Metals, realty sink Sensex's boat

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As if weak consumer demand reported in India yesterday was not enough, China today reported a weak set of numbers for its manufacturing sector. This laid the base for the markets to crash across Asia, with India leading the riot. Stocks from the realty and metal sectors were the worst hit here. Healthcare stocks though managed to buck the selloff.

The BSE Sensex and NSE Nifty closed with losses of around 370 points (2.2%) and 120 points (2.4%) respectively. Mid and small cap stocks followed suit. The BSE Midcap and BSE Smallcap indices closed down by 1.3% and 0.9% respectively. On the broader BSE, just one stock gained today for every two that closed in the red.

Among other key Asian markets, China (down 0.9%), Hong Kong (down 1.4%) and Japan (down 0.6%) closed in the red. Stocks across Europe have also opened the day on a weak note.

Metal stocks remained in the heat of today's selloff. Major losers here included Sterlite, Hindalco, and Tata Steel. The BSE-Metal index is in fact off 22% from its 52-week highs attained during the first week of April 2010. Continued concerns regarding the global economy have kept commodity stocks under tremendous pressure during this period. As if the US crisis and China's slowdown fears weren't enough, investors now fear a decline in commodity demand following the European contagion. Oil, aluminium, copper, and steel - all key commodities have come under severe price pressure over the past few weeks. And this pressure is not seen subsiding in the near future at least.

Anyways, one commodity that is enjoying this crisis the most is gold. As per an Economic Times report, gold prices have hit their fresh all-time high in India today. Gold futures on the Multi Commodity Exchange (MCX) have struck a fresh record of Rs 18,659 per 10 grams. The metal seems to be becoming ultra-sensitive to the weak global news flows, especially with respect to how the European crisis is panning out. With countries in the west being impacted by the slowdown, the chances are high that the demand for the yellow metal as an investment will remain strong. However the idea is to never go overboard with it. A 5-10% allocation of your portfolio is just about sufficient.

Energy stocks closed mixed today. While gains were seen in HPCL and IOC, selling pressure marked trading in Reliance and Cairn India. Gains in HPCL followed a stellar profit performance reported by the PSU oil major for the year ended March 2010. Profit grew by 126% YoY, led by higher other income (up 51%) and lower interest costs (down 57%). The growth in profit also came as a relief given that he company's sales remained under pressure during the year. These declined by 13% YoY, led by lower realisation on fuel sold.

Power stocks closed deep in the red, led by selling in Tata Power and NTPC. Earlier, as per a leading business daily, Tata Power was reported as looking for more coal assets in Indonesia and South Africa. As per the management, the company's coal imports are expected to surge to 22 m tonnes per annum (MTPA) by 2014, from 5 MTPA currently. The company already owns a 30% stake in coal mines owned by Bumi Resources. Most of the coal supplies for Tata Power's upcoming projects will come from these mines. It plans to hike production from these mines from 60 MTPA to 75 MTPA and subsequently to 100 MTPA. Anyways, it is also looking for mines in Australia, South Africa and South-East Asia to ensure fuel security for future projects. The latest reports therefore come in line of these very plans. We see these coal assets as holding tremendous importance for Tata Power, given the company's expansion plans.