Markets End Low, Europe Sinks Into Recession

The markets, which began the day on a negative note traded in a range bound manner throughout. As we had pointed out the negativity was mainly due to global worries, primarily the fiscal conditions that are likely to pan out in the US and the overall health of the European economy. Investor sentiment has been negative across the globe with indices losing roughly around 1% worldwide. These concerns have added an additional tinge of worry to an already uncertain situation on the fiscal and governance front back home. Subdued IIP data and higher CPI inflation along with increasing concern over India’s fiscal deficit have had the markets reeling under pressure for quite some time now.

While the government planned to raise Rs 40000 crore from the 2G spectrum auction that ended on Wednesday, the revenue generation from the sale of 1800 MHz came in at less than 25 per cent of the target, at Rs 9406.61 crore. All this put a lot of strain on the markets and resulted in the Sensex closing lower by 147.50 points at 18471.37 (down by 0.79%) and the Nifty closed by 35.95 points at 5631 (down by 0.63%).

Europe too followed global cues and was trading lower today. A host of data released today indicates of little or no improvement in the economic health of the Euro zone. The Euro zone GDP shrank 0.1% on a QoQ basis for the quarter ended September 30, 2012. This indicates that the region was falling back into a recession since this is the second consecutive quarter of a decline. In the previous quarter, the European economy shrank by 0.2%. Data showed that Spain and Italy which recorded a QoQ decrease of 0.3% and 0.2% respectively in GDP. France and Germany on the other hand, grew by 0.2% each. All in all it wasn’t a really great day for Europe too, with markets declining in the range of 0.29% and 0.49%.

On the domestic front, the broader indices saw their losses widen from where they had begun the day. The BSE Midcap Index ended the day lower by 0.17% while the Smallcap index closed higher by 0.28%. The overall breadth improved from what it was during the day with 1197 advances (40.92%) and 1632 declines (55.79%) at closing. Of the 13 sectoral indices, 3 ended the day in the black with gains in Realty, Consumer Durables and Power. Realty moved up thanks to a positive trend in Unitech, Oberoi Realty and DLF which advanced by 6.38%, 4.05% and 3.23% respectively. Also moving up were telecom stocks. Bharti Airtel, Idea Cellular and Videocon Industries moved up by 3.27%, 3.26% and 0.44% respectively.

Though worries over the fiscal cliff and the health of the European economy are likely to stick around, investors are also keeping an eye on data to be released in the US. Jobless Claims, CPI, Initial Jobless Claims, NY Empire State Manufacturing Index and Philadelphia Fed Manufacturing Index are scheduled to be released soon. This combined with the speeches by Fed Chairman Ben Bernanke and FOMC (Federal Open Market Committee) Member Richard Fischer is likely to define the directional trend of markets tomorrow.