31. The index touched a high and a low of 19,720.43 and 19,347.08, respectively.

The BSE Mid-cap and Small-cap indices dived 1.28% and 1.71%, respectively.

All the sectoral indices were trading in the negative territory. Capital Goods (CG) down 3.21%, Consumer Durables (CD) down 1.99%, Power down 1.86%, Public Sector Undertakings (PSU) down 1.40% and Healthcare (HC) down 1.37% 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 Reliance Infra up 0.97%, Sterlite Inds up 0.97%, Infosys up 0.80%, Bharti Airtel up 0.71% and Tata Motors up 0.63%.

HDFC down 4.12%, BHEL down 3.91%, L&T down 3.88%, HDFC Bank down 3.67% and NTPC down 2.49%, were the top losers on the index.

The apprehensions of large scale damage to cotton crop due to untimely rains have proved unwarranted and the Cotton Advisory Board (CAB) of the country has in fact raised the production estimates. The board now expected total harvest in the current season at 32.9 million bales compared with 32.5 million bales. The board said that while some crop damage in the southern region was witnessed, the northern and central regions have shown significant improvement in production, which will boost overall production.

However, as per the balance- sheet for the crop prepared by the CAB, overall supply over the season is unlikely to improve much on account of lower stock of the commodity at the start of this season. Total availability in this season will be 37.45 million bales, marginally higher than last year, with a year-end stock of around 4.45 million bales.

Anil Joshi, chairman, CAB and textile commissioner also said that the board had raised export estimates for 2010-11 to 5.5 million bales from 4.9 million bales estimated in August, in view of 5.5 million bales export quantity already approved by the government. This however will not result in any further exports of cotton than the already approved ceiling, in contrast to hopes of traders that hike in production estimates may allow greater export quota.

With India's textile exports posting strong recovery, the demand for cotton has been improving at home too. The CAB expects that total domestic consumption would increase by 2.5 million bales over the current season at around 27.5 million bales. Higher domestic consumption automatically leaves a lower surplus for exports.

The S&P CNX Nifty plunged 81.60 points or 1.38% to 5823. The index touched a high and a low of 5907.25 and 5798.35, respectively. 

The top gainers on the Nifty were Tata Motors up 0.78%, Reliance Infra up 0.72%, Sterlite Inds up 0.71%, Infosys up 0.62% and Bharti Airtel up 0.55%.

The top losers on the index were HDFC down 4.08%, BHEL down 4%, L&T down 3.89%, HDFC Bank down 3.84% and Kotak Mahindra Bank down 3.38%.

Other Asian markets with an exception of Taiwan Weighted, which trimmed 0.40% are trading in the red at this point of time. Shanghai Composite lost 1.64%, Hang Seng shed 0.64%, Jakarta Composite declined 3.56%, KLSE Composite slipped 0.64%, Straits Times decreased 0.62% and Seoul Composite dipped 0.26%.

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