BEARS ON RAMPAGE

It is turning out to be a nightmarish session for the Indian benchmarks in the afternoon trades on Thursday as they desperately search for a bottom. The selling pressure is intensifying moment after moment as uninspiring global developments have prompted across the board panic selling not only in the domestic markets but in markets across the world. The European markets have got off to a daunting opening with major markets taking a nasty laceration of around three percent while Asian counterparts too are exhibiting similar trends as benchmarks in Indonesia and Hong Kong suffer colossal damages of around 7% and 4% respectively. Meanwhile, local frontline index Nifty got drowned below the important psychological 5,000 levels and the Sensex got annihilated by over four hundred and fifty points and slipped below the crucial 16,600 levels. Investors have turned increasingly jittery as apart from the twin fears of US recession and a banking crisis brought on by Europe's sovereign debt woes, the disappointing Chinese PMI factory data gave further evidence that the global economy is in bad situation. In the meantime, local market participants even went on to overlook the food inflation numbers which dropped to 8.84% for the week ended September 10 as compared to 9.47% in the previous week. On the secotral front, the rate sensitive sectors like Realty, Automobile and Banking bore brutal assault while counters like metal and capital goods too suffered severe pounding.
Moreover, the broader markets too failed to show any kind fervor and traded with large cuts of around two percent. The bourses got pulverized on good volumes of over around Rs 1 lakh core while the market breadth on BSE was in favor of declines in the ratio of 1893:650 while 811 scrips remained unchanged.
The BSE Sensex is currently trading at 16,614.18 down by 450.97 points or 2.64% after trading as high as 16,833.61 and as low as 16,611.01. There was no stock advancing against 30 declines on the index.
The broader indices were trading on a negative note; the BSE Mid cap index plunged 2% and Small cap sank 1.84%.
On the BSE sectoral space there were no gainers while Realty down 3.91%, Metal down 3.64%, Auto down 2.88%, Capital Goods down 2.80% and Bankex down 2.74% were the major losers on the index.
There were no gainers on the Sensex, while Sterlite down by 5.66%, Jindal Steel down 4.66%, JP Associates down 4.60%, Tata Motors down 4.52% and DLF down 4.50% were the major losers on the index.
Meanwhile, the ministry of finance rejected power ministry's recommendation to double the External Commercial Borrowing (ECB) limit of companies which finance power projects. According to finance ministry, a higher ceiling for the power sector will hurt the efforts of other sectors to raise funds abroad.
The ministry of power had asked for increasing the ECB limit to $1 billion every year for finance companies and Non Banking Finance Companies (NBFCs) in the power sector via automatic route. However, finance ministry said a relaxation in ceiling for one sector will squeeze the funds available overseas and raise borrowing costs for other sectors.
A senior finance ministry official said that 'We do not want to exceed the basic limit for a specific category of borrowers,' by adding further he said another reason behind the refusal was that some companies, such as Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), have not been able to meet even the current ECB limit.
Currently the NBFCs can raise funds around $500 million per annum as overseas debt via the automatic route, given that their total borrowing is not more than half of their networth. However, company can borrow more than their ECB limit, only after securing the Reserve Bank of India's permission.

However, power ministry undertaking, REC Chairman, HD Kuntetea said raising the limit in the automatic approval route would have made it easier for them to secure funds overseas. 'We have raised around Rs 9,000 crore so far and the company's networth is around Rs 13,000 crore. Raising the limit would have made the process simpler and faster.'

The REC is power ministry undertaking, which finance power projects, aims to borrow around Rs 28,000 crore in the 2011-12, of this $ 1 billion or Rs 4,500 crore will come from overseas debt. The company is also planning to sanction Rs 50,000 crore worth loan in current financial year.
Experts have the view that the if the ECBs are not increasing then the borrowing cost of these power finance companies will increase as they will be restricted to borrow from cheat fund. The cost of funds for power financing firms is around 8% to 8.5%, and they further lend at 13.5-14%.
However, another government owned power financing firm, PFC, Chairman Satnam Singh said it was not too concerned with the limits. 'The only issue is that it does not give the leeway of setting up a MTN (medium term note programme).' PFC is planning to raise Rs 30,000 crore in 2011-12. However, it has got permission to raise Rs 12,000 crore via tax free and infrastructure bonds, the PFC may raise rest of money through ECB route.
The S&P CNX Nifty is currently trading at 4,998.90, lower by 134.35 points or 2.62% after trading as high as 5,059.85 and as low as 4,995.25. There were 1 stocks advancing against 49 declines on the index.
The top gainer on the Nifty was BPCL up 0.78%.
Sterlite down 5.44%, R Com down 4.86%, SAIL down 4.75%, Tata Motors down 4.73% and IDFC down 4.61% were the major losers on the index.
Asian markets traded on a mixed note, Shanghai Composite plunged 2.52%, Hang Seng shed 4.321%, Jakarta Composite sank 6.67%, KLSE Composite slipped 1.49%, Nikkei 225 plummeted 2.07%, Straits Times dived 2.23%, Seoul Composite deposed 2.90% and Taiwan Weighted got pounded by 3.06%.
The European markets traded on weak note as France's CAC 40 plunged 2.66%, Germany's DAX plummeted 3.22% and Britain's FTSE 100 nosedived 2.54%.