Fragile Indian equities continue to disintegrate amid global carnage

Entrenched jitters over the unprecedented US debt rating downgrade sent stocks markets in India towards multi-month lows in the opening session of a new week and the benchmarks witnessed one of the worst routs since the dark days following the collapse of Lehman Brothers in 2008. The tremors of global economic meltdown came to the fore following America's unprecedented credit rating downgrade from AAA to AA+ coupled with a negative outlook over the weekend, which brutally battered sentiments. Apart from the economic strife in the world's top economy, risks of European debt crisis contagion to larger economies weighed down investor's morale, overshadowing relief that the European Central Bank was buying bonds of struggling economies like Italy and Spain. The better than expected US jobs data along with a joint statement issued by finance officials from the G7 and G20 nations that they were committed to take all necessary measures to support financial stability and growth, too did little to stem the bloodbath in the riskier asset classes like equities and commodities. Rattled domestic indices showed some signs of recuperation in the afternoon trades as the revival of European Central Bank's bond-buying plan helped sentiment. But just when it appeared that the indices will halt the four session downtrend and break in to the green territory, marketmen started taking profits off the table amid mounting uncertainties over the global economic prospects. Meanwhile investors also overlooked upbeat reports that India's FDI inflow for the month of June registered an extraordinary growth of 310% to 5.65 billion from $1.38 billion in June 2010, which is the second highest monthly inflow in the last 11 financial years. However, optimists perceived the current global economic strife as a blessing in disguise for the markets as they speculate that the RBI now may be forced to pause its anti-inflation campaign as the crash in broader commodity complex will automatically minimize the inflationary pressure on the economy. The downstream PSU oil company shares like BPCL and IOC rallied in the session as international crude oil prices resumed the downtrend amid mounting fears about the slowdown in global economic growth. While fertilizers stocks like Chambal Fertilizer, National Fertilizer, RCF etc. also remained on buyers radar on reports that a ministerial panel has approved a conditional deregulation of urea pricing that would lead to a price increase of the most widely used fertilizer.

Earlier on Dalal Street, the benchmark plunged in early trades, falling nearly 550 points, or 3.15 percent, after a weekend downgrade of the world's largest economy and warning of a further cut if the US fiscal debt did not improve. Thereafter the key gauges slowly but steadily gathered steam and even went on to pare almost all the losses however, profit booking at higher levels once again dragged the indices, leading them to extend the four session declining run to yet another session with large cuts. Eventually the NSE's 50-share broadly followed index Nifty, suffered a nasty laceration of close to two percent to settle above the crucial 5,100 support level while Bombay Stock Exchange's Sensitive Index, Sensex collapsed over three hundred points and ended above the psychological 17,000 mark. The broader markets too got butchered amid the brutal bloodbath across counters and settled with massive losses, drifting deeper than their larger peers. On the sectoral front, it was the turn of high beta realty counter to languish at the bottom of the BSE sectoral space on being slaughtered by about four and half a percent. The information technology pocket too sank over four percent amid fears of a worsening crisis in Europe and stalling global economic growth will adversely impact their earnings. The counters with significant exposure to rising interest rates like the automobile, and Banking too bore hefty brunt of selling pressure. Reliance ADA Group shares too got badly butchered in the session with companies like R Com, R Capital, R Broadcast, R Power plummeting in the range of 4-8%. The markets wilted on large volumes of over Rs 1.80 lakh crore while the turnover for NSE F&O segment also remained on the lower side compared to Friday at over 1.65 lakh crore. The market breadth too remained very abysmal as there were only 661 shares on the gaining side against 2199 shares on the losing side while 82 shares remained unchanged.

Finally, the BSE Sensex shaved off 315.69 points or 2.82% to settle at 16,990.18, while the S&P CNX Nifty plunged by 92.75 points or 1.78% to close at 5,118.50.

The BSE Sensex touched a high and a low of 17,247.87 and 16,759.45, respectively. The BSE Mid cap and Small cap indices were down by 1.52% and 2.23% respectively.

