Sensex tests: IT shares low on US recession fears

Indian markets were witnessing a sell-off across the board, in line with peers, as investors exited equities on fears of global economic crisis. The selling pressure intensified following the weakness in European peers.

Bombay Stock Exchange's Sensex was at 16086.83, down 382.96 points or 2.33 per cent. The 30-share index touched 52-week low of 15987.77 and high of 16287.72.

National Stock Exchange's Nifty was at 4826.05, down 118.10 points or 2.39 per cent. The broader index touched a high of 4893.60 and 52-week low of 4796.10 in trade so far.

BSE Midcap Index was down 2.08 per cent and BSE Smallcap Index edged 2.64 per cent lower.

Amongst the sectoral indices, BSE IT Index plunged 4.99 per cent, BSE Capital Goods Index fell 4 per cent lower and BSE Bankex declined 2.20 per cent.

Market breadth was negative on the BSE with 2242 losers against 559 gainers.

"Current weak tone is likely to extend and prices could test the supports at 4920 & 4856 in the coming 2-3 sessions.

As the aforesaid oscillators are already hovering in the oversold territory prices are expected to see some buying interest in the said support zone and attempt an upside recovery towards 5200 and even higher.

However inability to hold support at 4856 would extend the fall towards the May low of 4786 delaying the expected recovery," said Aditya Birla Money report

Shares in India's leading software services companies including Infosys slumped to their lowest level in 21 months on Friday as investors retreated from the exporters on heightened fears of a recession in the United States, the top market for the sector.

Sector leader Tata Consultancy Services fell up to 6 per cent, Infosys dropped as much as 7.8 per cent and No. 3 Wipro shed as much as 5.4 per cent in the Mumbai market that was down 2.4 per cent. India's three largest IT companies dragged the country's IT index down as much as 3.8 per cent to its lowest level since November 2009.

HCL Technologies Ltd , the No. 4 software services firm, dropped as much as 7.8 per cent to 365.70 rupees on today after falling more than 6 per cent in the previous session.

Sensex Poised for Third Weekly Decline, Interest-Rate Concerns

India’s benchmark stock index fell for the eighth time in nine days as higher-than-expected growth in factory output intensified concerns of a further increase in borrowing costs, and as Asian equities declined.

Tata Motors tumbled 5.8 percent after the owner of Jaguar Land Rover reported first-quarter net income of 20 billion rupees, which lagged behind the 21.6 billion-rupee median of 32 analysts’ estimates compiled by Bloomberg. Industrial output growth unexpectedly accelerated in June, rising 8.8 percent from a year ago following a revised 5.9 percent gain in May, a government report showed today. Wipro Ltd. (WPRO), the third-largest software services exporter, sank 3.6 percent.

The Bombay Stock Exchange Sensitive Index, or Sensex, lost 224.27, or 1.3 percent, to 16,835.13 at 12:55 p.m. in Mumbai, after swinging between gains and losses at least 12 times. The gauge has lost 2.8 percent this week, set for a third straight weekly decline. The S&P CNX Nifty Index slid 1.4 percent to 5,065.40. The BSE 200 Index dropped 1.1 percent to 2,101.12.

The Sensex has lost 18 percent so far this year, the worst performer after Brazil’s Bovespa Index among major indexes in the 10 biggest markets, on concern that higher borrowing costs will erode earnings. Companies on the gauge are valued at 13.9 times estimated earnings, compared with a multiple of 9.8 for the MSCI Emerging Markets Index.

Asian stocks retreated for a second day, with technology and electronics companies leading the decline. U.S. stock-index futures dropped 1 percent at 3:05 p.m. in Tokyo.

About $6.77 trillion has been erased off from the value of global equities since July 26 after S&P cut U.S.’s debt for the first time, riots swept across Britain and Europe’s debt crisis deepened. Data today showed French economic growth stalled last quarter, ahead of reports that may show euro-region factory output was unchanged in June and U.S. consumer confidence weakened.

Emerging-market equity funds posted the third-largest weekly outflows on record with withdrawals of $7.7 billion in the week ended Aug. 10, Citigroup Inc. analysts led by Markus Rosgen said in a report today, citing figures compiled by EPFR Global. That took total outflows for the year to $14 billion, according to Citigroup.

Tata Motors sank 5.8 percent to 800 rupees, the steepest decline on the Sensex today. Wipro tumbled 3.6 percent to 340.30 rupees, on course for its lowest close since October 2009, while its larger rival Tata Consultancy Services Ltd.lost 3.3 percent to 946.60 rupees.

Earnings for the three months ended June reported by 11 out of 23 Sensex companies, or 48 percent, have lagged behind analyst estimates, according to Bloomberg data. That compares with 33 percent that missed forecasts in the previous quarter.

The median of 23 estimates in a Bloomberg News survey forecast factory output to grow 5.5 percent. The expansion comes after government data yesterday showed India’s food costs accelerated to a three-month high in the week ended July 30. That maintains pressure on the Reserve Bank of India, which has raised its repurchase rate 11 times since the start of 2010, to continue tightening even amid the risk of a global downturn.

Foreign investors bought a net 2.49 billion rupees worth of local equities on Aug. 10, increasing their investments in stocks this year to 47.8 billion rupees, data on the website of the market regulator.

Nifty seen Lower, Banks, Tech Down

Indian markets were witnessing selling pressure, in line with other peers, as weak manufacturing data from the US spooked sentiments. Realty, banks and technology were the worst hit while pharmaceutical space was marginally higher.

Nikkei 225 was down 1.32 per cent, Hang Seng declined 0.69 per cent and Seoul Composite fell 2.38 per cent.

Well, looks like the euphoria over the US debt deal has given way to concerns about the health of the global economy. Manufacturing PMI reports from Australia to the US have shown continued moderation. Concerns have also surfaced over the adverse implications of the large spending cuts in the US on the world's largest economy. In addition, a possible downgrade of the US debt rating is still lurking.

At 10:15 AM; National Stock Exchange's Nifty was at 5461.85, down 54.95 points or 1 per cent. The broader index touched a high of 5496.30 and low of 5456.40 in trade so far.
US stocks reversed early gains to finish in the red. Across the Atlantic, European stocks suffered nasty cuts. Asian markets this morning are mostly lower. Nifty futures trading in Singapore are pointing to a weak start.

The trading for the rest of the day will hinge partly on global cues and partly on domestic factors. DLF, MMTC, Piramal Healthcare and Power Grid are among the few companies declaring their results today.

Meanwhile, the government is trying its best to convince all that there is no policy drift and that reforms are on track. The monsoon session will be a key test, as spate of crucial bills are slated for presentation.

Bombay Stock Exchange's Sensex was at 18120.06, down 194.27 points or 1.06 per cent. The 30-share index touched intraday low of 18118.30 and high of 18283.55.