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Spanish shock for the markets
Mon, 23 Jul Closing

Indices in the equity market in India continued to trade lower during the closing stages and as a consequence, ended deeply in the red. While BSE-Sensex edged lower by around 290 points (down 1.3%), NSE-Nifty suffered a decline in the region of 90 points. BSE Mid Cap and BSE Small Cap indices also fell sharply, losing 1.3% and 1% each. Dr Reddy's emerged as the sole gainer amongst all the Sensex stocks.

While almost all Asian indices closed in the red, Europe too is trading weak currently. The rupee was trading at Rs 55.9 to the dollar at the time of writing.

There was no respite for the markets today as they kept going lower and lower right from the word go. The pessimism seemed to have been fuelled mainly by reports coming out from Spain to the effect that the economy is in worse shape than before and may eventually be forced to default. With corporate results in India also not covering themselves with glory, investors had no option but to liquidate their positions.

L&T, the engineering behemoth, came out with its 1QFY13 results today. The company's standalone net sales grew by 26% YoY during the quarter. Operating profits declined 5.3% YoY with margins going down by 300 bps to 9.1% during the quarter. Net profits increased by 15.7% YoY during the quarter. However, after adjusting for exceptional items, the recurring profits grew by 20.9% YoY. The exceptional item pertained to employee compensation pursuant to the voluntary retirement scheme initiated by the company. The company's order book stood at Rs 1.5 trillion at the end of the quarter. The stock closed lower by 1% on the bourses today.

Retail stocks closed weak today with Koutons Retail and Pantaloon amongst the leading losers. The negative sentiment seemed a result of reports that the Samajwadi Party, the new ally of UPA-II Government has opposed foreign direct investment in multi-brand retail. It has argued that if the investment is approved, it will lead to enormous loss of jobs at the local kirana stores, believed to be the largest employer after agriculture. However, the investors' reaction to the news seemed to be too premature as no decision has been reached on this issue so far.

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