Sanguinity peters out; benchmarks buckle under selling pressure

Indian benchmarks buckled under the hefty board  based selling pressure exerted by market participants on the penultimate day of August series Futures and Options contract expiry, leading the key indices to partly undo the good work done since the start of the F&O expiry week. The frontline indices, which witnessed over two percentage point rally in the span of last two days, got dragged below the psychological 4,900 and 16,300 levels as sentiments went awry since late morning trades and position squaring gathered greater momentum after optimism got swiftly petered out. Investors were apprehensive about the market outlook amid the lingering uncertainties while leads from Asia too remained discouraging as Moody's Investors Service slashed Japan's credit rating by one-notch to Aa3 citing concerns over growth prospects for the world's third largest economy, massive government debt and constant political uncertainty. The downgrade, which put Moody's Japan rating in line with both S&P's and Fitch ratings, offset the positive sentiments in Asia as it grimly reminded investors that all is not well yet. The lingering uncertainties about the US economy and European debt woes too were in place as it continued to keep the markets volatile. Marketmen were eagerly waiting for some action from the US Federal Reserve to guard the world's largest economy from sliding back into recession. On the domestic front, sentiments got undermined on report that CLSA downgraded its target on the Sensex 18,200 from 19,500, citing "faster slowdown of growth" and increased earnings downgrade as the reasons behind the cut in forecasts. Moreover, the Anna factor too weighed on the investors' mood which is already jolted by a turbulent Europe and fears of a global slowdown. The popular crusade against India's endemic corruption led by activist Anna Hazare, whose hunger strike has entered ninth day, also raised questions among global investors on whether a nervous government will be in a position to push through policy reforms at time the opposition parties led by BJP are also forcing adjournment of both the Houses of Parliament.

Earlier on Dalal Street, the benchmark got off to a sluggish opening in tandem with the pessimistic sentiments prevailing in Asian markets post the Japanese rating downgrade. The frontline indices overlooked the dismal trends that Asian peers exhibited and clawed back into the green territory. But the optimism fizzled out soon and the profit booking gradually started gaining momentum. Thereafter, there was no looking back for the frontline indices as every attempt of recovery was seen as opportunity for bears to square off positions. Selling pressure also intensified in the dying hours as bears build up hefty short positions in rate sensitive counters ahead of weekly inflation numbers and F&O expiry on Thursday. Finally the NSE's 50-share broadly followed index Nifty, slumped by over a percent to settle below the crucial 4,900 support level while Bombay Stock Exchange's Sensitive Index, Sensex shaved off over two hundred points and ended below the psychological 16,300 mark. The broader markets showed some resilience earlier in the session but finally succumbed to the selling pressure evident in the heavyweights but managed to outperform their larger peers. In the BSE sectoral space, the rate sensitive Automobile counter languished at the bottom of the table with over two percent losses as heavyweights like Tata Motors and Maruti Suzuki plummeted. The metal and mining pocket too bore the brunt of selling pressure, slipping around two percent after index major Coal India got brutally battered by over four and half a percent on report that the world's biggest coal miner will be facing closure of at least 22 mines over environmental concerns in Jharkhand, potentially suffering an output loss of up to 40,000 tonnes a day.  The mines in Jharkhand, which provide mostly coking coal for state-run firm Steel Authority of India, have been accused by pollution control authorities of running without proper forest clearance permission. The markets surged on large volumes of over Rs 1.91 lakh crore while the turnover for NSE F&O segment too remained on the higher side compared to Tuesday at over 1.79 lakh crore. The market breadth remained pessimistic as there were 1313 shares on the gaining side against 1528 shares on the losing side while 112 shares remained unchanged.

Finally, the BSE Sensex shaved off 213.49 points or 1.29% to settle at 16,284.98, while the S&P CNX Nifty plunged by 60.00 points or 1.21% to close at 4,888.90.

