Bears strike back with a vengence

Markets gave up all of Tuesday's gains and dropped in late noon trades. Markets had gained yesterday after eight straight days of losses. However, today the Sensex touched its lowest in two years at 15,479 in afternoon trades. The index managed to recover marginally to end finally at 15,699 - down 365 points. Nifty ended down 105 points at 4,706.

"The stocks markets are in a downtrend and are likely to remain bearish in the short-term and medium term. The immediate support for the Nifty would be 4,680 and any further weakness from there on could see the Nifty sliding to 4,600," said Somil Mehta, Sr Technical Analyst (Equity), Sharekhan.

US markets slipped on Tuesday on concerns about the worsening debt crisis in Europe where rising yields suggest the outlook continues to deteriorate and stocks have been tied to the European credit market's volatility. The Dow and S&P 500 dropped 0.4% each. The US economy grew more slowly than previously estimated in the third quarter, but a drawing down of stocks held by companies and firm consumer spending suggested output would pick up in late 2011. Following this data, global markets tumbled. In Asia, Hang Seng dropped 2% to 17,864. Straits, Seoul and Taiwan markets delcind 1-3% each.

The Indian rupee saw some recovery today on hopes that RBI may have sold dollars to cap the slide. The rupee was trading at 52.08 against the dollar in afternoon trades.

Markets are likely to remain volatile for the rest of the day as traders roll over positions ahead of the futures and options expiry on Thursday.

Meanwhile, the Reserve Bank of India (RBI) has allowed foreign investors to invest in debt instruments floated by infrastructure debt funds (IDF) set up as non-banking financial companies (NBFCs) or mutual funds (MFs). The debt instrument would include foreign currency and rupee bonds.

The Supreme Court today ordered the release of five top corporate executives from Tihar Jail, raising hopes of other accused in the case including former Telecom Minister A Raja and DMK MP Kanimozhi who have been in prison for over six months.

BSE bankex shed 2.4% to 9,649. Private banking major HDFC Bank dropped 4.2% at Rs 425 tracking weakness of its American Depository Receipt on the New York Stock Exchange on Tuesday. ICICI Bank and SBI touched respective 52-week lows and were down over 2% each.

BSE metal index dropped 2% to 10,023 as China - a key consumer of aluminium and copper - reported weak economic data. IT shares dropped on euro zone concerns with the BSE IT index slipping 2.5% at 5,447. Infosys expects third-quarter revenue growth closer to the lower end of its forecast as customers delay decisions on large contracts. It had forecast quarter-on-quarter revenue growth of 3.2-4.5% for the October-December period. The stock dropped 2.6% at Rs 2,651.

Market heavyweight Reliance was the biggest dragger followed by Infosys. Together the stocks have contributed to a 90 point fall in the Sensex. Bharti Airtel shed 3.7% Jaiprakash Associates, Larsen & Toubro and BHEL dropped 3-5% each.

Among other stocks, ONGC shed 2.2% at Rs 246 after it withdrew the papers it filed for a government share sale. However, they will file the red herring prospectus (RHP) again if instructed.

SKS Microfinance dropped to a new low on reports that Vikram Akula may resign as executive chairman of the company he founded in 1998. However, the stock rebounded smartly from there and was at its 5% upper circuit of Rs 116.