Benchmarks consolidate ahead of F&O expiry; end flat with negative bias

After clocking record levels in previous session, Indian equity indices went through consolidation on Tuesday as investors remained on sidelines on the penultimate day of F&O expiry. Benchmark indices moved in a narrow range for the major part of the day with bouts of volatility witnessed during the trade. Earlier, markets made a positive start as election euphoria played its part with international credit rating agency Crisil saying that a stable government post-elections is likely to help the country grow at an average of 6.5 percent for the next five years. However, Crisil said it is not the election results which impact the economy, except in improving sentiment, but policies formulated by the new government that will boost growth. Some support also came on report that foreign institutional investors (FIIs) bought shares worth a net Rs 212.85 crore on April 21, 2014, as per provisional data from the stock exchanges.

However, sentiments turned down-beat after Indian rupee fell to its weakest level against the dollar since March 21 weighed down by heavy greenback demand from importers, particularly oil firms, as well as weaker regional currencies. The partially convertible rupee was trading at 60.78 per dollar at the time of equity markets closing as against previous close of Rs 60.59 per dollar.

On the global front, merger and acquisition (M&A) talk in the pharmaceutical sector lifted European shares on Tuesday, but failed to support the euro, which held at a two week low against the dollar on rising expectations of further policy easing by the European Central Bank. Asian markets shut shop mostly in the green with Wall Street providing another strong lead.

Back home, metal stock lost its sheen on profit-booking. Nearly one-and-a-half years after it banned mining in Goa, the Supreme Court on Monday allowed mining in the state, but with an annual cap of 20 million tonnes of iron ore extraction. Tyre shares dropped after tyre major MRF declared weak Q2 result. The company reported a fall of 18.87% in its net profit at Rs 170.87 crore for the quarter ended March 31, 2014 as compared to Rs 210.61 crore for the same quarter in the previous year.

On the flip side, Oil and gas space witnessed some traction as the Prime Minister’s Office (PMO) sought a status report from the Oil Ministry on issues around the implementation of the Cabinet decision of increasing the gas prices. Select pharma stocks too edged higher as the Reserve Bank of India said that the non-compete clause will not be applicable in acquisition of existing pharma companies by foreign entities or investors except in certain special cases. Under a non-compete clause a party agrees not to enter into a similar trade in competition against another party as part of a deal.

The NSE’s 50-share broadly followed index Nifty ended marginally lower but managed to hold the psychological 6,800 support level, while Bombay Stock Exchange’s Sensitive Index – Sensex slipped by just six points to hold psychological 22,750 mark. Broader markets too struggled to get any traction during the session and ended the trade mixed. The market breadth remained in favour of advances, as there were 1,525 shares on the gaining side against 1,324 shares on the losing side while 125 shares remain unchanged.

Finally, the BSE Sensex ended lower by 6.46 points or 0.03%, to 22758.37, while the CNX Nifty was down by 2.30 points or 0.03% to 6,815.35.

The BSE Sensex touched a high and a low of 22853.03 and 22727.63, respectively. The BSE Mid cap index was down by 0.15%, while the Small cap index gained 0.01%.

The top gainers on the Sensex were L&T up by 1.65%, Gail India up by 1.41%, HDFC Bank up by 1.36%, ONGC up by 0.94% and Hindalco Inds up by 0.94%. While SSLT down by 4.01%, Wipro down by 2.80%, SBI down by 1.03%, Infosys down by 0.99% and Maruti Suzuki down by 0.90% were the top losers in the index.

On the BSE Sectoral front, Capital Goods up by 1.19%, Oil & Gas up by 1.15%, PSU up by 0.34%, Consumer Durables up by 0.27% and Bankex up by 0.16%, were the top gainers, while Metal down by 0.79%, IT down by 0.55%, Teck down by 0.52%, FMCG down by 0.46% and Realty down by 0.44% were the top losers in the space.

Meanwhile, the non-compete clause will not be applicable in acquisition of existing pharma companies by foreign entities or investors except in certain special cases with the approval of the Foreign Investment Promotion Board (FIPB), the Reserve Bank of India (RBI) said in a notification. Under a non-compete clause, a party cannot enter into a similar trade in competition against another party as part of a deal. The RBI’s notification follows revision of the existing FDI policy for pharmaceutical industry by the government in January' 2014.

At present, India permits 100 percent FDI in pharmaceutical sector through automatic approval route in the new projects but in case of brownfield or existing projects, foreign investments are allowed only through FIPB's approval. Presently, several global pharma companies are looking to buy stake in existing Indian firms on the back of their strong growth prospect in future.

Foreign direct investment (FDI) in the pharma sector has more than doubled to $1.26 billion during April-December’ 2014 as comparison to $589 million in the April-December period of 2012-13 amid increasing acquisitions of domestic firms by multinationals. Around 90 percent of the total FDI in the sector has come into brownfield pharma. However, low FDI in new pharma project has become a cause of concern for the government.

The CNX Nifty touched a high and low of 6,838.00 and 6,806.25 respectively.

The top gainers of the Nifty were BPCL up by 4.37%, Lupin up by 2.83%, GAIL (India) up by 1.75%, HDFC Bank up by 1.71% and Larsen & Toubro up by 1.69%. On the other hand, SSLT down by 4.12%, Wipro down by 2.65%, PNB down by 2.22%, Jindal Steel & Power down by 1.86% and IndusInd Bank down by 1.63% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.93%, Germany's DAX was up by 1.28% and United Kingdom's FTSE 100 was up by 1.04%.

The Asian markets concluded Tuesday’s trade mostly in green, in the first full day’s trade after the Easter break, with Wall Street providing another strong lead. In Japan the earnings season gets under way next week with the release of reports from big names. Japan’s annual export growth slowed sharply in March due to weaker shipments to China, casting doubt that a recovery in external demand could help offset the impact of the April 1 sales tax hike. Ministry of Finance data showed that exports rose 1.8% in March from a year earlier, following a 9.8% annual gain in the previous month.

Foreign Direct Investment in Shanghai grew 14.2% from a year earlier to $1.65 billion in March, up from an 8.5% increase in February. The rise in the city’s FDI indicated foreign investors’ confidence in the local business conditions. The gain also contrasted with the 1.47% decline in FDI in China. Buying sentiment for new homes rebounded in Shanghai last week but sales were still below the weekly average as home-seekers and real estate developers were still cautious overall. The purchases of new homes, excluding government-funded affordable housing, jumped 25% from the previous week to 183,500 square meters.