Equities fail to hold gains, end in red (Roundup)November 25th, 2008 - 8:20 pm ICT by IANS
Mumbai, Nov 25 (IANS) Indian equities markets Tuesday opened strong and were in positive territory for most of the day but bears once again had the last laugh and the bourses ended in the red, with a key index closing more than 200 points below its previous close Monday.“Unrelenting selling pressure due to the opportunity to exit at higher levels, plus the futures and options settlement coming up Thursday led to the markets finally going into the red,” Jagannadham Thunuguntla, head of the capital markets arm of India’s fourth largest share brokerage firm, the Delhi-based SMC Group, told IANS.
The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) finished at 8,695.53, down 207.59 points or 2.33 percent from its previous close Monday at 8,903.12 points.
The Sensex opened strong at 9,160.50, up 257.38 points or 2.89 percent from its previous close Monday and hit an intra-day high of 9,182.80 points before coming under selling pressure again to go well below the psychologically important 9,000 mark and end in the red, showing a volatility of nearly 500 points during the day.
The broader-based 50-share S&P CNX Nifty of the National Stock Exchange (NSE) also showed similar volatility and closed at 2638.65, down 69.6 points or 2.57 percent from its previous close Monday at 2708.25 points.
The BSE midcap closed at 2,872.59, down 29.70 points or 1.02 percent from its previous close Monday at 2,902.29 points.
The BSE smallcap finished at 3,333.42, down 30.54 points or 0.91 percent from its previous close at 3,363.96 points.
Of the 13 sectoral indices, only the consumer durables index finished with gains. The top losers were oil and gas, capital goods, realty and banks.
The top gainers were Satyam Computers, up 1.85 percent; Tata Motors, up 1.80 percent; Oil and Natural Gas Corp, up 0.97 percent and Maruti Suzuki, up 0.95 percent.
The top losers were Mahindra and Mahindra, down 7.63 percent; State Bank of India, down 6.55 percent; Reliance Industries, down 6.40 percent and Reliance Communications, down 4.98 percent.
As many as 1,442 stocks or 57.13 percent declined, 995 or 39.42 percent advanced and 87 stocks or 3.45 percent remained unchanged.
Indian markets opened strong on positive global cues. Overnight US markets had ended in the green with a key index of the New York Stock Exchange finishing with a 7.14 percent gain. The Nasdaq index too ended with a gain of 6.33 percent.
US markets were reacting to the $20 billion US government bail out plan for Citibank as well as President-elect Barack Obama’s hint that there will be another stimulus or spending plan of around $700 billion.
Asian markets were also up Tuesday with the Nikkei, the key index of the Tokyo Stock Exchange finishing with a gain of 5.22 percent and the Hang Seng, key index of the Hong Kong Stock Exchange, finishing 3.38 percent higher.
Underlying sentiment was still negative and once the Sensex crossed the 9,000 mark, selling pressure mounted to soon push it back into the negative zone, analysts said.
“The present situation with hefty bail out packages, near zero percent interest rate and deflation has not been handled by any central bank ever before in the past,” Thunuguntla said.
He President-elect Obama has also promised tax cuts.
“So who will finance these bail out packages? I think US printing machines will be very busy and we do not know the consequences as there are no precedents to learn from,” Thunuguntla said.
He also pointed out that through the bailouts the US central bank, the Federal Reserve Bank, has already taken on its balance sheet nearly $2 trillion worth of assets and will probably end up, after bailing out a few more companies, with a balance sheet of $3-4 trillion.
The Fed’s balance sheet size had been only $700 billion so far, so again with so much bad assets in its books nobody knows what all this means, Thunuguntla said.
“In the case of a company we could have easily said it would go bankrupt, but will the US go bankrupt?” he wondered.
“With the US GDP around $14-15 trillion, it means nearly 30 percent of the country is now nationalized,” Thunuguntla said.
“So bail outs do not mean the problems are over or will soon disappear. It will be very naïve to think so and that is the reason why there is still so much nervousness in the market,” Thunuguntla said.
“There is just too much uncertainty and no one really knows what the future holds,” he said, adding: “it is hard to see how positive sentiments can return in the near future unless there is more clarity on the various issues.”