Terrific Tuesday: Logic behind Markets fall on 3rd Nov 2009

The BSE 30-share Sensex lost 491.34 points or 3.09%. The S&P CNX Nifty slipped 147.8 points or 3.14% to 4,563.90.

The BSE Sensex has shed 1405.87 points or 8.36% in six trading days from 16,810.81 on 23 October 2009. From a 17-month closing high of 17,326.01 on 17 October 2009, the Sensex has lost 1921.07 points or 11.08%.

Major Reasons for Todays Panic Sell off::
1. Weakness in European markets and US index futures weighed on investor sentiment.
2. Risk aversion rose after the UK Treasury today, 3 November 2009, announced a shake-up of British banks, which raised concerns about its financial system. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc will receive 31.3 billion pounds ($51 billion) in a second bailout from the UK taxpayer in return for putting a cap on bonuses. The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide.
3. The sell-off on the domestic bourses in the latter part of the trading session was partly due to selling by European funds. Some European funds could be selling to get the cash they need to take up their shares in Lloyds.
4. Profit taking ahead of the year-end (December) has pulled world markets off their recent highs.
5. Earlier, the Reserve Bank of India (RBI) at its monetary policy review on 27 October 2009 left its key rates unchanged, but raised the wholesale price-based inflation projection for end-March 2010 sharply to 6.5% with an upward bias, from 5 % earlier.
6. India's largest firm by market capitalisation and oil refiner Reliance Industries (RIL) slumped 6.23% to Rs 1811 on reports the Comptroller and Auditor General of India (CAG) will soon audit RIL books of accounts. Earlier, the director general of hydrocarbons has been accused by Reliance Natural Resources (RNRL), controlled by Mukesh Ambani's estranged brother Anil Ambani, of approving an increase in RIL's capital expenditure on the D6 exploration block from $2.4 billion (Rs11,280 crore) to $8.8 billion. This block is where RIL made one of the biggest discoveries of natural gas in India. Meanwhile, RIL reported a 6.4% fall in net profit at Rs 3,852 crore despite 6% rise in total income to Rs 47,476 crore in Q2 September 2009 over Q2 September 2008. Refining margins more than halved to $6 a barrel from $13.3 a barrel a year earlier.
7. India's largest private sector aluminium maker by sales Hindalco Industries tumbled 10.21% to Rs 109.50 after net profit declined 52.2% to Rs 344.05 crore on a 13.2% decline in sales to Rs 4892.56 crore in Q2 September 2009 over Q2 September 2008. It was the top loser from the Sensex pack.
8. Rate sensitive realty shares declined, extending a recent sharp fall, after the RBI in its monetary policy review meet on 27 October 2009 raised the provisioning requirements for loans to commercial real estate from 0.4% to 1%. DLF (down 7.97%), Unitech (down 9.06%), HDIL (down 6.51%), Indiabulls Real Estate (down 14.73%), and Parsvnath Developers (down 6.13%), declined.
9. India's largest engineering & construction firm by sales Larsen & Toubro rose shed 2.75% to Rs 1524.10. The stock had surged to day's high of Rs 1600 after the company said it won an order worth Rs 6897 crore from Maharashtra State Power Generation Company.
10. IRB Infrastructure Developers rose 1.56% after consolidated net profit soared 71.9% to Rs 70.82 crore on a 76.5% spurt in consolidated sales to Rs 355.90 crore in Q2 September 2009 over Q2 September 2008.
12. Suzlon Energy tumbled 13.75% after reporting a net loss of Rs 184.91 crore in Q2 September 2009 compared with a net profit of Rs 16.98 crore in Q2 September 2008. Also the sales fell by 78% in Q2.
13. However India's largest cellular services provider by sales Bharti Airtel surged 2.14% to Rs 298.40, on news that Singapore Telecommunications has bought additional 1.52% stake in Bharti Airtel and will pay up to Rs 3008.4 crore in three installments ranging over 18 months.
14. Sugar maker Balrampur Chini Mills shed 9.58% after it today, 3 November 2009 said it has not entered into any stake sale agreement with rival Bajaj Hindusthan. The company held some talks with Bajaj Hindusthan to discuss future business strategies, it said in a letter to the stock exchange. Bajaj Hindusthan rose 0.46%.