Weak global cues, disappointing L&T nos thrashed markets
15 October 2008
It was a dreadful session for the markets, as benchmark indices have given up 70-75% gain, which they had seen in first two days of this week. It seemed that markets fizzled out two days pullback rally due to bad global cues, wherein financial stability is still big concern for global banks. Asian and European markets have witnessed huge selling pressure. The Sensex has closed below 10,900 and the Nifty tanked below 3350.
Redemption pressure has led this sell off. Incremental flows are negative at FII desk; selling in metal pack continues. A leading foreign fund has turned negative on the metal sector. L&T has failed to impress street by its second quarter numbers; entire capital goods space is under pressure post results. Midcap and small cap stocks are still vulnerable to margin call pressure.
Finance Minister P Chidambaram said that the inter-bank lending still remains constrained and that it was important to enhance credit limits. The government and the Reserve Bank of India or RBI have agreed that measures have to be taken immediately, he said.
RBI is going to announce some measures in the evening to ease liquidity in financial system; experts feel that this news would be good for tommorrow's gap up opening. But nervousness in global markets due to financial instabliity could nullify RBIs move.
Liquidity concerns have taken a centrestage, a high-powered panel of bankers met in Mumbai to assess the needs to boost credit flow and the announcement is likely shortly. After speaking to three-four Chairmen from the meeting, Suvashree Ghosh of NewsWire18 said that they have lobbied for a CRR, Repo and an SLR cut in the meeting. ''They explained that further liquidity will be injected in the system and measures will be taken to ensure that there is adequate credit flow across the sectors.''
Experts feel that CRR cut may be between 50-100 bps. SLR is also expected to be cut and interest caps on NRI deposits may be removed. There are not much hopes of repo cut, but that would not be ruled out.
