Sensex drops 1.21% on weak global cues

Lingering worries about the economic slowdown, weak global markets and sustained selling by foreign funds pulled the market lower, snapping last two days' gains. Nevertheless, the key benchmark indices in late trade made some recovery from the day's low as index heavyweights ICICI Bank, Reliance Industries and Infosys came off the day's low. The BSE 30-share Sensex was down 110.97 points, or 1.21%, off close to 75 points from the day's low.

After opening on a positive note tracking firm Asian stocks, the market soon fell into the red as investor sentiment remained edgy on heavy selling by foreign institutional investors this year. The market soon regained positive zone. The market weakened in morning trade as some Asian markets slipped into the red after swinging between positive and negative zone. It extended losses later as most of the Asian stocks slipped into the red.

The market cut losses in mid-afternoon trade as bank stocks recovered. A bout of volatility was witnessed in late trade.

Lingering concerns about the economic slowdown weighed on the market. A recent report by Ministry of Labour said that the economic slowdown claimed close to five lakh jobs in the December 2008 quarter in sectors that accounted for more than 60% of the country's GDP last fiscal. There is fear that job cuts will hit aggregate demand, mainly the discretionary spending by consumers, which in turn may accelerate the slowdown in the economy.

India's economy is expected to grow at 7% or less in the year to March 2009 due to declining exports and moderating domestic consumption, compared with 9% or higher growth in the last three years.

Investor sentiment was edgy due to sustained selling by foreign funds. Foreign funds have sold shares worth Rs 4,435 crore in calendar year 2009 so far (till 3 February 2009). Domestic funds have absorbed selling by foreign funds. Domestic funds provisionally bought shares worth a net Rs 284 crore on Wednesday, 4 February 2009. In calendar 2009, domestic funds have bought shares worth a net Rs 3,832.90 crore, as per BSE data.

European shares fell early on Thursday, weighed down by financial stocks after Deutsche Bank posted a big loss and insurer Swiss Re slumped on a large writedown. Key benchmark indices in France, Germany and UK were down by between 0.12% to 0.78%.

Most of the Asian markets slipped into the red in contrast to gains earlier in the day, on deepening concerns about US consumer demand. Key benchmark indices in Japan, China, South Korea, Singapore and Taiwan fell by between 0.16% to 1.46%. Hong Kong's Hang Seng rose 0.88%.

Asian shares had briefly gained earlier in the day on hopes for a recovery in China's economy. An improved manufacturing data in China has raised hopes that its downturn may be bottoming out. Data during trading hours in Asia on Wednesday showed China's official purchasing managers' index rose, even though it remained below a reading of 50 that divides expansion from contraction. The index rose to 45.3 for January 2009, up from 41.2 in December 2008 and a record low of 38.8 plumbed in November 2008.

China unveiled an eye-popping $585 billion spending plan in November 2008, and central bank governor Zhou Xiaochuan said in remarks published on Wednesday that the pump-priming had a positive impact.

US stocks fell on Wednesday, 4 February 2009, as a glum profit forecast from the top North American food maker Kraft Foods signaled consumers are skimping even on the basics and investors worried that government efforts to rescue banks could wipe out their shareholders. Even so, a report showing that the vast service sector shrank less than expected in January 2009 spurred technology gains, helping the Nasdaq finish near break-even. But that was before Cisco Systems Inc, the network equipment maker that is a tech bellwether, forecast a slide of as much as 20% in its current quarter revenue, hitting other tech shares after the bell.

The Dow Jones industrial average fell 121.70 points, or 1.51%, to 7,956.66. The Standard & Poor's 500 Index shed 6.28 points, or 0.75%, to 832.23. The Nasdaq Composite Index dipped 1.25 points, or 0.08%, to 1,515.05.

The BSE 30-share Sensex lost 110.97 points, or 1.21%, to 9,090.88. The Sensex rose 45.24 points at the day's high of 9,247.09 in early trade. The Sensex fell 184.77 points at the day's low of 9,017.08 in mid-afternoon trade.

The S&P CNX Nifty was down 23 points, or 0.82%, to 2,780.05.

The market breadth, indicating the overall health of the market, was negative on BSE with 1,009 shares advancing as compared with 1,487 that declined. A total of 61 shares remained unchanged.

The BSE clocked turnover of Rs 2,580 crore lower than Rs 2,947.14 crore on Wednesday, 4 February 2009. Nifty February 2009 futures were at 2773.40, a discount of 6.65 points as compared to the spot closing of 2780.05. Turnover in NSE's futures & options (F&O) segment declined to Rs 30808.31 from Rs 32,068.03 crore on Wednesday, 4 February 2009.

As per the provisional figures on BSE, the foreign institutional investors (FIIs) sold shares worth Rs 26.97 crore and domestic funds sold shares worth Rs 100.72 crore today, 5 February 2009.

The BSE Metal index (up 0.15%), the BSE Healthcare index (up 0.03%), the BSE FMCG index (down 0.19%), the BSE PSU index (down 0.4%), the BSE Bankex (down 0.55%), the BSE Power index (down 0.61%), the BSE Realty index (down 0.73%), the BSE Oil & Gas index (down 0.91%), outperformed the Sensex.

The BSE Auto index (down 1.98%), the BSE Consumer Durables index (down 1.88%), the BSE IT index (down 1.86%), the BSE Capital Goods index (down 1.47%), the BSE Teck index (down 1.44%), underperformed the Sensex.

