Indian benchmarks indices extended the sorrow of
closing in the red territory for the fourth consecutive session and this
time they only have the domestic leads to blame as most global markets
rebounded in the day, especially the European ones. After, trading on a
sanguine note through the morning trades, the frontline indices were
caught amid high amount of volatility and optimism soon made way for
cautiousness in the second half of trade. The selling pressure in
domestic markets intensified in the noon trades despite the sharp rally
in European markets as shares in the financial sector there were boosted
by reports that European Union finance officials were looking at a bank
recapitalization plan. However, back home the rate sensitive banking
pocket continued to exert serious amount of pressure on the key indices
for the second straight session after reports of a downgrade by global
rating agency Moody's. Apart from SBI, majors like ICICI Bank, Axis and
HDFC too bore the brunt of hefty selling pressure on concerns of
deteriorating asset quality. Meanwhile investors also lacked conviction
to open fresh bets as sentiments got pounded after reports showed that
India's services PMI contracted for the first time in more than two
years due to fall in new business while, India's private sector output
growth weakened further in September. The HSBC composite Purchasing
Managers' Index which covers both - manufacturing and services, receded
from Augusts' 54.5 to 50.2 in September, slightly above the neutral 50
level. Moreover, to add to the European woes, rating firm Moody's
downgraded Italy's credit rating by three notches to A2 and assigned it a
negative outlook.
Earlier on Dalal Street, the benchmark got off to a positive start as the indices rebounded after the recent sell-offs following the strong overnight bounce back on Wall Street on the back of reports that European leaders were working on ways to help banks with recapitalization. The key indices remained choppy through the morning trades but saw a sudden spurt in buying in early afternoon trades post the sanguine European market opening. However, the frontline gauges met with severe resistance around the psychological 4,800 and 16,000 levels as hefty bouts of profit booking brought about a steep and nasty laceration on the bourses. Thereafter, the indices recuperated after hitting intraday lows but only to once again drift below the neutral line and settle on a negative territory around session's lowest levels. Eventually the NSE's 50-share broadly followed index Nifty, took a cut of about half a percent to settle above the crucial 4,750 support level while Bombay Stock Exchange's Sensitive Index Sensex slipped by over seventy points and closed below the psychological 15,800 mark. Moreover, the broader markets too succumbed to the selling pressure and closed with losses of about a percent. On the BSE sectoral space, the rate sensitive - bankex and PSU pockets remained among top laggards in the space as they got lacerated by 2.52% and 0.67% respectively. While sectors like Consumer Durables and Oil & Gas too got pounded in the session. On the flipside, the defensives like Healthcare and FMCG along with high beta Realty managed to go home with moderate gains of over half a percent. The markets got dragged on good volumes of over Rs 1 lakh crore while the turnover for NSE F&O segment too remained on the higher side as compared to Tuesday at over 0.85 lakh core. The market breadth remained pessimistic as there were 1086 shares on the gaining side against 1642 shares on the losing side while 127 shares remained unchanged.
Finally, the BSE Sensex lost 72.45 points or 0.46% to settle at 15,792.41, while the S&P CNX Nifty declined by 20.85 points or 0.44% to close at 4,751.30.
The BSE Sensex touched a high and a low of 16,044.91 and 15,760.53 respectively. The BSE Mid cap and Small cap index were down by 0.97% and 0.90% respectively.
The major gainers on the Sensex were Jaiprakash Associate up 3.86%, DLF up 2.63%, Sun Pharma up 1.70%, Coal India up 1.55% and ITC up 1.46%. While, SBI down 4.00%, Hindalco Industries down 3.65%, ICICI Bank down 2.72%, HDFC Bank down 2.65% and Jindal Steel down 2.55% were the major losers on the index.
The top gainers in the BSE sectoral space was Health Care (HC) up 0.80%, Realty up 0.55%, FMCG up 0.52% and IT up 0.01%. However Bankex down 2.52%, PSU down 0.67%, Consumer durables (CD) down 0.62%, Oil & Gas down 0.58% and Metal down 0.44% were top losers on BSE sectoral space.
Meanwhile, the service sector, which account for India's Gross Domestic Production (GDP), declined to its two year lowest level because of decline in new business orders and expectations weakened on the back of the sluggish global economic environment, a survey showed on October 5.
