MARKETS PLUMMET

Indian equity indices went on to undo all the good work done in the September F&O expiry session as they shaved off about one and half a percent and drifted below the psychological 16,500 (Sensex)and 4,950 (Nifty) levels on Friday. Furthermore, the frontline indices even got obliterated by 12.8% for the quarter ended September 30, 2011, the biggest quarterly decline since the 25% plunge in the October-December quarter of 2008 amid the global financial crisis and their third straight quarterly decline. The domestic bourses were once again tormented by global developments on the last trading session of the week as investors fretted over global economic growth prospects which prompted them to take profits off the table amid little signs of recovery. The better than expected US GDP data which showed that the economy grew at a 1.3% pace in the Q2 along with the upbeat US Jobs data failed to bolster local sentiments. In addition, Chinese PMI data indicated that the factory sector contracted slightly for a third consecutive month in September while German retail sales declined the most in more than four years in August, stoking concern that the global economy is heading for another recession. The European counterparts got off to a gloomy start drifted deeper into the red while the Asian markets settled on a mixed note. On the domestic front, the Union Cabinet approved the new Mines and Minerals Development and Regulation Bill, 2011 which will mandate companies operating in the sector to provide 26 percent of post-tax profit for the welfare of affected people, a move intended to benefit mostly tribals. The development may hurt mining companies like Coal India, Hindustan Zinc, Tata Steel, Sesa Goa and JSPL by pushing down their profits and margins. Furthermore, Anil Dhirubhai Ambani Group's stocks like Reliance Communications, Reliance Capital, R Power and Reliance Infrastructure sank deeper into the red terrain and suffered nasty lacerations in the range of 3-13% after reports that the CBI told the Supreme Court that three Reliance Group executives, Gautam Doshi, Surendra Pipara and Hari Nair, may turn approvers in the case. The sharp plunge came despite the group's clarification that it was not a beneficiary of any telecom licence issued in January, 2008. Meanwhile, local sentiments were also undermined by reports that India's revenue collection during the second quarter of current financial year has declined significantly, which is indicative of the fact that Asia's third largest economy is slowing down, due to the weak global economic environment and nonstop hike by RBI. The overall advance tax collections have declined to 12% in July-September 2011 from 19% in April-June 2011.
Earlier on Dalal Street, the benchmark got off to a negative opening as the indices breached the psychological 5,000 and 16,600 levels in the early moments of trade since investors largely remained influenced by the cautiously pessimistic sentiments prevailing in Asian markets. Thereafter, the key indices showed some fervor and clawed back into the green terrain in morning trades. However, indices suffered a setback in afternoon trade as sudden bouts of profit booking emerged in the local markets after a somber European market opening, post which the indices could not stage any kind of recovery. Eventually the bourses pared almost all the gains garnered in the previous session and settled around the low point of the day. The NSE's 50-share broadly followed index Nifty, took a cut of about one and half a percent to settle below the crucial 4,950 support level while Bombay Stock Exchange's Sensitive Index, Sensex slipped by about two hundred fifty points and closed above the psychological 16,450 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around half a percent, outclassing their larger peers. On the BSE sectoral space, Metal pocket remained top laggards in the space with over two and half a percent cuts as reports that Cabinet approved the new mining bill that weighed on sentiments. While rate sensitive sectors like Realty, Bankex and Auto too bore the brunt of hefty selling pressure and sank by close to two percent each. On the flipside, the Consumer durable counter was the only index which bucked the somber trend prevailing in the space and climbed by a percent. The markets got dragged on weaker volumes of over Rs 1.07 lakh crore while the turnover for NSE F&O segment too remained on the lower side as compared to Thursday at over 0.93 lakh core as it was the first day of a new F&O series. The market breadth remained pessimistic as there were 1019 shares on the gaining side against 1716 shares on the losing side while 134 shares remained unchanged.
Finally, the BSE Sensex plunged by 244.31 points or 1.46% to settle at 16,453.76, while the S&P CNX Nifty shaved off 72.20 points or 1.44% to close at 4,943.25.
The BSE Sensex touched a high and a low of 5,025.55 and 4,924.30 respectively. The BSE Mid cap and Small cap index were down by 0.58% and 0.88% respectively.
The major gainers on the Sensex were Bharti Airtel up 0.44% and Reliance up 0.02%. While, Coal India down 5.15%, Sterlite Industries down 4.05%, Tata Steel down 3.99%, Jindal Steel down 3.78% and Hero Motocorp down 3.01% were the top losers on the index.
The only gainer on the BSE sectoral space was Consumer Durables (CD) up 1.02%. However Metal down 2.68%, Realty down 2.08%. Bankex down by 1.84%, Auto down 1.76% and PSU down 1.62% were top loser on BSE sectoral space.
Meanwhile, the finance ministry on September 29, said the government in the second half of the current financial year would borrow an additional Rs 52,800 crore from the market, more than the budget estimate, sending bond yields higher. However, the government is hopeful that this additional borrowing will not affect the government's fiscal deficit target of 4.6% of the GDP in 2011-12.
After the meeting, the Reserve Bank of India's officers, the Economic Affairs Secretary R Gopalan, said, the government was increasing the gross borrowings by Rs 52,800 crore for the second half. 'The reason is a dip in the small savings collection.' Because of the increase in government borrowing in second half of the fiscal year, triggered an increase in the yields on the ten-year benchmark government bond by 10 basis points. It closed at 8.44% due to the extra borrowing from government was much higher than market expectations.
Actually, the additional borrowings are more than Rs 40,000 crore. The government is targeting to achieve this from the disinvestment of public sector units (PSUs). However, because of the present sluggish situation, meeting the disinvestment target would be difficult. Though, the government is hopeful of meeting this difficult target. 
For the current financial year, originally, the government was about to borrow Rs 4.17 lakh crore, but now it will borrow around Rs 4.7 lakh crore, this Rs 53,000 crore increase is due to lower cash balance and decline in collections from small savings schemes due to better interest rate offered by the banks to depositors. The budget calculations were made with an estimate of Rs 24,000 in the National Small Saving Funds (NSSF), however, it declined by Rs 35,000 crore.

