US fiscal cliff fears, EU crisis push Indian indices to two-month low

Written by fe Bureau | Mumbai | Updated: Nov 17 2012, 06:45am hrs
Indian equities ended in the red for the sixth consecutive session on Friday as the dispute between the Obama administration and the US Congress over fiscal cliff measures and the European Union slipping into another recession spooked investors globally.

Indian benchmark indices declined nearly 1% in the last hour of the trade on Friday to a two-month low as investors grew more averse to Indian equities ahead of the US fiscal cliff' talks. US President Barack Obama and congressional leaders were scheduled to meet at the White House late on Friday to discuss spending cuts and tax hikes on the wealthy to stop the US economy from going back into recession.

The 17-nation euro zone tipped into recession in the third quarter (July-September), with the economy shrinking 0.1% from the second quarter (April-June), official data showed on Thursday. In the second quarter, the euro zone economy had contracted 0.2%.

The Sensex ended the day at 18,309.37, down 162 points or 0.88% from Thursdays close, while the broader Nifty settled at 5,574.05, down 56.95 points or 1.01% from the previous close, led by sharp falls in realty, banking and automobile stocks. The pessimism was reflected in broader markets, too, with the BSE midcap index falling 0.9% to end at 6,658.33 and the BSE smallcap declining 1.13% to end at 7,110.75.

Stocks, such as DLF, IDFC, Punjab National Bank, Tata Motors, ICICI Bank and SBI, were among the biggest losers, all ending down in the range of 2-4%.

Market experts said investor attention was focused on the meeting between US lawmakers to discuss the fiscal cliff. Investors fretted and booked profits ahead of the weekend, as concerns mounted whether US would be able to avert a fiscal crisis.

Suddenly, things are not looking good as they did 2-3 weeks ago. Hence, we are seeing people taking money off the table, said Andrew Holland, CEO, Ambit Investment Advisors. On a weekly basis, Indian equity benchmarks dropped more than 2% as a result of weak global markets and uncertainty in the winter Parliament session starting next week. Global indices, meanwhile, fell in the range of 1-3% in the week.

Barring the BSE consumer durables index, all sectoral indices ended in the red this week. BSE auto was the biggest loser (down 3%) followed by BSE capital goods (down 2.15%) and BSE FMCG index (down 2%). Traders said the market was showing signs of weakness ahead of economic events in the forthcoming week and could see another 3-5% correction. The fall (2%) is in line with global indices, said a report by Kotak Institutional Equities, citing slowdown in Indian industrial production and sticky inflation numbers, gloom in global economy and muted FIIs flows into equities.