US President’s comments weighed heavily on Indian and Asian markets
The Indian market continued its downtrend following weak global cues after US President Barack Obama proposed limiting risk-taking at US banks. The market however recovered from the day’s low (16,608) on the back of Reliance Industries’ (RIL) better-than-expected December quarter result and the comment by Kaushik Basu, chief economic adviser to the finance ministry, that the economy will return to a 9% growth rate by the next fiscal year.
At the end of the day, the Sensex declined 191 points from the previous day’s close to 16,860 while the Nifty closed at 5,036, down 58 points. India VIX, which measures the market’s expectation of volatility over the next 30 calendar days, surged for the second day in a row by 5.74% to 24.85. India VIX is a volatility index based on the S&P CNX Nifty index option prices.
At 12:00 hrs IST, the Sensex was trading at 16,905, down 145 points from the previous day’s close, and the Nifty was trading at 5,047, down 46 points.
At 15:00 hrs IST, the Sensex was trading at 16,861, down 189 points, while the Nifty was down 56 points at 5,038.
Index heavyweight RIL ended flat after the company announced its December 2009 quarter results. Net profit rose 14% to Rs4,008 crore and sales were up 80% at Rs56,856 crore. Analysts had estimated Rs3,954.60 crore net profit and Rs48,785 crore sales.
Idea Cellular shot up 8% after reporting better-than-expected third-quarter numbers. The telecom service provider saw a 25% growth in revenue and a 12% rise in profit after tax over the same period last year.
Hindustan Copper surged 10% on reports that the mines ministry has approved selling a 10% stake in the copper miner.
Dynamatic Technologies signed an exclusive agreement with Reuben Power Plc to establish a national electric vehicle (EV) charging infrastructure network in the UK. The stock shot up 9%.
As per reports, the December 2009 results of 469 companies showed an average gain of 42.20% in net profit on a 20.30% increase in sales over the December 2008 quarter.
During the day, Pronab Sen, chief statistician, said that India’s October-December 2009 quarter economic growth is expected to be lower than the previous quarter, due to a contraction in farm output. He also said that the Indian economy, which grew at 7.9% in the September 2009 quarter, is expected to grow 6%-6.5% in the December 2009 quarter.
During the day, Asia’s key benchmark indices in China, Hong Kong, South Korea, Japan, Singapore and Taiwan were down by between 0.65%-2.56% on concerns of China’s economic growth leading to policy tightening.
According to research firm EPFR Global, investors have pulled $348 million from China equity funds in the week ended 20 January 2010, the biggest outflow in 18 weeks. Asia ex-Japan equity funds took in only $29 million because of the China-related outflows though global emerging market equity funds attracted $748 million in fresh money in the week to 20th January.
In the US markets on Thursday 21 January 2010, the Dow Jones Industrial Average slipped 213 points while the S&P 500 and the Nasdaq Composite were down 22 points and 26 points, respectively. The US markets slumped after Barack Obama proposed that banks be prohibited from running proprietary trading operations or investing in hedge funds and private equity funds. The move, intended to limit the risk of another financial crisis, comes as banks around the world are recovering from $1.7 trillion in losses and write-downs since the start of 2007.
The Indian market is expected to open lower on Monday 25 January 2010 on the back of weak European and US markets on Friday. However the Sensex will have support at 16,600. If this support is breached, we may see a severe sell-off.