Nervousness grips markets

The markets are trading weak this afternoon, weighed down by the negative cues from the global front. The Sensex has trimmed its losses, but is still down 255 points at 17,050 and the Nifty is down 78 points at 5113. The boader markets are doing no better, with the midcap index shedding 1.5% at 6489 and the smallcap index shedding 2% at Rs 7652. All the BSE sectoral indices are in the red, with IT, realty and metals doing the most damage.

The market proceedings started on a wobbly note as the turbulence across the bourses worldwide had a resonance on the activity back home. There was panic selling across the markets that were open for trading on Sunday. Israel's Tel Aviv stock exchange gad dropped 7% and Egyptian stocks had plunged more than 4%. And Asia was also staring down the barrel, with the likes of Hang Seng, Nikkei and Shanghai tumbling anywhere between 2% and 5% each and South Korea slumping as much as 7% at one point. The benchmark indices touched 14-month lows; the Sensex broke the 17k mark to touch a low of 16,759 and the Nifty eased below the 5100 mark to 5054.

It all started with the credit agency, Standard & Poor's downgrading the United States' AAA credit rating, held since 1941, by a notch to AA+ late Friday, followed by a weekend warning that further downgrades could come if Washington remains mired in political gridlock over solving its long-term debt woes.

The lurking fears of a worsening crisis in Europe only exacerbated the all-pervasive bearishness. The yields on Italian and Spanish debt soared to 14-year highs last week on political wrangling and doubts over budget cuts, raising fears that the euro zone's bailout fund could be under pressure.

While there was no respite for Asia, with the Hang Seng and Nikkei shedding more than 2% each, and Taiwan, Seoul and Straits Times slidding more than 3% each, the absence of jitters across seem to have arrested the downfall, atleast for the day. The ECB's plans to intervene in the Italian and Spanish debt markets to reduce borrowing costs seem to have signalled a ray of hope for Europe.

All eyes are glued on the Federal Reserve's policy meet on Tuesday to see whether it would initiate any steps to bail out the beleaguered US economy, which has already seen two quantitative easing packages worth $600 billion thus far. The Dow futures  are down more than 200 points  ahead of the trading session later in the day, their first since the weekend  developments.

Most auto stocks have rebounded into the green. Hero Honda has raced ahead by 3.7% at Rs 1851, Bajaj Auto has gained 2.6% at Rs 1437, M&M has adde d2.2% at Rs 670 ahead of its quarterly numbers and Maruti has added 0.6% at Rs 1200. ONGC and Coal India are the other significant gainers.

On the other hand, Tata Motors has plunged by 5.4% at Rs 870 to top the loser's list on the BSE. IT stocks have crumbled throughout this session, with Infosys and Wipro shedding around 45 each to hit 52-week lows of Rs 2465 and Rs 358 respectively as the US rating downgrade may lead to a slowdown in technology spending by clients in the world's largest outsourcing market. And TCS is down 4.5% at Rs 1009. And metal shares have are witnessed a meltdown, with Hindalco weakening by 5.4% at Rs 150 and Tata Steel shedding 3.8% at Rs 512.

The market breadth is abysmal. Out of 2847 stocks traded on the BSER, there are 688 advancing stocks as against 2081 declines.