Benchmarks end lower on feeble global cues

Friday’s trading session turned out to be a disappointing day of trade for the Indian equity markets, as market participants booked profits ahead of February Index of Industrial Production (IIP) data due for release later in the day. Domestic gauges traded in the red throughout the session, amid weak global cues but pared some losses in late trades following a rebound in software counter ahead of fourth quarter earnings from Infosys next week. Meanwhile, foreign institutional investors continued investing in Indian equities for the past few weeks and remained net buyers to the tune of Rs 343 crore on April 10, as per the provisional data released on the stock exchanges.

Overall, sentiments remained dampened after Reserve Bank of India (RBI) Governor Raghuram Rajan said that if the spillover effect of monetary easing in the US was not controlled; emerging markets like India would be forced to build large foreign exchange reserves through aggressive intervention in the foreign exchange markets. He also said that a very accommodative monetary policy could lead to more problems for an economy rather than help sustain growth.

Some disappointment also came after India’s trade deficit widened to $10.51 billion in the month of March as compared to $8.13 billion in February and $10.41 billion reported in the corresponding month of the previous year. The increase in trade deficit was mainly attributed to lower exports, which declined by 3.15% to $29.58 billion in the reported month from $30.54 reported in March 2013. Furthermore, Indian imports contracted marginally by 2.11% to $40.09 billion in March from a year earlier, the first single digit decline in imports after sixth consecutive month of double digit contraction.

Global cues too remained sluggish with US markets suffering sharp cuts led by sell-off in technology stocks and profit booking after big gains of previous session. Asian equity indices shut shop mostly in the red on reduced demand for riskier assets tailing the fall in US markets, though China’s producer-price index retreated following the previous month’s 2 percent drop. European markets too made a weak start with CAC, DAX and FTSE all edging lower by over a percent in early deals.

Back home, stocks related to banking sector remained under pressure after a committee set up by the Reserve Bank of India (RBI) on credit pricing framework submitted a draft report on April 10, 2014. Selling in oil and gas space too weighed down sentiments, led by decline in Reliance Industries which succumbed to selling pressure after Oil ministry shunned the plan to form an inter-ministerial committee to determine gas prices every quarter based on the C Rangarajan committee formula and decided to utilize its own expertise to compute new rates. Additionally, auto shares witnessed profit taking after domestic passenger car sales declined 5.08% to 1,71,489 units in March as compared to 1,80,675 units in the year-ago month. On the flip side, pharma counter attracted buying interest following a rebound in Sun Pharmaceutical Industries which gained by over 1.50%.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below the psychological 6,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dipped by over eighty points to end below its crucial 22,650 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of around half a percent. The market breadth remained in favor of advances, as there were 1,539 shares on the gaining side against 1,267 shares on the losing side while 125 shares remain unchanged.

Finally, the BSE Sensex declined by 86.37 points or 0.38%, to settle at 22628.96, while the CNX Nifty lost 20.10 points or 0.30% to settle at 6,776.30.

The BSE Sensex touched a high and a low of 22679.18 and 22526.89, respectively. The BSE Mid cap index was up by 0.10%, while the Small cap index gained 0.66%.

The top gainers on the Sensex were Sun Pharma up by 1.87%, TCS up by 1.75%, Wipro up by 1.34%, Cipla up by 1.16% and Infosys up by 0.91%, while Mahindra & Mahindra down by 1.75%, Tata Motors down by 1.75%, RIL down by 1.65%, SBI down by 1.61% and Gail India down by 1.59% were the top losers in the index.

On the BSE Sectoral front, IT up by 1.54%, Teck up by 1.21%, Healthcare up by 0.91%, Consumer Durables up by 0.40% and Realty up by 0.29% were the top gainers, while Oil & Gas down by 1.28%, Auto down by 1.20%, Capital Goods down by 0.98%, Bankex down by 0.78% and PSU down by 0.35% were the top losers in the space.

Meanwhile, in a move to bring greater transparency in the pricing of credit, the Reserve Bank of India (RBI) panel suggested a benchmark floating interest rate, especially for home loans. As per the panel’s draft report on Pricing of Credit, the Indian Banks Association (IBA) may develop a new benchmark for floating interest rate products, namely, the Indian Banks Base Rate (IBBR), which may be collated and published by IBA on a periodic basis. The RBI Deputy Governor Anand Sinha headed the panel which was set up recently to examine issues related to discrimination in the pricing of credit and recommend measures for transparent and appropriate pricing of credit under a floating rate regime. The RBI has invited feedback and comments on the recommendations in the draft report by May 16.

The panel draft noted that interest rates on floating rate loan will reset periodicity on particular dates only, irrespective of changes made to the base rate or minimum lending rate within the reset period. Banks are restricted to give loans below the base rate to any customer. The base rate (benchmark lending rate) should be linked to the marginal cost of funds if the average deposit tenure is on the lower side. Draft report further added that benefit of interest reduction on the principal on account of pre-payment should be given on the day the money is received by the bank without waiting for the next EMI cycle date to effect the credit.

Regarding retail loans, the draft highlighted that customers should have ‘exit’ and ‘sans exit’ options at the time of entering the contract. These exit option should be easily exercisable by the customer with minimum notice period and without impediments. Panel report further added that these recommendations will also enable informed decision-making by customers and improved asset-liability management at banks. The grievances redressal systems in banks should be made robust and responsive to customers' needs.

The CNX Nifty touched a high and low of 6,789.35 and 6,743.15 respectively.

The top gainers of the Nifty were HCL Technologies up by 3.35%, Ambuja Cements up by 2.33%, Sun Pharmaceuticals Industries up by 1.92%, Tech Mahindra up by 1.68% and TCS up by 1.66%. On the other hand, IndusInd Bank down by 4.32%, State Bank of India down by 2.06%, Mahindra & Mahindra down by 1.97%, GAIL (India) down by 1.90% and Reliance Industries down by 1.84% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 1.07%, Germany's DAX was down by 1.44% and United Kingdom's FTSE 100 was down by 1.19%.

The Asian markets concluded Friday’s trade mostly in red with stock indices dropping from an almost three-month high amid a renewed selloff of technology shares and as a gain in the yen dragged Japan’s Topix index to its worst week since June. Indonesian shares however rose amid bargain hunting in battered large caps as investors weighed political uncertainties after an unconvincing election win by the main opposition party. Chinese CPI rose to an annual rate of 2.4%, from 2.0% in the preceding month while Chinese PPI fell to an annual rate of -2.3%, from -2.0% in the preceding month.