Markets opened weak as expected and showed some signs of a recovery as the Sensex gained more than 100 points from its early morning lows. Traders who expected the indices to bounce back after 2 days of losses and built up long positions were shattered in the sell-off that followed.

In morning trades on the London Metal Exchange, Zinc dropped more than 11 per cent in panic selling. Copper declined more than 9 per cent while Aluminium lost more than 6 per cent. Precious metals like gold and silver also lost substantial ground.

The sharp fall in international metal prices hit the metal stocks very badly. Most of these stocks had appreciated substantially over the last few months on continuously rising metal prices. Just as the rally has been spectacular, the correction is even more so and has come at a much faster pace.

The contagion spread to other frontline stocks and even those which were holding in morning trades tumbled. The decline was so severe that not even a single index stock managed to close with gains. The Sensex saw a low of 11771 while the Nifty had its lowest point at 3483.

Sensex closed with losses of 463 points at 11822 and the Nifty lost 147 points to close at 3503. Nifty May futures closed at a large discount of 57 points to the spot index.

Today's fall was the worst intra-day decline for the frontline indices since May 2004. This correction which started last Thursday is the worst since October 2005.

Aluminium stocks were the worst hit in today's sell-off. Hindalco closed a massive 13.5 per cent lower while Nalco gave up nearly 11.5 per cent.

Copper manufacturer Sterlite lost 14 per cent while Hindustan Zinc closed more than 12.5 per cent lower.

Among steel stocks, Tata Steel closed nearly 9 per cent lower while SAIL gave up nearly 7.5 per cent. Iron ore exporter Sesa Goa closed 12 per cent lower.

Dabur, which had gained substantially over the last couple of weeks on speculation about overseas buyouts, closed nearly 10.5 per cent lower. Among other FMCG stocks, ITC lost more than 5 per cent while HLL ended more than 4 per cent lower.

Telecom stocks were also hit hard. VSNL closed 10 per cent lower while MTNL ended nearly 6 per cent lower. Reliance Communications lost nearly 4.5 per cent while Bharti ended nearly 3 per cent lower.

Oil stocks continued their decline today as well. ONGC have up more than 3.5 per cent taking the total losses over the last 3 sessions to nearly 8 per cent. Reliance Industries gave up another 4 per cent after giving up nearly 10 per cent last week.

RPL faced more selling pressure today and ended nearly 6 per cent lower. The stock closed at Rs79, a decline of more than 20 per cent from its listing price.

Among oil marketing stocks, HPCL gave up nearly 5 per cent while BPCL ended 3 per cent lower. Indian Oil also gave up nearly 3 per cent.

Technology stocks were relatively better off. Infosys lost nearly 3 per cent while Wipro declined almost 2 per cent. Satyam closed 2 per cent lower while TCS lost nearly 2 per cent.

Among banking stocks, HDFC Bank gave up more than 3.5 per cent while ICICI Bank closed more than 2.5 per cent lower. SBI also lost more than 3.5 per cent.

Cement stocks showed some signs of a recovery in morning trades as ACC and Gujarat Ambuja notched up gains. They were unable to hold on to their gains and declined later.

Grasim lost more than 5.5 per cent while Gujarat Ambuja Cement ended nearly 4.5 per cent. ACC lost close to 4 per cent.

Global markets / crude oil
Almost all Asian markets tumbled as fears of rising interest rates and a decline in the US Dollar affected stocks of large exporting companies. The commodity meltdown pushed stocks deeper into the red. Indonesia was the biggest loser, closing more than 6 per cent lower. Singapore lost over 3 per cent while Hong Kong and South Korea lost over 2 per cent each. The Japanese index gave up nearly 0.7 per cent.

Once again, Shanghai was completely untouched by the weakness in other markets and surged nearly 4 per cent. The Shanghai Composite Index has gained over 14 per cent in the last 6 sessions.

Major European markets have also opened lower today as stocks of metal producers and mining companies are facing pressure. Most major indices are trading with losses of more than a per cent each.

