Turbulent Sensex ends at 20-month low; SBI rattles bank stocks

It was an unexiciting day in the markets today with the BSE Sensex cloing at 15,792 - down by 72 points. The Nifty shed 21 points to close at 4,751.

The focus today was on banking stocks, with the banking index falling close to 3 percent. The State Bank of India (SBI), a day after its Moodys downgrade, was the biggest loser, down by 4 percent. The concern with SBI is that while the government has to put in money, the government may not do so because it will increase the fiscal deficit -following which chances of India’s downgrade will increase.

Listen in to our podcast on the market action today why SBI is still not a safe bet:

15.30 p.m: A volatile session ended with the Sensex 72 points lower at 15,792, while the Nifty was down 18 points to 4754.

Banking stocks continue to fall; SBItumbled by 4 percent and touched a new two-year low. SBI closed the day at Rs 1,712 after touching a low of Rs 1,710. ICICI Bank rebounded from its low after Moody’s maintained the bank’s rating at C-. The stock closed 2.63 percent lower at Rs 779.90.

Among the other stocks that witnessed action was Rolta, which fell by 9.50 percent as fears of FCCB repayment and provisioning were factored in. Sintex, which also started slipping on FCCB provisioning fears, saw some buying with the stock closing 2.54 percent higher at Rs 109.

Post market close, the Carlyle group said it has picked up 9 percent in India Infoline. The stock closed 1.72 percent higher at Rs 70.80.

14.30 p.m: Volatility continues in the domestic market, with the Sensex bouncing back from its low. Sensex currently trades at 15,845 down 55 points while Nifty is at 4776 higher by 5 points.

ICICI Bank’s rating has been reaffirmed by Moody’s at ‘C-’

Reliance Industries meanwhile has served a notice for suspension of gas supplies to five fertliser units Indo Gulf, KRIBHCO, IFFCO, Shyam Fertilisers and Tata Chemicals. Gas supplies to these fertiliser units will halt unless these companies enhance their financial guarantees to cover for sales tax.

13.30 p.m: Indian markets have slipped further in the red, with the Sensex trading 83 points lower at 15,781 and the Nifty trading at 4756, down by 15 points. The Sensex has falling by nearly 250 points from its high just before SBI management started its press conference.

Analysts have turned negative after SBI’s press conference as the bank has not been able to address fears of recapitalisation and NPAs. Analyst feel given the current fiscal scenario government will not be too keen on giving Rs 8,000 crore to SBI as that would increase the fiscal deficit and thus have a potential of downgrading India’s sovereign rating. Further, there is also a possibility of the government asking SBI to slow down its growth plan which will result in lower requirement of funds. SBI continues to trade lower and presently trades at Rs 1,725, down by 3.5 percent. ICICI Bank is down 4.20 percent at Rs 766.75. The banking index is trading 2.75 percent lower, while the healthcare sector is holding on and currently trades 0.75 percent higher.

JP Associate is the top gainer among the most liquid stocks. It trades 4 percent higher at Rs 71.45.

European markets have come off their highs and are currently trading 1-1.5 percent higher.

**12.45 p.m:**Prakash Controwell, the company which listed on Tuesday and touched a high of Rs 232, has hit the lower circuit at Rs 184.

Markets have started losing ground although European markets open 2 percent higher. Sensex is trading at 15,818 down 77 points while Nifty is at 4768, down 4 points.

SBI is trading 2.4 percent lower after the management addressed a press conference post Moody’s downgrade. Analysts are not too happy with the management saying that slippages will remain high.

JP Associate is trading 5 percent higher at Rs 71.95. DLF is up by 3.5 percent, while Tata Motors is 3 percent higher.

Jet Airways is trading 5.7 percent higher on news of foreign airline companies might be allowed to pick up stake in Indian companies.

PG Electorplast, which listed and hit a high of Rs 537 last week, is trading 8 percent lower at Rs 207.

12.10 p.m: Markets continue to remain lackluster with the Sensex trading at 15,954 up 89 points while the Nifty trades at 4800 up 29 points. Market breadth remains neutral with one share rising for every one falling.

Banking stocks continue to remain low with SBI and ICICI both trading nearly 2 percent lower. Reliance is trading 0.3 percent lower and looks subdued as market waits for details of CBI filling a case against the company.

SBI chairman has said that the bank’s net interest margin is improving and it is confident of recapitalising maximum by March 2012, but is hopeful of meeting it by December 2011. The management said medium to long term capital and NPA remain satisfactory. The bank will try to increase lending to companies with higher rating.

SBI says bulk recovery in some NPAs seen during September quarter.