The HSBC India Composite Index, which include the manufacturing and service sectors, declined to 50.2 in September compare to 54.5 in August, which is lowest level of headline index since November 2008. Meanwhile, the seasonally adjusted Service Sector Business Activity Index also declined to the below 50 mark, to 49.8 in September compare to 53.8 in August. The below 50 level of service sector activity indicate a broad stagnation in the sector's activity.
Commenting on the India's Service PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, "The slowdown in growth has continued to broaden with the service sector seeing a further slowdown in economic momentum, especially for financial intermediation. Business activity was broadly unchanged from the previous month and new business is growing at a slower pace. Backlogs of work are still rising, however pace is slow and employment fell in response to the deceleration in new order growth as well as staff leaving because of unmet wage demands."
The slowdown in global economy and increased cost of capital along with inflation have affected the pace of the new business orders in the manufacturing and service sectors, thus the growth rate of composite index is easing to the slowest from April 2009.
As per the survey, the employment during the month of September declined in both the sectors because of the weaker growth in output and new business orders. Input prices also surged in month of September. However, the rate of cost inflation was slowest compared to August. But the overall output prices surged for 28 successive months, while the rate of charge inflation slowed slightly, it was the second-strongest in over three years. The increase in service sector charges outpaced the rise in costs for the first time in the series history, survey showed.
The headline inflation measured by wholesale price index (WPI), has been hovering around the two digit mark, and for the month of August it surged to 9.78% compare to 9.22% in July. The current level of inflation is almost twice the comfort level of the Reserve Bank of India (RBI). To bring inflation back into its comfort zone, the RBI, have increased its key policy rates for 12 times since March 2010, as a result, the cost of capital have increased which is adversely affecting the pace of investment in economy.
However, inflation pressures remain firmly in place. While both input prices and prices charged grew at a slower pace, they stayed above the historical standards. "We are getting close to the end of RBI's tightening cycle, but we are not quite there yet", Leif Eskesen added.
The S&P CNX Nifty touched high and low of 4,827.80 and 4,741.00, respectively.
The top gainers on the Nifty were JP Associate up 4.38%, DLF up 3.24%, Sun Pharma up 2.48%, Tata Power up 2.27%, and Dr Reddy up 1.94%. On the flip side, SBI down 4.22%, Hindalco down 3.80%, BHEL down 3.40%, Jindal Steel down 3.23% and ICICI Bank down 2.82% were the top losers on the index.
The European markets were trading in green. France's CAC 40 gained 3.23%, Britain's FTSE up by 2.31%, and Germany's DAX surged by 3.53%.
Earlier on Dalal Street, the benchmark got off to a positive start as the indices rebounded after the recent sell-offs following the strong overnight bounce back on Wall Street on the back of reports that European leaders were working on ways to help banks with recapitalization. The key indices remained choppy through the morning trades but saw a sudden spurt in buying in early afternoon trades post the sanguine European market opening. However, the frontline gauges met with severe resistance around the psychological 4,800 and 16,000 levels as hefty bouts of profit booking brought about a steep and nasty laceration on the bourses. Thereafter, the indices recuperated after hitting intraday lows but only to once again drift below the neutral line and settle on a negative territory around session's lowest levels. Eventually the NSE's 50-share broadly followed index Nifty, took a cut of about half a percent to settle above the crucial 4,750 support level while Bombay Stock Exchange's Sensitive Index Sensex slipped by over seventy points and closed below the psychological 15,800 mark. Moreover, the broader markets too succumbed to the selling pressure and closed with losses of about a percent. On the BSE sectoral space, the rate sensitive - bankex and PSU pockets remained among top laggards in the space as they got lacerated by 2.52% and 0.67% respectively. While sectors like Consumer Durables and Oil & Gas too got pounded in the session. On the flipside, the defensives like Healthcare and FMCG along with high beta Realty managed to go home with moderate gains of over half a percent. The markets got dragged on good volumes of over Rs 1 lakh crore while the turnover for NSE F&O segment too remained on the higher side as compared to Tuesday at over 0.85 lakh core. The market breadth remained pessimistic as there were 1086 shares on the gaining side against 1642 shares on the losing side while 127 shares remained unchanged.
Finally, the BSE Sensex lost 72.45 points or 0.46% to settle at 15,792.41, while the S&P CNX Nifty declined by 20.85 points or 0.44% to close at 4,751.30.
The BSE Sensex touched a high and a low of 16,044.91 and 15,760.53 respectively. The BSE Mid cap and Small cap index were down by 0.97% and 0.90% respectively.
