Sensex breaches the 16k psychological mark

The Indian Markets have tumbled on International as well as on domestic cues. The European market continued its free-fall and the stocks were down for the third straight day in the midst of declining optimism policy makers will be able to resolve the sovereign debt crises. A sharp fall was witnessed in Banking and Auto stocks; we saw SENSEX closing below the psychological 16000 mark.

Other Asian markets also ended on a negative bias, on concerns that European debt crisis will worsen. The Euro was at 101.29 yen after earlier slumping to 100.76, the weakest since June 2001.

The Dow Jones Futures is currently trading 20 points or 0.19 per cent down at 10509 indicating a negative sentiment in the US markets.

Among the SENSEX stocks, State Bank of India was down 4 per cent to Rs 1786, as Moody’s downgraded SBI’s financial strength rating from C- to D+. ICICI and Axis bank too, hit 52-week lows. Other metals and Auto Stocks were down 3 to 4 per cent.

Realty stocks extended losses as higher interest rates could curb demand for residential and commercial properties. SKS microfinance stock was shifted from elite ‘A’ group to ‘B’ group as a result of which scrip was down 5 per cent to Rs 222.10. Shares of fertilizers companies such as Chambal Fertilizers, Rashtriya Chemicals and Fertilizers, National Fertilizers, and Coromandel International witnessed some positive trades today owing to hopes of decontrol in urea prices.

BSE clocked turnover of Rs 2204 crore, higher than Rs 2140 crore on 3rd October 2011. The market breadth, indicating the overall health of the market, was negative. Out of 3188 stocks traded, 2032 stocks declined while 1052 advanced. A total of 104 stocks remained unchanged.

With Q2FY12 results season drawing close, investor focus may shift to expectations of Q2 results of individual firms. A poor set advance tax numbers posted by top 100 companies suggest corporate profit growth is likely to be muted in the second quarter. We recommend our readers to closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

In conclusion we would like to bring to notice of our readers that India’s external debt data has thrown up some disturbing numbers. As much as USD 137 billion of it comes up for maturity in the next one year and if the current global turmoil persists, their rollover, which is normally a routine process, can cause severe pain to borrowers. 

A depreciating rupee coupled with rising credit spread for dollar bond issuers has made things very difficult. We expect times ahead to be very gloomy and advise you to tread with caution.