The gainers on the Sensex were Hero Honda up 4.03%, ONGC up by 2.35%, Mahindra & Mahindra up by 1.68%, Bajaj Auto up by 0.86% and Hindustan Unilever up 0.31%. On the flip side, DLF down 6.85%, Hindalco Inds down 6.85%, Tata Motors down 6.51%, Infosys down 4.73% and TCS down 4.49% were the top losers on the index.

There was no gainer on the BSE sectoral space. While, Realty down 4.46%, IT down 4.33%, TECk down 3.60%, Metal down 3.50% and Power down 1.62% were the top losers on the BSE sectoral space.

Meanwhile, Foreign Direct Investment (FDI) inflow for the month of June registered an impressive growth. It surged by the 310% to 5.65 billion in June 2011 from $1.38 billion in June 2010. This 310% jump in FDI inflow is the second highest monthly inflow in the last 11 financial years, showing the revival of confidence of investors in the Indian economy.

FDI inflows were also high in the month of May, receiving investment worth $4.66 billion from $2.21 billion in May 2010, registering a growth of 111%. As a result of which the FDI inflow for the first quarter of the current fiscal year jumped by 133% to 13.44 billion from $5.77 billion in the corresponding year of last financial year. The first quarter figure of data is almost 69% of the last financial year i.e. $19.43 billion, indicating a good possibility of India receiving positive growth in FDI inflow in 2011-12. 

In a statement, the Commerce and Industry Ministry said, "the figures indicate that the trend of high FDI equity inflows since the beginning of the present financial year is being maintained.'  During the first half of the current calendar year, FDI equity inflow increased by the 57% to $16.832 billion from $10.74 billion in the corresponding period of last calendar year.

During the April-June 2010, FDI equity inflow had declined by the 25% due to uncertainty in the global economic condition after the recession of 2008. From last two financial years India is registering a decline in FDI equity inflow, in the last fiscal year, FDI inflow declined by almost by 25% to $19.43 billion from $25.6 billion in 2009-10. And in 2009-10 it fell to $25.6 billion from $27.3 billion in 2008-09.

The S&P CNX Nifty touched high and low of 5,204.20 and 5,054.05, respectively.

The top gainers of the Nifty were Ambuja Cement up 2.01%, ACC up 1.85%, Bajaj Auto up 1.17%, Dr Reddy up 0.80% and BHEL up 0.45%.

On the flip side, DLF down 7.11%, Cairn down 3.07%, GAIL down 2.15%, Cipla down 1.43% and Bharti Airtel down by 1.39% were the top losers on the index.

The European markets were trading in red. France's CAC 40 lost 1.70%, Britain's FTSE 100 lower by 1.67% and Germany's DAX declined by 2.37%.

All the Asian counterparts witnessed bloodbath and snapped the day's trade with a huge cut after last week's historic downgrade of the United States' credit rating. The rating agency Standard & Poor's on Friday cut the US debt rating to AA+ with a negative outlook from the top notch triple-A for the first time. Lingering concerns about the sovereign debt crisis in the euro-zone also weighed on the sentiment. Seoul Composite and Taiwan Weighted remained the biggest losers among the other Asian peers losing about four percent in the trade moreover, other indices too faced deep cut and snapped the trade with a cut about of 2-4 percentage point. Seoul shares ended 3.82 percent lower on Monday, as retail investors stepped up selling after the United States lost its top-notch credit rating for the first time. However, some regional markets did recover from their day's lows as European shares reversed their initial losses in early trade.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,526.82	-99.61	-3.79
Hang Seng	20,490.57	-455.57	-2.17
Jakarta Composite	3,850.27	-71.38	-1.82
KLSE Composite	1,496.99	-27.44	-1.80
Nikkei 225	9,097.56	-202.32	-2.18
Straits Times	2,884.00	-110.78	-3.70
Seoul Composite	1,869.45	-74.30	-3.82
Taiwan Weighted	7,552.80	-300.33	-3.82

 

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