Mumbai: Indian equity benchmark Sensex dropped 1 per cent on Friday led by the slowdown in industrial growth and Moody's negative outlook on the Indian banking system due to rising bad loans. Depreciation in rupee, rising crude oil prices and consistent problems in the eurozone were other concerns that dampened market sentiment further.
The 30-share BSE Sensex fell 169.28 points, to close at 17,192.82 and the 50-share NSE Nifty lost 52.2 points, to end at 5,168.85.
S Naren, CIO Equity at ICICI Prudential feels that the market will have to live with the problems in eurozone. But according to him, the most worried fact is tax collections, which are not going up. "Others causes of concerns are - 10-year yields are going up consequently and crude oil is not coming down," he said.
Domestic as well as global factors dampened the sentiment in the truncated week, which started with a consolidation on Tuesday amid lingering uncertainty over eurozone. The Sensex saw over 200 points fall in the late trade on Wednesday followed by more than 169 points fall on Friday.
Deterioration in asset quality is the most worried part for banks, which forced the international rating agency Moody's to put negative outlook in the Indian banking system on Wednesday. This was proved after increased non-performing assets in the second quarter of SBI, which lost nearly 7 per cent on Wednesday and 3.5 per cent today. Even some banks planned to restructure power sector debts.
Exposure to Kingfisher Airlines (KFA) too added to the injury of banks. ICICI Bank, SBI and IDBI Bank have major exposure to debts of KFA. The stock fell 9.5 per cent on huge volumes.
The BSE Bankex tumbled 3 per cent; ICICI Bank and Axis Bank crashed nearly 5 per cent. HDFC Bank was down 2.8 per cent.
September IIP numbers indicated Industrial growth has deteriorated further, resulting in a definite slowdown in India. Industrial output grew just at 1.9 per cent in September as against 4.1 per cent in August. Manufacturing, basic goods, consumer goods, consumer durables goods sectors showed less growth in the September as compared to a year ago period. But capital goods and mining sectors' growth came in negative.
Arun Singh, Senior. Economist, D&B India believes the sharp deceleration in IIP growth reaffirms the slowdown in the economic activity.
"The capital goods yet again plummeted into the negative territory pointing to the rising interest rates, high inflation and weak global and domestic sentiment taking its toll on the investment activity. Moreover, the mining sector continued to post a decline for the two consecutive months primarily led by the sharp fall in the coal production," Singh explained.
Depreciation in the rupee was another cause of concern. Rupee fell to two-year lows of 50.42/$ in early trade, though it recovered to trade at around 50.24 a dollar. Some dealers say, rupee recovery may be on the back of selling of dollar by RBI. Brent crude increased to USD 114 a barrel.
From the metal space, Tata Steel and Hindalco plunged 4 per cent on the back of disappointing numbers in Q2. JSPL and Sterlite Industries were down 2 per cent each.
Among other largecaps, Infosys, L&T, ONGC, BHEL, HDFC, Tata Motors, Maruti, DLF and JP Associates tanked 1.5-3 per cent.
However, Reliance Industries played a supportive role in the second half of trade, rising over 2 per cent. Sun Pharma jumped 2.5 per cent on account of good results of its subsidiary Taro.
M&M, HUL, Bajaj Auto, Hero Motocorp and Wipro were up 1-3 per cent; TCS and ITC too were gainers.
The market breadth remained in favour of declines; two shares dropped for every share rising on BSE. The BSE Midcap and Smallcap indices fell 1-1.5 per cent.
HDIL, Educomp Solutions and Mundra Port tumbled 5-10 per cent on disappointing numbers in the quarter ended September 2011.
Total traded turnover was more than Rs 1.3 lakh crore.
The markets shrugged positive global cues - European markets were trading 0.3-0.6 per cent lower while the Dow Jones futures gained 35 points. Asian markets too closed in green. All global markets saw short covering as they had witnessed huge selling pressure on Wednesday and Thursday due to eurozone concerns - Indian markets were shut on Thursday.
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