Sensex sheds 3.47% as euro zone fiscal woes curb risk appetite

The key benchmark indices tripped as as Europe's sovereign debt, indications of weak US jobs data and a crash in commodity and energy prices raised fresh concerns over global economic recovery. The Sensex fell in 4 out of 5 trading sessions in the week ended Friday, 5 February 2010. The BSE Sensex fell below the psychological 16,000 mark.

Fiscal woes in Europe pushed global equities sharply lower on Friday 5 February 2010, as the cost of insuring Greece, Spain and Portugal's debt against default rose sharply. European Commission's endorsement Wednesday of Greece's deficit-cutting plan failed to assuage investor fears.

The BSE Sensex declined 567.03 points or 3.47% to 15,790.73 in the week ended 5 February 2010. The S&P CNX Nifty fell 163,40 points or 3.34% to 4718.65.

The BSE BSE Mid-Cap index fell 2.5% and the BSE Small-Cap index fell 1.93%. Both the indices outperformed the Sensex.

Chairman of the prime minister's economic advisory council C. Rangarajan on Friday said the government is no hurry to roll back economic stimulus measures in one go. He also said that efforts will be made in the budget later this month to lower the fiscal deficit. It has been pointed out repeatedly that the process of exit must be gradual, coordinated and must not be sudden, should not disrupt the economy and efforts will be made to bring down the fiscal deficit in the coming budget, Rangarajan said.

Following rising prices of potato and pulses, food inflation rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week, government data released on Thursday showed. The inflation for primary articles, which include food and non-food items, marginally eased to 14.56% in the reporting week from 14.66% in the previous week. The fuel price index rose 5.88%

Pronab Sen, the country's chief statistician, said on Wednesday the government should wait till May to roll back stimulus, as the strength of the demand recovery visible in available data may not be for real, pulling the finance minister, Pranab Mukherjee, away from a policy direction which the Reserve Bank of India (RBI) desires.

Reserve Bank of India (RBI) governor D Subbarao has for the first time, said the nation may have to take some measures towards capital control in the short term to avoid stark economic imbalances after acknowledging in the past the role played by fund flows in worsening inflation, boosting asset prices and destroying industry competitiveness.

The RBI will target inflation in the coming months, Subbarao said on Monday. Subbarao also said it is important for the government to withdraw the stimulus and that the government and central bank would have to coordinate in withdrawing stimulus. He reiterated that the economy is back to growth and added that the challenge is to accelerate momentum.

The Reserve Bank of India (RBI) will adjust monetary policy outside of its quarterly review cycle only under extraordinary circumstances, a deputy governor Subir Gokarn said on Monday.

Meanwhile, the business activity among Indian services companies expanded at its fastest pace in 16 months in January 2010, rising for a second straight month on sharp increase in new work orders, a survey showed. The HSBC Markit Business Activity Index, based on a survey of 400 Indian firms, rose to 58.96 in January 2010, its highest since September 2008, after rising to 57.41 in December 2009.

Earlier this month, another data showed that manufacturing activity grew at its fastest pace in almost 1-1/2 years in January 2010, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian companies, rose to 57.7 in January 2010, its strongest reading since August 2008 and up from 55.6 in December 2009.

Exports continued to rebound, rising an annual 9.3% in December to $14.6 billion, their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2% registered in November. Imports increased by 27.2% in December from a year earlier to $24.75 billion while the trade deficit shrunk by a little over 28 percent to $76.24 billion for the April- December 2009 period.

India can gradually start raising interest rates as Asia's third-largest economy is among the first to recover after the global financial crisis, the International Monetary Fund (IMF) said in a report published on 4 February 2010 on its website. India's economy is one of the first in the world to recover and the central bank should take a gradual approach to ensure the recovery reaches its full potential, the IMF report said.

The International Monetary Fund sees the Indian economy coming back to potential by 2010-11 to log 8% growth from the current year's 6.75 per cent. Still, the IMF's assessment of GDP growth for the current fiscal is in contrast to the government's projection of more than 7% and the RBI's latest forecast of 7.5%

The two top stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have decided to hold a special trading session on Saturday, 6 February 2010, as NSE is testing an upgraded trading system. Trading will begin at 11:00 IST and end at 12:30 IST.

The advance estimates on economic growth for the current fiscal ending March 2010 will be released on Monday. It will be based on the provisional data for the first half of the year and partial data for third quarter and no data on the fourth quarter, which contributes the highest to the annual Gross Domestic Product.