The BSE Sensex touched a high and a low of 16,533.22 and 16,253.78 respectively. The BSE Mid cap and Small cap indices were down by 0.54% and 0.51% respectively.

The top gainers on the Sensex were Hindustan Unilever up 0.71%, Hindalco Industries up by 0.38% and HDFC up by 0.12%.

On the flip side, Coal India down 4.61%, Tata Power down 4.51%, Tata Steel down 4.28%, Tata Motors down 3.90% and Maruti Suzuki down 3.69% were the top losers on the index.

There was no gainer on the BSE sectoral space. While, Auto down 2.31%, Metal down 2.26%, Bankex down 1.64%, Capital Goods (CG) down 1.42% and PSU down 1.40% were the top losers on the BSE sectoral space.

Meanwhile, India's export of gems and jewellery grew at a slower pace of 5.4% in July compared to previous month, in June; the exports surged by 17%. As per the data released by the Gems and Jewellery Export Promotion Council (GJEPC) data, during July 2011, the exports of gems and jewellery increased by 5.4% to $3.3 billion from $3.1 billion in July 2010.

The debt crisis in the US and Europe, which are important market destination, had adversely affected the demand for gems and jewellery. The fall in exports is mainly due to the decline in demand from these markets.  The US and Europe account for around 25% and 20% of the India's total Gems and Jewellery exports. 

GJEPC Chairman Rajiv Jain said, 'there are less number of orders from markets like the US and European markets,' however, by adding further he said that demand from new markets like Russia, Latin America and Africa is increasing.

The traders are concerned over the debt crisis in the western economies, which could affect demand and lead to payment problems. According to GJEPC data, in July, exports of silver jewellery surged by 63.4% year-on-year followed by the gold medallions and coins which increased by 33.8% and gold jewellery by 25.33%. However, exports of coloured gemstones declined by 82% in July.

During the April-July 2011, the exports of gems and jewellery increased by 14.4% to $14.1 billion from the April-July 2010. As per the commerce ministry data, in last financial year, exports of gems and jewellery increased by 15.34% to $33.54 billion from previous fiscal year. 

The S&P CNX Nifty touched high and low of 4,962.40 and 4,875.30, respectively.

The top gainers of the Nifty were Ranbaxy up 1.08%, Powergrid up 0.79%, Grasim up 0.59%, GAIL up 0.53% and Kotak Bank up 0.45%.

On the flip side, Tata Steel down 4.62%, Tata Motors down 4.40%, Axis Bank down 4.39%, SBI down 3.91% and IDFC down 3.84% were the top losers on the index.

The European markets were trading in mixed. France's CAC 40 gained 0.25%, Britain's FTSE 100 lost 0.04% and Germany's DAX advanced by 0.63%.

All the Asian equity indices finished the day's trade in the negative terrain on Wednesday after a Moody's downgrade of Japan's credit ratings brought back worries related to sovereign debt and the global economic outlook. Moody's cut the nation's debt ratings by one notch to Aa3 from Aa2 with a stable outlook, citing wide budget deficits and burgeoning debt since 2009. However, most of the regional bourses began on a high after the three main indexes in New York posted huge gains on hopes that Federal Reserve chairman Ben Bernanke will announce a fresh round of monetary easing to kickstart the US economy. Meanwhile, Taiwan stocks declined over half percent, dragged down by cement stocks, while Acer shed 2.9 percent ahead of second-quarter preliminary results due later in the afternoon.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,541.09	-12.93	-0.51
Hang Seng	19,466.79	-408.74	-2.06
Jakarta Composite	3,847.02	-33.44	-0.86
KLSE Composite	1,469.15	-13.22	-0.89
Nikkei 225	8,639.61	-93.40	-1.07
Straits Times	2,719.90	-45.25	-1.64
Seoul Composite	1,754.78	-21.90	-1.23
Taiwan Weighted	7,502.93	-47.30	-0.63

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