The markets caved in to selling pressure towards the close of trade due to possible unwinding pressures on the last day of the November derivatives series. The Sensex ended at 19318, lower by 141 points and the Nifty ended at 5799, down 66 points. The midcap index ended at 7852, lower by 151 points and the smallcap index ended at 9963, down 187 points.
The indices had begun the day on a steady-to-positive note after being jolted on the previous evening by the CBI's damning revelations of how some big PSU banking officials had colluded with Mumbai-based private company, Money Matters to sanction loans to certain realty players. CBI had arrested eight top officials from various public sector banks and financial institutions viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance on charges of taking bribes to grant corporate loans. In the process, the overall markets ignored the inevitable hammering in select pockets such as banking and realty.
The reason for the momentary return of normalcy was the rally on Wall Street and the rub-on effect across the Asian markets. The US indices had rallied overnight as stock investors put aside worries about swirling global problems, turning to an improvement in the labour market and signs that consumers are ready to open their wallets ahead of the biggest shopping day of the year. And Asian stocks took it from there, bouncing back from 1/2-month lows, with buying focused in the technology and retail sectors on hopes for a busy US shopping season. Major European stock markets are also showing robust gains of 1-2% each in mid-day trades. But the indices succumbed to selling pressure in the noon session as the derivatives players would have been compelled to unwind their loss-making positions as this was the F&O expiry day.
And even the decline in food inflation to a three-month low failed to lift the glommy sentiment. Food inflation declined to 10.15% for the week ended November 13. This is the sixth week in a row that food inflation has fallen on the back of improved crop arrivals in markets across the country, as also the impact of RBI's monetary tightening which has arrested pressure on demand. Food inflation stood at 10.30% in the previous week. On an annual basis, pulses prices fell by 7.58% and vegetables became cheaper by 3.76%.
The realty index was the top sectoral loser on the BSE, ending poorer by more than 5%. Hindustan Construction Company slumped by 10.9% at Rs 49, DB Realty slipped by 10% at Rs 235 and Oberoi Realty shed 3.6% at Rs 254 after coming under the CBI scanner. Money Matter Financial Services, which has been at the centre of the storm, plunged by 20% and froze at the lower circuit for the second consecutive day. Among the other names under a cloud, Suzlon Energy lost 7% at Rs 46, BGR Energy lost 7.5% at Rs 647, Ashapura Minechem lost 6.6% at Rs 42, Punjab National Bank lost 6.3% at Rs 1183 and Bank of India dropped 5% at Rs 420. LIC Housing Finance, however, recovered considerable ground from the day's low of Rs 945 to end flat at Rs 1058, down 0.9%. The statement by the chairman of LIC that he does not see any impact on the balance sheet and asset quality of their housing unit probably accted as a soothing balm for the hitherto battered stock. But the denials issued by Oberoi Realty and BGR Energy Systems regarding any connection with the beleagured Money Matters did not seem to carry any favours with the market participants.
Prakash Agarwal, Analyst (realty sector), RBS Equities reckons that companies with weak balance sheets may get de-rated because it will be difficult for them to get loans, and they might be scrutinized for existing loans as well. However, companies with stronger balance sheets will not be affected.
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According to Rishi Nathany, Director, Touchstone Wealth Planners, the scam is plainly a bribery scandal where a few individuals are involved. The banks and financial institutions have no role to play in this and neither would they be adversely affected. The markets should recover from this as long as there are no further hidden skeletons falling out of the cupboard.
On the other hand, the information technology stocks had a good session on account of the weakening rupee. Infosys jumped by 2% at Rs 3063 to emerge as the top gainer on the NSE and TCS gained 1.3% at Rs 1023.
The market breadth was negative. Out of 3056 stocks traded on the BSE, there were 743 advancing stocks as against 2203 declines.