Crude oil prices are continuing the decline from Friday. The sell-off in metals by large funds has affected the sentiment in crude also. Statements from senior OPEC officials that planned production capacity additions by member countries may lead to oversupply of oil has affected the sentiment considerably. Near month NYMEX futures has slipped over 2 per cent in European trades today and is trading at around $70.5 per barrel.

Large-cap news flow

• Hindalco said its Australian subsidiary has raised A$ 300 million from its IPO and has been listed on the local exchange. Hindalco, which holds a 51 per cent stake in the subsidiary, said the market value of the subsidiary is in excess of A$ 900 million based on the closing prices on listing day.
  
• Wockhardt has received US FDA approval for cephalosporin antibiotic in injectible form. The company said the drug would be launched within a few weeks.
  
• Suzlon Energy would raise up to Rs5,000 crore from an overseas issue to fund expansion and acquisition plans.

Mid-Cap Action
Mid-cap stocks were doing much better than frontline stocks in morning trades. But the mid-cap index dropped sharply in early afternoon and continued the slide for the rest of the session. The CNX Mid-Cap index lost 208 points, or 4.01 per cent, to end the day at 4995. Market breadth was neutral in morning trades on the NSE, but declined substantially towards close.

Sugar stocks faced heavy selling pressure on reports that the government would impose controls on sugar stocks. Triveni Engineering ended more than 12.5 per cent lower. Bajaj Hindustan gave up more than 8 per cent while Balarampur Chini ended more than 7 per cent lower.

Stocks of companies implementing projects eligible for carbon credits came down substantially on reports that prices of carbon credits have declined substantially. SRF lost 14 per cent while Gujarat Flourochemicals ended more than 5 per cent lower.

Jindal Drilling, Indian Hume Pipe, Sundaram Clayton, Karur Vysya, Finolex Cables and Shi-Vani Oil were among the major mid-cap gainers.

Mukand Limited, Usha Martin and Gujarat Alkalies were among the significant mid-cap losers on the NSE.

Mid-cap news flow

• Allahabad Bank would fully computerise its operations by next month. The bank is also planning to open its first overseas branch in Hong Kong.
• Pidilite has formed a wholly owned subsidiary in the US to sell various products.
• Emami is considering a merger with JB Marketing and Finance, subject to a detailed valuation.
• Rasandik Engineering would become one of the first companies to raise funds through the QIP route notified by SEBI last week. The company is planning to raise up to Rs40 crore.
• Punj Lloyd has formed a JV with a Saudi royal family member to offer EPC services for the oil, power and water sectors besides undertaking other civil infrastructure and industrial projects. Punj Lloyd would hold a 49 per cent stake in the JV.
• Praj Industries has received new orders worth Rs75 crore for fuel ethanol plants from sugar companies like Triverni Engineering, Upper Ganges Sugar and Balrampur Chini.
• Karur KCP has won orders worth Rs14 crore for supply of packaging material to cement companies.
• The board of Nagarjuna Constructions would meet later this month to consider a bonus issue
• Lupin would market a cardiovascular critical care drug sourced from an Italian company in the domestic market.
• Suprajit Engineering has acquired the whole of a UK based company. The company has also bought out the 50 per cent stake held by an overseas company in a JV.
• The board of Abhishek Industries would meet next week to consider an overseas issue.
• GV Films has acquired an existing movie theatre in Madurai for its proposed multiplex complex.
• Surana Industries is planning to raise Rs300 crore from a public issue to part-finance its proposed new steel complex in Karnataka.
  

*Disclaimer: The author may have positions in some of the stocks specifically mentioned above at the time of writing this article. This analysis / report is only for the purpose of information and is not an investment advice. Readers are advised to consult a certified financial advisor before taking any investment decisions. While efforts have been made to ensure the accuracy of the information provided in the content the author or publisher shall not be held responsible for any loss caused to any person whatsoever.