Benchmark’s recover from intra-day lows thanks to lower level buying

Bears that took on actively in the early trading session have now supposedly gone in hibernation as benchmarks have recovered from their intra-day's low thanks to some investor's picking up cheap but fundamentally strong bets. Carnage in opening deals was witnessed as fears of U.S. recession and renewed worries over the health of Europe's banks gripped investors and sent stocks tumbling down to a 14 and ½ month low. However, bounce back of the Public Sector Undertaking stocks along with the Realty counters curtailed the losses. The stocks of PSU oil marketing companies such as that of ONGC and OIL India, HPCL and BPCL are trading in jubilant mood tailing the lower prices of oil which fell near $81 a barrel in Asia, extending a major sell-off fueled by investor amidst fears that slowing global growth will undermine demand for crude.

On the global front, overnight, Wall Street sank in volatile trading on Thursday, with the S&P 500 down more than 4 percent as weak U.S. economic data pressured markets already beaten down by renewed fears about the health of European banks. Meanwhile, Asian stocks extended losses, with South Korea's benchmark shedding 5 per cent on Friday on bleak global economic outlook. The US futures indices too are showing a downtick in the screen trade.

Back home, on the BSE sectoral space, stocks from Information Technology, TECk and Capital goods were the worst hit, while stocks from Realty and PSU stocks eased some nervy investor's. The 30 scrip sensitive index which is off its intra day's low is currently trading lower over 200 points above the 16200 level, while 50 share index -Nifty-losing over 50 points with no surprise is trading below the 5000 level. The broader indices too are clobbered out of shape and are trading down with a cut of over 1%. The market breadth on BSE is in the favour of declines which have thrashed advances in the ratio of 1708:609, while 80 shares remained unchanged.

The BSE Sensex is currently trading at 16,262.30, down by 207.49 points or 1.26%. The index has touched a high and low of 16,287.72 and 16,118.42 respectively. There were just 8 stocks advancing against 22 declines on the index.

The broader indices too were clobbered out of shape in the early trade; the BSE Mid cap and Small cap indices were down by 1.14% and 1.59% respectively.

Realty up by 0.36% along with Public Sector Undertaking up by 0.04% were the only gainers in the sectoral indices on the BSE. While, IT down by 4.66%, TECk down by 3.49%, CG down by 2.77%, CD down by 2.20% and Power down by 1.18% were the top losers on the index.

The top gainers on the Sensex were Coal India up by 1.57%, M&M up by 1.05%, ONGC up by 0.92%, SBI up by 0.89% and Bajaj Auto was up by 0.66%.

On the flip side, Infosys down by 6.31%, TCS down by 3.70%, L&T down by 3.41%, BHEL down by 2.70% and Hindalco Industries down by 2.65% were the top losers on the index.

Meanwhile, maintaining its stand on India's economic growth rate, the Reserve Bank of India (RBI) Deputy Governor Subir Gokarn on August 18 said, India's growth rate should be maintained at around 8% for a while to tame inflation and spur growth at a later stage. For the current financial year, RBI has forecasted Indian economy to grow by 8%, due to uncertainty in global economy and stubbornly high inflation. However, RBI Deputy Governor said that the objective was to ensure maximum growth without provoking inflation.

Giving reference to India's past experience in support of his argument Subir Gokarn said, "Our past experience substantiates this argument. When our growth rate was around seven per cent, inflation was peaking and corrective monetary measures were taken. This eventually led to 8.5 per cent growth at a later stage." By adding further he said, 'this may result in somewhat slower growth than is possible at any given time, but it would help achieve sustained high growth.' On RBI's non-stop hike in its key policy rates since March 2010, he said the moves were essential and tailored with the objective of controlling inflation.

Since March, RBI has increased its interest rates for more than 11 times, and on July 26 it increased its short term leading and borrowing rates by 50 basis points. These hikes in its key policy rate were taken to curb inflation, which has been more than 8% during the 2010-11 and in current finance year i.e. April to July 2011, head line inflation measured by wholesale price index (WPI) has been more than 9%.

For reducing inflation, deputy governor said public spending should be curbed to an extent to spur private investment and create capacities and demand, leading to healthier growth and lower inflation. Low inflation is associated with growth sustainability. Among other channels, it also has a positive impact on investment. High inflation, even with high growth, is not conducive to investment or corporate performance, he added.

On the virtuous cycle of low inflation, fiscal consolidation, high investment and high growth, deputy governor said corporate performance benefits from this cycle and data for the last financial year on corporate performances substantiated this fact. "There is a drop in the margin levels for the first quarter of the ongoing financial year, but I don't see any meltdown. Corporates are managing to pass on the increase in input costs to an extent and recent inflationary pressures are being exacerbated by structural trends in food prices," he added.

The S&P CNX Nifty is currently trading at 4,883.60, down by 60.55 points or 1.22%. The index has touched a high and low of 4,893.60 and 4,839.50 respectively. There were 14 stocks advancing against 36 declines on the index.

The top gainers of the Nifty were IDFC up by 1.96%, Kotak Bank up by 1.28%, BPCL up by 1.13%, M&M up by 1.09% and ONGC up by 0.89%.

Infosys down by 5.90%, TCS down by 3.80%, L&T down by 3.63%, HCL Tech down by 2.85% and Hindalco Industries down by 2.76%, were the major losers on the index.

All the Asian equity indices were trading in the red; Shanghai Composite was down by 1.33%, Hang Seng was down by 2.38%, Jakarta Composite was down by 2.76%, KLSE Composite was down by 1.23%, Nikkei 225 was down by 1.65%, Straits Times was down by 2.66%, Seoul Composite was down by 4.53% and Taiwan Weighted was down by 3.49%. 

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