Post Session: Quick Review

Correction which was long overdue, finally came to Dalal Street on final trading session of the week, with the trigger turning out to be boiling crude oil prices overseas, which sapping the global risk appetite, led to massive losses of around 1.5% for Indian equity markets on Friday.  While, good macro-economic data, released after market hours previous day, managed to hold the benchmarks’ neck in green for the first half of the session, the second half was dominated by global concerns which underpinned market-participants to wind up their position on last trading session of the week, leading to weekly losses of over half a percent for front-line indices. On the macro-front, in a relief for government, April IIP surged at thirteen months high by expanding by robust 3.4% and May CPI eased to three months low of 8.28% as compared to 8.59% in April. Meanwhile, crude oil prices inched towards $114 a barrel and hit a nine-month high, as supply disruption fears took centre stage with the United States threatening military action in Iraq as Sunni Islamist militants pushed towards Baghdad. 

By close of trade, both Sensex and Nifty settled below the crucial 25,300 and 7,550 levels respectively. Broader indices too succumbing to brutal selling pressure, settled with a cut in the range of 2%-3%. For the week too broader indices nursed heavier losses than frontline indices, with CNX Midcap index plunging over 2.5% and BSE Midcap index dipping over a percent.

On the global front, Asian markets settled mixed on Friday following a Wall Street sell-off, as oil prices hit a nine-month high on concerns about the growing crisis in Iraq but Hong Kong and Shanghai reversed morning losses following upbeat Chinese data. In China the government said industrial output and retail sales accelerated in May, with consumption increasing at its fastest pace since December, suggesting renewed strength in the Asian giant. Additionally, European shares were lost into sea of red, hit by UK rate hike prospects, Iraq turmoil. British property companies led a pullback in European indexes on Friday after the Bank of England (BoE) flagged concerns about loose mortgage lending and raised the prospect of a rate hike.

Closer home, amidst across the board selling pressure, stocks from Realty, Power and India Infrastructure index were the prominent losers on BSE sectoral front. On the flip side, stocks from Information Technology (IT) counter were the only exceptions in trade, as Rupee depreciated to one month low level on Friday. Meanwhile, shares in state-owned oil marketing companies--Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOC)--took a hit for the worst on account of rising international crude oil prices. Besides, banking shares also witnessed heavy drubbing on concerns of RBI not easing key policy rates in its upcoming monetary policy meeting in August, given that higher crude oil prices poses an upwards risk to inflation. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 943:2152, while 74 scrips remained unchanged. (Provisional)

The BSE Sensex lost 348.04 points or 1.36% to settle at 25228.17. The index touched a high and a low of 25688.31 and 25171.61 respectively. Among the 30-share Sensex, just 4 stocks gained, while 26 stocks declined. (Provisional)

The broader indices too struggled to get any traction and ended in the red; the BSE Mid cap index was down by 2.51% and Small cap index was down by 3.11%. (Provisional)

On the BSE Sectoral front, Realty down by 5.24%, Power down by 3.53%, Infrastructure down by 3.37%, PSU down by 3.30% and Consumer Durables down by 3.21% were the top losers while, IT up by 0.13%, was the lone gainer in the space. (Provisional)

The gainers on the Sensex were HUL up 1.50%, M&M up by 0.36%, Dr Reddys up by 0.18% and Infosys up by 0.18%. On the flip side, the key losers were Tata Steel down by 4.81%, Axis Bank down by 4.70%, Hero MotoCorp down by 4.56%, NTPC down by 4.40% and Hindalco down by 3.91%. (Provisional)

Meanwhile, in order to make Inflation-linked bonds more attractive for retail investors, the Reserve Bank of India (RBI) is likely to revamp the structure of inflation-indexed bonds (IIBs). The RBI’s Deputy Governor H R Khan has stated that the central bank has circulated a proposal to government containing measure on how to revamp IIBs structure to attract maximum investments.

The RBI’s Deputy Governor asserted that as retail investors want regular payouts from their investments in IIBs, the proposed features will help to provide regular income and higher tax-adjusted returns to investors. The central bank also proposed to offer a quarterly interest payout on inflation-indexed bonds as against the present interest payment on maturity.

In spite of the RBI’s various measure to enhance investments in IIB’s, recently launched Inflation Indexed National Savings Securities-Cumulative (IINSS-C) has failed to attract retail investors. The factors like lack of awareness among investors, the option of only cumulative interest payment (interest is cumulated and paid on maturity-10th year), absence of tax benefits than other competing investment avenues and recent fall in retail inflation can be attributed to the poor response. 

However, to attract maximum investments, the RBI has already doubled the maximum limit for investment in inflation-indexed bonds to Rs 10 lakh per annum for individuals. Further, the investment limit for institutions like Hindu undivided family (HUF), Charitable Trusts, Education Endowments and similar institutions was increased from Rs 5 lakh to Rs 25 lakh per annum.

India VIX, a gauge for markets short term expectation surged 5.08% at 17.76 from its previous close of 16.92 on Thursday. (Provisional)

The CNX Nifty declined 107.80 points or 1.41% to settle at 7,542.10. The index touched high and low of 7,678.50 and 7,525.35 respectively. Out of 50 stocks in Nifty, 8 stocks ended in the green and 42 in red. (Provisional)

The major gainers of the Nifty were HCL Tech up 1.99%, HUL up by 1.37%, Tech Mahindra up by 0.79%, Infosys up by 0.38% and M&M up by 0.35%. On the flip side, the key losers were DLF down by 8.07%, BPCL down by 5.02%, NMDC down by 5.01%, Hero MotoCorp down by 4.90% and Tata Steel down by 4.63%. (Provisional)

European markets were trading in red; UK’s FTSE 100 down by 0.91%, Germany’s DAX down by 0.73% and France’s CAC 40 was down by 0.83%.

The Asian markets concluded Thursday’s trade mostly in red, tailing cues from Wall Street where stocks ended weak overnight after the World Bank lowered its global growth forecast. Indonesia’s central bank will review interest rates today whereby Bank Indonesia is expected to keep its benchmark policy rate unchanged in order to maintain economic growth amid growing pressure on its exports. Japan’s currency held gains amid speculation that BOJ will refrain from expanding stimulus at a meeting that started today, after the European Central Bank introduced negative rates last week. Japan’s Core Machinery Orders fell to -9.1% compared to 19.1% in the preceding month.