Sensex escapes deep cuts...Ends modestly lower

The Indian stock markets kicked off the new trading week on a negative note, extending the losses from Friday. Concerns about the worsening macro-economic backdrop - both domestic and global - kept the market participants on tenterhooks throughout the day.

The frontline Indian indices and the rupee both recovered from their session lows after a couple of key markets in Asia pulled back from their day's lows. European indices too rallied after a weak start. The Nifty recovered from the session low after hitting an intra-day low of 4556.

But overall, the undercurrent remains very fragile, as investors continue to shun risk amid no sign of improvement in the domestic economic fundamentals and persistent worries about the eurozone debt crisis.



The rupee, which had recovered on Friday, resumed its descent today and broke below the 53 per dollar mark before recovering some of the lost ground in the afternoon. Currently it is hovering around 52.95 after being as low as 53.25. It had opened at the day's high of 52.8450 versus the previous close of 52.7450.

Finally, the BSE Sensex ended at 15,379, down 112 points. It had earlier touched a day's high of 15,440 and a day's low of 15,190. It opened at 16,440.

The NSE Nifty closed at 4,613, down 39 points.

The decline today was led by heavy selling in Banking, Capital Goods and Realty indices, down ~3% to 3.5%. Power and PSU indices lost ~1.5% each. IT, Pharma, Metals and Consumer Durables indices dropped less than 1%. The Oil & Gas index was up nearly 1%. FMCG and Auto indices also advanced modestly.

Tata Motors, Cairn, Coal India, SAIL, Hindustan Unilever, Reliance, Bharti Airtel, Cipla, ITC, Ambuja Cement, and ACC were among the gainers.

On the other hand, Axis Bank, BHEL, PNB, L&T, SBIN, Reliance Comm, Tata Power, Jindal Steel and ICICI Bank were among the laggards on the NSE.

The market breadth was fairly weak due to sharp selloff in the broader indices. The BSE Small-Cap index and the BSE Mid-Cap index were down 2.5% and ~2%, respectively.

Separately, India Infoline group Chairman Nirmal Jain warned today that the Sensex could sink as low as 12,000 to 13,000. He told a television channel that buying interest is quite low as there are very few positives to cheer the Indian markets.

The FIIs are not enthused by the Government’s populist measures and the rupee's weakness has forced most of them to flee Indian equities, Jain said. He said he prefers exposure to defensives like Consumers, Pharma and IT stocks. He recommends avoiding rate sensitives, including Capital Goods.

Separately, reports suggested that the Indian market is on the verge of dropping out of the elite US$1 trillion club thanks to this year's big losses and the relentless slide in the rupee.

This could happen if the rupee again slides below the 54 to a dollar mark, the stock market dips further, or both.

India first entered the US$1-trillion m-cap club on May 28, 2007. The rupee at that time was pretty strong against the dollar and hovered around the 40 mark.

The Sensex is down ~25% year-to-date while the rupee has lost ~18%.

In global action, selling in Asian markets accelerated after media reports that North Korean leader Kim Jong-il died on Saturday. The Kospi in Seoul was down almost 5% at one point before pulling back. However, stock indices in China and Hong Kong recovered smartly from their intraday lows.

The death of the North Korean leader and its implications on the geopolitical situation in the Korean peninsula sapped investors’ appetite for risky assets amid ongoing trepidation about Europe’s debt crisis. The US dollar advanced on the news, driven by safe-haven appeal, while the South Korean won tumbled.

One positive that has emerged out of the ongoing upheavals is softer commodity prices, especially that of crude oil. Some of the adverse impact from the rupee's weakness could ease if the trend persists going forward.

An important event to watch today will be ECB President Mario Draghi’s address to EU Parliament’s committee on Economic and Monetary Affairs. Draghi has warned that struggling eurozone countries that leave the euro bloc would still face great economic difficulties afterwards.

For India the big worry is the worsening macro-economic climate and its fallout on the rupee. The RBI did check the rupee’s slide last week but the steps may turn out to be insufficient. Decisive and bold policy action is the need of the hour.

Shares of tea companies such as Jayshree Tea, McLeod Russel, and Tata Global Beverages among others fell 2-4% on reports that tea prices in the country declined at the previous week's auction due to poor quality of leaf on offer.

Realty shares such as DLF, Unitech, Sobha Developers and DB Realty fell over 3%.

DQ Entertainment climbed 7.2% to close at Rs. 20.85 at after it announced that it had sold the TV broadcasting rights of animated 3D series Chaplin and Co, to Cartoon Network Asia, reports said.

After rising to Rs. 22.35 on reports that the Sahara group conglomerate would lend over Rs. 2.5bn to the cash-strapped air carrier, Kingfisher Airlines closed unchanged at Rs. 21.80.

After rising to Rs. 93.20 on news that the consortium won an Rs. 4.88bn order from NMDC, Shriram EPC fell 3.2% to end at Rs. 88.10 in a weak market on Monday.

NTPC fell on reports the company cut generation by 11.07bn units in Apr-Nov period, but recovered slightly to end at Rs. 160.50, down 0.3%.