There seems to be no end to the gloominess prevailing in the market as the indices continue to be buffeted by weakness in global markets and drying up of FII inflows. Today's session was extremely volatile with the indices moving in and out of positive territory in morning trades. Just when hopes were raised in the early afternoon when select heavyweights rallied, the indices tumbled once again on heavy selling pressure. Sensex closed at 6454, down 81 points and the Nifty at 2026, down 35 points. Nifty futures are quoting at an 8 point discount to the spot index.

As expected, the US Fed Reserve raised interest rates by 0.25 per cent to 2.75 per cent. A statement from the Fed chairman about inflation worries was enough to pull down the US indices to the lowest levels seen this year. Both Dow and NASDAQ lost close to a per cent each. Oil declined by about 2 per cent on profit booking by traders.

Indian ADR's had a particularly bad day with all of them losing ground. HDFC Bank, Tata Motors, VSNL and MTNL all lost more than 3 per cent each. The tech pack Wipro, Satyam and Infosys lost more than a per cent each.

Reliance group stocks staged a smart rally in the early afternoon on rumors of a settlement between the feuding brothers to be announced soon. Reliance Industries, Reliance Energy and IPCL all shot up between 3 to 4 per cent each and dragged the Sensex back into positive territory for a brief period. However, all three stocks gave up part of their gains towards close of the session.

Pharma stocks saw good gains early in the day as the Patent (Amendment) Bill passed by the Lok Sabha yesterday is perceived as providing some relief to Indian pharma companies as compared to the earlier version of the bill and the patent ordinance issued by the government. Indian pharma companies like Dr Reddy's and Ranbaxy, who are focusing on the generic space, may find the new product patent regime more palatable because of the clauses added to the Bill.

Banking stocks were among the largest losers. SBI lost more than 5 per cent while Punjab National Bank lost more than 2 per cent. Among the smaller PSU banks, Union Bank lost close to 10 per cent while Indian Overseas Bank lost close to 8 per cent. Private sector bank major HDFC Bank as well as its parent HDFC lost close to 4 per cent each. ICICI Bank lost over a per cent.

HDFC and SBI announced their tie up to launch a real estate fund in the country. This fund would be the first of its kind in India.

Tata Motors announced that it is planning to launch a medium commercial vehicle in the South Korean market through its subsidiary Daewoo Commercial. Daewoo Commercial has increased its market share in the Korean market to one third from the earlier one fourth after the take over by Tata Motors. The news failed to support the stock which lost more than 2 per cent.

Tata Chemicals announced that it is picking up a 33 per cent stake in Indo Maroc Phosphore based in Morocco, North Africa for Rs166 crore. Many African countries have rich deposits of phosphorous and India is a large consumer of phosphate fertilizers.

Frontline IT stocks were also heavy losers and Infosys was the largest contributor to the fall in Sensex. The stock lost more than 2 per cent. Wipro, TCS and Satyam also closed with substantial losses.

FMCG majors HLL and ITC withstood the selling pressure and managed to close the day with gains.

The large fall in ONGC saw the Nifty losing more than the Sensex in percentage terms as ONGC has a higher weight on the Nifty.

Mid-cap action
Mid-caps continue to fall heavily as no support seems to be forthcoming from either FII's or retail investors. The mood is such a contrast to the mad rush for mid-cap stocks a week ago.

Jindal Vijayanagar, formed by the merger of Jisco and the earlier Jindal Vijayanagar, re-listed on the bourses today. The stock opened at Rs445 on the NSE and closed below Rs400. The company indicated that it is expecting strong earnings growth for next year and it is considering a price increase.

Matrix Laboratories announced plans to acquire up to 60 per cent stake in Chinese drug company Mchem. The two companies had formed an alliance a few months back. The stock shot up more than 15 per cent on the news before declining.

Centurion Bank completed its GDR issue which raised close to Rs300 crore. The GDR's were issued at a discount to the domestic stock price and will be listed on the Luxemburg stock exchange.

Mid-cap IT company Scandent has won an order from the Dhaka stock exchange to upgrade the trading system. The stock shot up more than 8 per cent before settling at lower levels.

There were very few winners among the mid-cap stocks. Eicher Motors, Hindustan Motors, McDowell and Bombay Burmah Trading were among the largest losers.

With the Sensex crashing through 6500, analysts are expecting a far deeper correction than anticipated earlier. Foreign brokerage CLSA is expecting a downward target close to 6000 levels. Weakness in global markets is affecting the sentiment further. With futures & options settlement coming up next week, high volatility can be expected.

Other articles by Rex Mathew

List of general reports on markets

List of general reports on finance

Market: Indices

National Markets
Gain (+) / Loss (-)