Sensex slides as Govt faces heat on reforms

The Indian equity benchmarks extended losses to a second straight trading session as market participants continued to lock in profit on Dalal Street. The NSE Nifty ended below the 5600 mark but just managed to close above 5500. Market participants were anxious about mounting concerns about the worsening political situation in the country and lingering worries over the precarious global economic outlook. The honeymoon between the Trinamool Congress and the Congress party is over following bitter differences over the recently announced reform measures. The UPA Government is also under pressure from other political parties, including allies like DMK over its decision to allow FDI in multi-brand retail and the steep hike in fuel prices. "Politically, all eyes will be on the Samajwadi Party (SP) and the Bahujan Samaj Party (BSP) as to what strategy they adopt on the issue of supporting the UPA II regime in the current scenario. The Congress party claims it has the numbers in the Lok Sabha to survive any short-term threat. One has to see if the Government succumbs to pressure and announces partial rollback or stands its ground on reforms," says Amar Ambani, Head of Research IIFL. The main indices started the session near day’s low before recovering in late morning session. It looked like they could end modestly in the red but a late bout of selloff put paid too any such hopes. The two main indices finished the session not too far from their session lows, which is not a good sign for traders in the near term. The BSE Sensex ended at 18,349, down 146 points or ~0.8% over the previous close. It had earlier touched a day's high of 18,443 and a day's low of 18,291. It opened at 18,292. The NSE Nifty closed at 5,554, down 46 points or ~0.8% over the previous close. It earlier touched a day’s high of 5,581 and a day’s low of 5,534. It opened at 5,536. BHEL, GAIL, Reliance Infra, Tata Steel, Axis Bank, Sesa Goa, Reliance Industries and SAIL were among the notable losers in the Sensex and the Nifty. BPCL, Bajaj Auto, TCS, ONGC, Ranbaxy, ITC, DLF, Wipro, Infy and Kotak Bank and Maruti were the top gainers in the Sensex and the Nifty. The BSE Small-Cap index and the BSE Mid-Cap index were down ~0.5% and 0.6%, respectively. The INDIA VIX on the NSE was up by more than 4.4%. The INDIA VIX on NSE surged by 4.4% at 18.62. It hit a day’s high of 18.81 and a day’s low of 17.13. Profit booking was seen in Metals, Capital Goods, Power and Oil & Gas stocks. PSU and Banking indices were the other top losers (down 1% to 2%). Consumer Durables index lost ~0.8%. Auto, Pharma and Realty indices were down marginally. On the other hand, IT, Telecom and FMCG stocks bucked the negative trend. Even the broader indices ended up on the losing side. The BSE Mid-Cap and the Small-Cap index lost 0.6% each. Market sentiment has been temporarily hit by the recent political upheavals. Globally too, political tension is on the rise, with the Muslim community up in arms against an anti-Islam film. The opening was weak as most Asian indices were trading lower amid ongoing worries about the health of the key global economies. China’s ‘flash’ manufacturing PMI for September has shown mild improvement but it is still likely to contract for the 11th straight month. Stock indices in the US and Europe advanced on Wednesday after the Bank of Japan (BOJ) added to its monetary stimulus. Encouraging reports on the US housing sector also buoyed the mood on Wall Street and in Europe. Meanwhile, the world's top mutual fund managers say that the US stock rally is about to come to an end. Asian markets fell the most in two weeks after a preliminary reading of manufacturing sector output in China showed continued contraction in September and Japanese exports dropped for a third straight month. European stocks declined for the third time in four days. The Stoxx Europe 600 index was down ~0.3%, as resources firms weakened on disappointing Chinese provisional manufacturing PMI data. Oil-related shares also fell as futures dropped to levels not seen since early August. The IBEX 35 index in Spain slumped ~1%. Stock indices in the UK, Germany and France too were down 0.5% to 1%. A preliminary September Markit composite PMI showed that private-sector activity in the eurozone contracted at its fastest pace since June 2009. The index fell to 45.9, below analyst forecasts of a 46.7 reading. A reading below 50 indicates contraction. Spain's government sold more bonds than planned at auctions and raised 4.8 billion euros (US$6.22bn).