Indian equities plummet to new lows in early afternoon trades

Indian markets are witnessing hefty bouts of profit booking and the benchmark indices have gone on to hit new bottom levels in the Tuesday afternoon session. Profit booking has intensified in the Metal and rate sensitive Banking and Realty counters which dragged the frontline indices around the psychological 5,250 (Nifty) and 17,500 (Sensex) levels. Investors’ morale took a hit after discouraging developments from global front surfaced. Marketmen lacked fervor as little clarity emerged over how the Euro-zone sovereign debt trouble will be tackled while the Greek Prime Minister George Papandreou’s call for a confidence vote and a referendum on last week’s deal too spooked sentiments globally. Also reports that the Chinese manufacturing activity, South Korean exports and Taiwan’s economy are all growing at the weakest pace since 2009; did not go down well with market participants as it indicated that the global economy is still not firm on its road to recovery. On the domestic front, automobile companies announced unimpressive month sales numbers which triggered sell-off in the auto stocks. Meanwhile government released India’s September trade data which showed that exports in the month rose by 36.3%, while imports rose by 17.2% leading to a trade deficit $9.8 billion in September from $11.3 billion a year earlier. Investors also went to overlook India’s PMI reading which showed that manufacturing sector in October recovered for the first time in last six months on the back of improved conditions in the sector, which reflected rise in domestic orders for new business.

Moreover, the broader markets too traded on a pessimistic note with cuts of around half a percent but managed to outclass their larger peers. The bourses plunged on volumes of around Rs 0.50 lakh core while the market breadth on BSE was in favor of declines in the ratio of 1488:1019 while 113 scrips remained unchanged.

The BSE Sensex is currently trading at 17,504.43 up by 200.58 points or 1.13% after trading as high as 17,661.78 and as low as 17,501.79. There were 9 stocks advancing against 21 declines on the index.

The broader indices were trading in the red terrain; the BSE Mid cap index shed 0.60% and Small cap fell 0.30%.

On the BSE sectoral space there were no gainers while Metal down 1.61%, Bankex down 1.44%, Realty down 1.26%, Capital Goods down 1.22% and IT down 1.16% were the major losers in the space.

Sun Pharma up 2.06%, HUL up 1.59%, Wipro up 1.51%, Tata Moto up 1.05% and Tata Motors up 0.58% were the major gainers on the Sensex, while ICICI Bank down 3.22%, Sterlite down 3.22%, Cipla down 2.22%, Jindal Steel down 2.13% and L&T down 2% were the major losers on the index.

Meanwhile, India’s manufacturing sector in October recovered for the first time in last six months on the back of improved conditions in the sector, which reflected rise in domestic orders for new business. The HSBC Markit India Manufacturing Purchasing Managers’ Index (PMI) increased to 52 in October from 50.4 in September. However survey said that the rate of growth was modest, but stronger than in last survey period.

The new order index, an indicator of future output increased after six successive declines. The factor output index also surged to 52.7 in October after declining for five consecutive months to 51.1 in September. As per the survey, the purchasing activities in manufacturing sector also increased in October compared to previous month. This increase in purchasing was in line with the strong growth of new orders and output.

However, in October, the input prices faced by the manufacturing in India increase considerably. The rate of cost inflation was broadly unchanged since September and strong in the context of historical data. Higher raw material and transport costs were the main drivers of the increase in costs. Output prices rose markedly, although the need to remain competitive limited the extent of the increase, the survey said.

Leif Eskesen, Chief Economist for India & ASEAN at HSBC said 'The Indian manufacturing sector rebounded in October, with rising orders pulling up output. Tight capacity is evident from rising backlogs of work, lengthening supplier delivery times and reported difficulties filling vacancies. Not surprisingly, input and output prices continued to rise at a rapid pace.'

The headline inflation measured by the Wholesale Price Index (WPI) stood 9.72% in September, which is marginally less from 9.78% in August. The headline inflation has hovering around two digit marks from December 2010 despite the Reserve Bank of India’s anti inflationary monetary policy stance. Since March 2010, the RBI has increased its repo and reverse repo rates for 13 times. But this non-stop hike in RBI’s key policy rates has affected the pace of investment into economy, hence the growth of industrial sector.

The S&P CNX Nifty is currently trading at 5,265.00, lower by 61.60 points or 1.16% after trading as high as 5,310.85 and as low as 5,264.75. There were 11 stocks advancing against 39 declines on the index.

The top gainers on the Nifty were Sun Pharma up 1.85%, Wipro up 1.65%, HUL up 1.50%, Cairn up 1.26% and Tata Power up 0.95%.

Sterlite down 3.42%, ICICI Bank down 3.39%, HCL Tech down 3.38%, R Infra down 2.86% and Cipla down 2.62% were the major losers on the index.

Asian markets traded on a weak note, Hang Seng plunged 2.01%, Jakarta Composite sank 0.91%, KLSE Composite declined 0.61%, Nikkei 225 plummeted 1.70%, Straits Times shaved off 0.99%.

On the flipside, Shanghai Composite added 0.04%, Seoul Composite rose 0.03% and Taiwan Weighted gained 0.45%.