Sell spree sends scrips spiralling to new lows

Domestic equities dropped sharply on Monday with key benchmark indices hitting 9-week lows caused by a setback in world stocks as a result of euro zone debt.

Investors apparently tracking a sell-off on Asian bourses, followed by lower than D-street estimates earnings from BHEL and gains in the dollar index, opted for safer bets over riskier assets. 

Near 9-week low aside, the Sensex at BSE plummetted below the psychological 18,000 mark after moving above and below that mark in intraday trade.

The 50-unit S&P CNX Nifty hit 9-week low below 5,400 level. The 30-scrip sensitive index (Sensex) of Bombay Stock Exchange (BSE), which opened at 18,269.06 points, closed at 17,993.33 points, down 332.76 points or 1.82 percent from its previous close at 18,326.09 points.It had fallen to an intra-day low of 17,971 points.

The 50-unit S&P CNX Nifty was down 99.80 points or 1.82 per cent to 5,386.55, its lowest closing level since March 22, 2011. The Nifty hit a low of 5,373 in intraday trade.

Two major foreign banking majors, Goldman Sachs and Barclays predicted in separate reports that inflation will remain on the higher side in India and that the Reserve Bank of India is likely to hike interest rates by 75 basis points in the next periodical monetary policy review.

Over the weekend Finance Minister Pranab Mukherjee too said that inflation could continue to be high due to rising global commodity prices.

Broader markets too closed in the negative with BSE midcap index closing 1.41 per cent down and BSE smallcap index 1.57 per cent down. The market breadth was negative with 801 stocks advancing, 1,973 on the decline and 124 unchanged.

The market skidded in early trade on weak Asian stocks, while a sell-off in afternoon trade dragged the market to fresh intraday lows but weakness persisted in late trade.

Ajit Dayal, Director of Quantum AMC feels there’s no reason to be concerned about the long-term prospects of the country’s growth going by the fundamentals of the Indian economy. On rising inflation impacting stock markets, Dayal said: “Price rise are concerns of the past few quarters and things will look better for India going forward.”

Brokers said investors sold across-the-board and heavy offloading was also partially prompted by the approaching expiry, on Thursday, of the derivative contracts for May.

“The Sensex nose-dived nearly 2 per cent on broad based selling on global cues. Capital goods, power, banking and realty stocks witnessed sharp decline,” said Parag Doctor, Senior Analyst (Technical Equities), at Motilal Oswal Securities. He said most of the global markets witnessed sharp fall after Fitch cut Greece’s credit rating and Standard & Poor’s said Italy’s rating was at risk.

“Indian markets got trapped in the worldwide selling of risky assets and the general flight-to-safety trend. Going forward, they will take cues from the upcoming earnings, F&O expiry, fund flows,” said Amar Ambani, Head of Research (India Private Clients), IIFL.

Meanwhile, FIIs have sold shares worth Rs 5,273 crore in 7 sessions since May 12, including provisional data of May 20. BSE clocked turnover of Rs 2012 crore, lower than Rs 2776.46 crore on Friday.