The market snapped last two days' winning streak. The BSE Sensex had risen 135.15 points or 1.49% to 9,201.85 on 4 February 2009 from 9,066.70 on 2 February 2009. The Sensex is down 556.43 points or 5.76% so far in 2009 from its close of 9647.31 on 31 December 2008. The barometer index had lost 10639.68 points or 52.44% in the calendar year 2008

Among the 30-share Sensex pack, 21 fell while rest gained. Reliance Communications, Jaiprakash Associates, Hindustan Unilever, Tata Power Company fell by between 1.51% to 2.14%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 1.58% to Rs 1,286.75 on profit booking. The stock came off the day's low of Rs 1,271.60. From a recent low of Rs 1,080.90 on 13 January 2009, the stock had jumped 20.95% to Rs 1,307.40 on 4 February 2009.

Outsourcing focussed IT firms fell after a senior official from IT bellwether Infosys Technologies said there is pricing pressure adding that the software export growth could be lower than 16% in the year ending March 2009. Infosys, India's second largest software services exporter, fell 1.79% to Rs 1,260 off the day's low of Rs 1,238.10.

India's third largest software services exporter, Wipro fell 1.9% as its American depository receipt (ADR) fell 1.16% overnight. India's fifth largest IT exporter by sales HCL Technologies rose 0.33%. TCS, India's largest software services exporter by sales fell 3.27%.

On Wednesday, the National Association of Software and Service Companies (Nasscom) cut export growth target for the current year. Nasscom said on Wednesday India's software and services exports should rise 16-17 % to about $47 billion in the year to March 2009, slower than 21-24% forecast earlier.

Auto stocks remained weak as high interest rates and sluggish consumer spending have dented demand for automobiles, including for cars, trucks, motorcycles and scooters. India's largest tractor maker by sales Mahindra & Mahindra fell 5.69%.

India's largest commercial vehicle maker by sales Tata Motors fell 2.77% on reports it has run into payment problems with vendors and suppliers as it is grappling with declining sales and the financial burden of acquiring British brands Jaguar and Land Rover.

India's largest car maker by sales Maruti Suzuki India tumbled 4.07% after its Japanese-parent Suzuki Motor slashed profit forecast as slumping demand and a strong yen hammered third-quarter results.

Bank stocks recovered from lower level on hopes lower interest rates will spur lending growth. India's largest private sector bank by net profit ICICI Bank rose 0.35% to Rs 390.95 off the day's low of Rs 384.10.

India's second largest private sector bank by net profit HDFC Bank fell 1.39%.

India's largest bank in terms of assets and branch network State Bank of India fell 0.27% to Rs 1,093.90 off the day's low of Rs 1,083. State Bank of India will lower its home loan rates to 8% for new customers over the coming year, the second time it has reduced mortgage rates in as many months as the economy slows. The new rate will be offered between 2 February and 30 April 2009. SBI had previously charged 9.75% on a floating basis for home loans, and 11.25-12.25% on a fixed basis.

Inflation based on the wholesale price index rose 5.07% in 12 months to 24 January 2009, below the previous week's annual rise of 5.64%, data released by the government in early afternoon today, 5 February 2009, showed. It was the slowest annual rise since 9 February 2008 when inflation was at 4.98%. The Reserve Bank of India (RBI) said in its monetary policy review on 27 January 2009 it expected annual inflation to be below 3% by the end of the 2008/09 fiscal year in March 2009.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 3.08% as investors were skeptical of about its interest in fraud-hit IT firm Satyam Computer. L&T has built up a 12% stake and is Satyam's largest shareholder. Other capital goods stocks, Bharat Heavy Electricals, ABB, Crompton Greaves fell by between 0.08% to 5.59%.

Metal stocks extended yesterday's (4 February 2009) gain as improved manufacturing data in China on Wednesday suggested its downturn may be bottoming out. Tata Steel, Steel Authority of India, Hindustan Zinc, National Aluminum Company and Hindalco Industries rose by between 1.46% to 3.72%. China is the world's largest consumer of industrial metals.

Ispat Industries gained 1.62% extending gains for the third consecutive day, on reports lenders have allowed the firm to defer payment of Rs 586 crore.

But India's largest copper maker by sales Sterlite Industries plunged 5.71% on reports the company is close to buying the US-based bankrupt copper miner Asarco LLC.

India's largest cement maker by sales ACC rose 0.64% to Rs 531.50 off the day's low of Rs 510.10. ACC's net profit fell 23% to Rs 1,099 crore in financial year ended December 2008 over financial year ended December 2007. The company announced the result during the market hours today. The firm had recently reported a 12.5% rise in January 2009 shipments from a year ago, to 1.89 million tonnes. The company, in which Swiss cement maker Holcim holds a more than 46% stake, said production rose to 1.87 million tonnes from 1.67 million tonnes a year earlier.

Shipping stocks rose tracking the overnight surge in the Baltic Dry Index, which measures changes in the cost of shipping commodities. Shipping Corporation of India, Mercator Lines and Great Eastern Shipping rose by between 0.66% to 23.12%.

The Baltic dry index notched up its biggest single-day gain on Wednesday 4 February 2009 at more than 14.6 %, on signs of recovering demand for raw materials in China.

Avaya GlobalConnect advanced 3.3% on reports institutional investors and some high net worth individuals have demanded an open offer from the promoters.

Sahara One Media & Entertainment fell 7.02% after it said on Thursday its promoters have pledged 15 lakh shares, or 6.97% of the total equity, with IDBI Bank as collateral for loans.

Lanco Infratech slipped 0.27%, after the company said its promoters have pledged more than 1.89 crore share of the company.

Wire & Wireless clocked the highest volume of 5.78 crore shares on BSE. Firstsource Solutions (2.2 crore shares), Satyam Computer Services (1.88 crore shares) and Ispat Industries (1.47 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 192.86 crore on BSE. Wire & Wireless (Rs 106.38 crore), Reliance Infrastructure (Rs 99.35 crore), Satyam Computer Services (Rs 87.77 crore) and Reliance Capital (Rs 80.37 crore) were the other turnover toppers in that order.