The major gainers on the Sensex were Jaiprakash Associate up 3.86%, DLF up 2.63%, Sun Pharma up 1.70%, Coal India up 1.55% and ITC up 1.46%. While, SBI down 4.00%, Hindalco Industries down 3.65%, ICICI Bank down 2.72%, HDFC Bank down 2.65% and Jindal Steel down 2.55% were the major losers on the index.
The top gainers in the BSE sectoral space was Health Care (HC) up 0.80%, Realty up 0.55%, FMCG up 0.52% and IT up 0.01%. However Bankex down 2.52%, PSU down 0.67%, Consumer durables (CD) down 0.62%, Oil & Gas down 0.58% and Metal down 0.44% were top losers on BSE sectoral space.
Meanwhile, the service sector, which account for India's Gross Domestic Production (GDP), declined to its two year lowest level because of decline in new business orders and expectations weakened on the back of the sluggish global economic environment, a survey showed on October 5.
The HSBC India Composite Index, which include the manufacturing and service sectors, declined to 50.2 in September compare to 54.5 in August, which is lowest level of headline index since November 2008. Meanwhile, the seasonally adjusted Service Sector Business Activity Index also declined to the below 50 mark, to 49.8 in September compare to 53.8 in August. The below 50 level of service sector activity indicate a broad stagnation in the sector's activity.
Commenting on the India's Service PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, "The slowdown in growth has continued to broaden with the service sector seeing a further slowdown in economic momentum, especially for financial intermediation. Business activity was broadly unchanged from the previous month and new business is growing at a slower pace. Backlogs of work are still rising, however pace is slow and employment fell in response to the deceleration in new order growth as well as staff leaving because of unmet wage demands."
The slowdown in global economy and increased cost of capital along with inflation have affected the pace of the new business orders in the manufacturing and service sectors, thus the growth rate of composite index is easing to the slowest from April 2009.
As per the survey, the employment during the month of September declined in both the sectors because of the weaker growth in output and new business orders. Input prices also surged in month of September. However, the rate of cost inflation was slowest compared to August. But the overall output prices surged for 28 successive months, while the rate of charge inflation slowed slightly, it was the second-strongest in over three years. The increase in service sector charges outpaced the rise in costs for the first time in the series history, survey showed.
The headline inflation measured by wholesale price index (WPI), has been hovering around the two digit mark, and for the month of August it surged to 9.78% compare to 9.22% in July. The current level of inflation is almost twice the comfort level of the Reserve Bank of India (RBI). To bring inflation back into its comfort zone, the RBI, have increased its key policy rates for 12 times since March 2010, as a result, the cost of capital have increased which is adversely affecting the pace of investment in economy.
However, inflation pressures remain firmly in place. While both input prices and prices charged grew at a slower pace, they stayed above the historical standards. "We are getting close to the end of RBI's tightening cycle, but we are not quite there yet", Leif Eskesen added.
The S&P CNX Nifty touched high and low of 4,827.80 and 4,741.00, respectively.
The top gainers on the Nifty were JP Associate up 4.38%, DLF up 3.24%, Sun Pharma up 2.48%, Tata Power up 2.27%, and Dr Reddy up 1.94%. On the flip side, SBI down 4.22%, Hindalco down 3.80%, BHEL down 3.40%, Jindal Steel down 3.23% and ICICI Bank down 2.82% were the top losers on the index.
The European markets were trading in green. France's CAC 40 gained 3.23%, Britain's FTSE up by 2.31%, and Germany's DAX surged by 3.53%.
Asian markets
continued their southbound journey and most of the Asian equity indices
ended the day's trade in the negative terrain on Wednesday on heightened
fears that Greek debt default could trigger a banking crisis in the
region and tip the global economy into a double-dip recession.
Meanwhile, Seoul index gave up earlier gains and ended down by 2.3
percent, hurt by substantial falls in construction issues and automakers
like Samsung Engineering and Hyundai Motor while, Pension funds
remained sellers of a net $12 million worth of stocks, snapping a
19-session buying streak too dampened the sentiments moreover, foreign
investors were sellers of a net 300 billion won worth of shares,
offloading stocks for a second straight session also supported the
downfall in the region. However, stock markets in China remained closed
for the trade today in observance of Golden Week holiday while bourses
in Hong Kong too remained closed for public holiday.
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