NPA deterioration is an industry wise phenomenon.

Net interest margin likely to improve to 3.5 percent.

Medium term borrowing will be affected due to the rating downgrade.

European markets open higher between 2-2.5 percent.

11:05 am: Punj Lloyd has won an engineering, procurement and contract with Qatar Solar Technologies, according to a BSE notice. The stock has gained 2 percent to Rs 53.6.

The rupee is trading at 49.16 against the dollar. The Sensex is up 84 points at 15,947, while the Nifty is at 4,801 , higher by 29 points.

Asian stocks trimmed earlier gains as investors remained skeptical about whether European leaders are doing enough to contain the sovereign debt crisis from spilling over into a full-blown banking crisis. Federal Reserve Chairman Ben Bernanke promised the US central bank was “ready to do more if needed” to boost a faltering economy.

The bank index remains the biggest sector loser; SBI is down 2 percent at Rs 1,749.

A Reuters report said India’s service sector contracted for the first time in more than two years as new business all but dried up and expectations weakened amid concern over a flagging world economy.The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, plunged in September to 49.8 – its lowest reading since April 2009 – and below the 50 mark which separates growth from contraction.

**10:30 am:**Banking stocks continue to remain under pressure with SBI breaking through Tuesday’s low of Rs 1,750.

SBI currently trades at Rs 1740, down by 2.61 percent. As was the case on Tuesday, ICICI Bank has fallen more than SBI and is down by 2.7 per cent at Rs 779.25.Meanwhile, the broader market continue to remain range bound and has again bounced back to 15,956 higher by 92 points over the previous day’s close. Nifty trades at 4792, up 21 points over the previous close.

Ashok Leyland, which, unlike most other auto majors posted negative growth for September, is trading 1.2 per cent lower at Rs 24.65.

Godrej Propertiesannounced that it had entered into an arrangement with Godrej & Boyce, the company which holds vast patches of land at Vikhroli, an eastern suburb of Mumbai. The stock is trading 1.7 percent higher at Rs 660.

Jaiprakash Associates is the top gainer among index stocks, rising by 3.35 percent, followed by Tata Motors, which is up 2.28 percent.

10:00 am: The Sensex has given up some of its gains, is now just 47 points higher at 15,912. The Nifty is just 14 points up at 4,786.

Television channel NDTV Profit quoted Bank of Baroda as saying that it was seeing no pressure on asset quality and that it would maintain its margins for the second quarter compared with the first quarter. The stock is trading down 0.8 percent at Rs 731.70.

Banking stocks continue to be under some selling pressure. SBI, downgraded by ratings agency Moody’s, slipped by 2.5 percent to Rs 1,741. Among sector indices, the bank index is the biggest loser, tumbling 1.29 percent. All bank stocks barring Union Bank and Yes Bank are in the red. Consumer durables and the oil and gas indices have also slipped.

Jet Airways is 3.5 percent higher at Rs 235 on the possibility that FDI norms in the aviation sector could be eased.

9:25 am: Volatile trading saw the Sensex climb above 16,000 in early morning trade and then fall back below that mark. Currently, the benchmark is trading 104 points higher at 15,969, but seems to be losing ground.

The banking index is the only sector index in the red, down 0.12 percent. SBI is down 0.68 percent at Rs 1,774.50, a day after Moody’s downgraded its standalone rating to D+ from C-. Other bank stocks marginally lower are ICICI Bank, Bank of Baroda and Union bank.

Talk of a possible easing of FDI norms in the aviation sector boosted airline stocks.Jet Airways is 2 percent up at Rs 232, while Kingfisher Airlines is up marginally at Rs 20.6.

9:00 am: A late-evening recovery in the US markets is likely to result in a flat opening of the Indian markets. Technically, Nifty should hold above the 4,720 support level, unless there is renewed selling in the European markets in the second half of the day.

The rating downgrade of SBI by Moody’s is likely to result in continued volatility in banking stocks, although there could be some short covering. Analysts have maintained their rating on the stock post the downgrade. They believe nothing is likely to change for the bank, except in the case of raising funds in the international markets. SBI was reported to be planning to raise $4 billion in the international market to strengthen its balance sheet.

Among the other counters that can see some action is Hindalco, for which analysts have given a positive assessment after returning from a plant visit of its new unit in Mahan.

Oil prices have shot up by 2.5 percent in the global markets on weak inventory data. This can result in movement in Cairn India and Aban.

Food Minister KV Thomas hinted on Tuesday of a possible decontrol of the sugar sector. Short covering and renewed buying might be seen in sugar shares.