As regards government's divestment plan, Rural Electrification Corporation (REC) will be the next Government- owned entity to come out with a follow-on public offer (FPO). Its 17.1-crore share FPO will open on 19 February 2010 and will close on 23 February 2010. This will be followed by NMDC's FPO.

As per reports, in the next fiscal, the Government is likely to divest its stake in state-run firms such as Engineers India, Coal India through initial public offers (IPOs) and Power Grid and Sail through FPOs.

Emerging market equity funds lost $1.6 billion in weekly withdrawals, the biggest outflows in 24 weeks, as earnings and Greece's debt woes raised concerns that the global recovery may falter, the EPFR Global data indicated. Investors withdrew $516 million from Asian equities outside of Japan in the week ended 3 February 2010. Within Asia, China equity funds reported net outflows for the fifth time in six weeks while Indian funds lost $180 million, the most in 68 weeks

The key benchmark indices witnessed a divergent trend, with BSE Sensex closing flat and S&P CNX Nifty eking out small gains on Monday, 1 February 2010 after a strong intraday rebound triggered by upbeat economic data and higher monthly sales figures from two auto majors Maruti Suzuki and Mahindra & Mahindra. The BSE 30-share Sensex was down 1.93 points or 0.01% to 16,356.03 on that day.

Key benchmark indices declined reversing early gains on Tuesday, 2 January 2010 as investors turned cautious ahead of the opening of the large follow-on public offer (FPO) of state-run power generation firm NTPC on Wednesday, 3 February 2010. The BSE 30-share Sensex fell 192.59 points or 1.87% to 16,163.44 on Tuesday.

The key benchmark indices surged on Wednesday, 3 January 2010 on robust services sector data for January 2010 and firm global stocks boosted investor sentiment. The BSE 30-share Sensex rose 332.61 points or 2.06% to 16496.05 on that day.

Weak global cues casted their shadow on the domestic bourses on Thursday, 4 January 2010 which ended sharply lower following a late sell-off in index pivotals. The BSE 30-share Sensex was down 271.10 points or 1.64% to 16,224.95 on that day.

Sustained selling pressure kept key benchmark indices suppressed throughout the day on Friday, 5 February 2010. World stocks fell as Europe's sovereign debt, indications of weak US jobs data and a crash in commodity and energy prices raised fresh concerns over global economic recovery. The BSE Sensex fell 431.58 points or 2.66% to 15,793.37 on that day.

Metal stocks declined on weak metal prices on London Metal Exchange. Hindalco Industries (down 6.21%), Tata Steel (down 3.26%), Sterlite Industries (down 2.13%), National Aluminium Company (down 4.8%) and Hindustan Zinc (down 7.52%), edged lower.

Index heavyweight Reliance Industries (RIL) fell 6.23%. As per reports RIL has submitted a $2 billion expression of interest for Value Creation Inc, a Canada-based private firm which holds oil sands assets.

India's largest power utility firm by sales NTPC fell 4.64%. NTPC's follow-on pubic offering (FPO) was fully bid on the last day of the issue on 5 February 2010. The FPO was subscribed 1.19 times. The FPO which opened for bidding on 3 February 2010 closed on Friday, 5 February 2010.

NTPC's FPO is the first public issue which is adopting the French Auction route to raise funds. Under the French Auction model, institutional buyers are free to bid above a certain floor price. The highest bidder gets preference during the allotment of shares

The government currently holds an 89.5% stake in NTPC and it plans to dilute 5% through the FPO. At the floor price, the government would mop up Rs 8286 crore

Rate sensitive realty shares dropped on fears a hike in interest rate following inflationary pressures in the domestic economy may crimp housing demand. DLF (down 7.02%), Indiabulls Real Estate (down 7.28%) and Unitech (down 7.19 %) edged lower.

IT pivotals declined following poor US economic data. US is a key market for Indian IT firms. India's second largest IT exporter by sales Infosys slipped 5.03%

India's third largest software services exporter Wipro declined 1%. As per recent reports, Wipro Consumer Care and Lighting, the FMCG arm of Wipro, is in advanced talks to buy Nigeria-based skincare company, Tura International.

India's largest IT exporter by sales Tata Consultancy Services fell 1.28%. Reportedly TCS' Passport Seva Project, which aims to issue passports in flat three days, is all set to be launched in a week or two.

The National Association of Software and Service Companies (Nasscom) has projected export revenue to grow 13% to 15% to $56-$57 billion in the year to March 2011, below the previous outlook for $60-$62 billion.