Concerns over global economic recovery weighed heavily on Indian markets

Indian markets slipped again for the second day on the back of weak global cues. Rocketing sovereign debt problems in Europe and an unexpected rise in US jobless claims raised fresh concerns over global economic recovery.

The Sensex declined massively by 434 points from the previous day’s close, ending the day at 15,791, while the Nifty declined 127 points to end the day at 4,719. Yesterday we had said, “Check out 16,100 for support. If this level is breached, we may see a sharp downfall.” And the markets behaved accordingly.

From here on, we expect Indian bourses to make a bottom at 15,500. But if the market continues breaching this level, then get ready for another sharp decline.  

At 11:00 hrs IST, the Sensex was trading at 15,865, down 360 points from the previous day’s close. However, at 14:00 hrs IST, the Sensex was trading down 464 points from the previous day’s close at 15,761.

At the end of the day, sugar stocks declined massively after sugar prices dropped in the local market due to higher supply at stockists and tightening of norms by the government against bulk industrial users. Bajaj Hindusthan and Shree Renuka Sugars were down 7% and 5% respectively while Balrampur Chini Mills was down 1%.

Sun Pharmaceutical Industries fell 1% on reports that the Supreme Court of Israel had debarred the company from acquiring further stake in Israeli drug firm Taro.

Ranbaxy Laboratories slumped 5% after the US drug regulator reportedly asked the company to immediately assess whether its plants making drugs for the US market meet the required standards.

Venus Remedies has received yet another good manufacturing practices (GMP) approval from Ethiopia’s Drug Administration and Control Authority (DACA) for four of its facilities. However, the stock was down 4%.

Sumeet Industries has received an export order for polyester chips of Rs20 crore from Egypt. The stock was up 3%.

Dishman Pharmaceuticals and Chemicals announced that a USFDA team has successfully completed inspection of Dishman’s EOU facility situated at its Naroda works, Ahmedabad, and approved the facility for API production for the US market. The stock was up 2%.

As per an International Monetary Fund (IMF) report, India’s economy is one of the first in the world to recover and the central bank should take a gradual approach to ensure that the recovery reaches its full potential. The IMF sees the Indian economy coming back to potential by 2010-11 to log 8% growth from the current year’s 6.75% in contrast to the government’s projection of more than 7% and the Reserve Bank of India’s latest forecast of 7.5%.

During the day, Asia’s key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 1.87%- 4.30%.

As per reports, China’s GDP growth is expected to reach 11.5% in the first quarter while the pace of the consumer price index’s rise could accelerate to about 2.5% compared to a year earlier. China posted full-year GDP growth of 8.7% for 2009 while the quarterly rate accelerated to 10.7% in the fourth quarter from 9.1% in the third and 7.9% in the second.

On Thursday, 4 February 2010, the Dow Jones Industrial Average fell 268 points while the S&P 500 and the Nasdaq Composite dropped 34 points and 65 points.

In premarket trading, the Dow was trading 35 points lower.

As per data released by the US government, the initial jobless claims rose by 8,000 last week to a seasonally adjusted 480,000 against economists’ expectation of a drop of 10,000.

Meanwhile, the European Central Bank (ECB) and Bank of England (BOE) kept interest rates at record lows at 1% and 0.5% respectively on Thursday as financial markets looked for aid on growing euro-zone debt problems.

According to data released by EPFR Global, emerging market equity funds lost $1.6 billion in weekly withdrawals, the biggest outflow in 24 weeks, as earnings and Greece’s debt woes raised concerns that the global recovery may falter. The report also stated that investors withdrew $516 million from Asian equities outside of Japan in the week ended 3 February 2010. Meanwhile within Asia, China equity funds reported net outflows for the fifth time in six weeks while Indian funds lost $180 million, the most in 68 weeks, the report added.