In the first six months of current financial year, the government borrowed around Rs 2.5 lakh crore via dated securities, which is 60% of the total estimate made in budget. In next six months the government is scheduled to borrow around Rs 2.2 lakh crore from the market. The net borrowing will be around Rs 4 lakh crore for 2011-12. During 2010-11, the government had borrowed around Rs 4.37 lakh crore.

Giving stress on the increased need to go for dated securities on the place of depending on small saving, Gopalan said, 'there is a switch taking place from the NSSF into dated securities. Also we need to work to shore up the cash balance. It has nothing to do with fiscal deficit computation. The target of fiscal deficit remains unchanged.' By adding further he said, 'the borrowing calendar has been programmed in such a way that there is enough credit for the private sector.' Finance Minister Pranab Mukherjee earlier this year had said that the borrowing in the year would not expand the target, and the government would ensure that the private sector was not elbowed out of the market.
However, because of increase in the international energy prices, the government's expenditure has increased, while the revenue generation has been declined significantly, due to slowdown in growth. The government has raised only Rs 1,144 crore from the target of Rs 40,000 via disinvestment, as of now. And the advance tax collection also declined in the second quarter, it grew by 9% in July-September 2011, from 19% in April-June 2011.
To reduce government expenditure, the government has taken number of steps. It had issued instruction to all government departments to reduce all unavoidable expenditures, containing seminars and conferences at five star hotels or abroad, purchase of new vehicles, foreign travel, and appointment of consultants and reduce of new government posts. 
The S&P CNX Nifty touched high and low of 5,025.55 and 4,924.30, respectively.
The top gainers on the Nifty were Sesa Goa up 4.60%, Ranbaxy up 2.73%, Powergrid up 1.59%, Grasim up 1.16%, and Ambuja Cement up 1.16%. On the flip side, Reliance Capital down 13.17%, Reliance Communication down 7.99%, Reliance Infra down 7.27%, Sterlite Industries down 4.72% and Tata Steel down 4.30% were the top losers on the index.
The European markets were trading in red. France's CAC 40 lost 1.86%, Britain's FTSE declined by 1.71%, and Germany's DAX plunged by 2.94%.
Most of the Asian equity indices ended the trade in the negative terrain on last trading day of the week as cautious traders shrugged off strong US growth data and news the German parliament had approved a crucial EU bailout package. Moreover, Chinese benchmark edged lower on Friday to the lowest level in two and half years, winding up the third quarter with a 14.6 percent loss, as investors dumped financial and export-related stocks amid growing signs of an economic slowdown. Meanwhile, Chinese manufacturing sector contracted for a third consecutive month in September, indicated that the world's second-largest economy is not protected to global headwinds.