The Hindu Business Line : Sensex plunges into sub-10,000 territory

THE dalliance with the five-figure Sensex came to an end, as markets slid sharply, after a few days of lacklustre price trends. Chartists have been highlighting the likelihood of a deep correction to the bullish phase of the past few months. Is the decline a mere blip in the upward march or is it the onset of a corrective phase? The evidence of trading early next week may provide valuable clues to the likely trend.

A widespread decline: What was striking was the broad based nature of the downward trend. The indices tracking stocks in large-, mid- and small-cap spaces sported sharp declines. For a change, the small-cap stocks shed more value as compared to the large-cap category. That this widespread decline came on a day when trading started on news of a four-and-half year high for the Dow, which swept past 11,000 in Thursday's trading, may have significance.

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In the plethora of NSE and BSE indices that track the market, only the IT index ended the day in positive territory and that too just by the skin of its teeth. It was helped mainly by the gains in Infosys. On the BSE, only three stocks - IL&FS Investment Managers, Jayant Agro and Cyber Systems - touched the upper circuit breaker. In absolute terms, too, the biggest price gainer for the day rose by less than Rs 100.

Short on breadth: There were four stocks declining for every stock that advanced indicating the weakness in market breadth. This was the pattern across different market-cap categories; such a trend has rarely been seen in recent months. You had several clear pointers to the well-entrenched downward trend on the day. This could make investors wary as we move into the homestretch to the Budget.

Leading the decline in the Sensex were HDFC, ICICI Bank, Hindustan Lever and ITC. HLL and ITC took a much-needed breather after notching smart gains in recent weeks.

Sector-specific patterns: Even on a day when there was weakness aplenty, a few sectors stood out:

* Commodities stay soft: Stocks from the tea, plantations and sugar space shed value after a relentless downward trend over the past several weeks. McLeod Russell, Harrisons Malayalam and Sakthi Sugars were prominent losers.

* Stocks from the metals space had a rough outing with the steel sector plays such as Tata Steel and SAIL leading the downward trend.

* Media sector stocks sported gains with the likes of Adlabs, Zee Telefilms, Television Eighteen, NDTV and Creative Eye notching up gains. Zee may the stock to watch, as there will be focus on which broadcaster gets to showcase cricket matches in India; Nimbus has bagged the rights and is set to choose the broadcast partner.

* It may not have been a good day for construction sector stocks with even Larsen & Toubro shedding value after a sharp run-up to kiss the Rs 2,500-mark. Stocks of companies that supply construction materials did, however, manage to buck the trend. Kitply, Greenply, Snowcem and Ramco Industries sported smart gains.

* Even as FMCG stocks led the decline in the market, banking stocks were not left behind. The Bank Nifty ended 2 per cent lower pointing to sizeable declines in frontline banking stocks.

Stock-specific action: In price trends that were driven by company specific developments, the following were prominent:

* A big-ticket acquisition and fund mobilisation in overseas markets through a convertible bond offering enabled Dr Reddy's Labs and Ranbaxy, respectively, to be in the small number of large-cap stocks that bucked the trend.

* Godrej Consumer was the only FMCG stock that enjoyed a fine outing, as news flow of an acquisition in the Chinese market appeared to enthuse investors.

* Markets cheered the commissioning of the second float glass plant near Chennai by Saint-Gobain Sekurit.

* Television Eighteen was marked up on indication from the RBI that there was leeway for FIIs to pick up the stock.

* Vaibhav Gems ruled weak on a day when a strategic financial investor picked up a 27-per cent stake in its equity through a preferential offer. The stock has, however, marched ahead relentless over the past few months.

* Indiabulls Financial Services also suffered a similar fate as markets responded in a lukewarm manner to a strategic investment (60 per cent stake) by a foreign investor in Indiabulls Infrastructure.

Gainers and losers: Stocks that figured in the gainers list included TCI Finance, Mastek, Jindal Drilling, Kothari Products, Hindustan Composites, IVC, Radico Khaitan, Cholamandalam Investments, Bharat Rasayan and Industrial Meters. Notable in the losers list were Wyeth, Aventis Pharma, Grasim, India Cements, Shaw Wallace, Shree Sakthi Paper (a recent listing), EIH Associated Hotels, LML, Torrent Power AEC and R.S Software.