Markets clobber out of shape amid escalating Iraq crises

Pressurized by rising crude oil prices overseas, distressed markets clobbered out of shape in Friday’s trade with benchmarks ending the session with a cut of around one and a half percentage point and frontline gauges tumbled below their crucial 7,550 (Nifty) and 25,250 (Sensex) levels. Selling was both brutal and broad based as none of the sectoral indices, barring software on BSE were spared. Those counter which featured in the list of worst performers, included realty, power and infrastructure.

Earlier, markets made a positive start supported by good macro-economic data, released after market hours in last session and managed to hold the momentum till first half. India’s index of industrial production (IIP) rebounded to 13-month high of 3.4 percent in April after contracting for two consecutive months. At the same time, subdued prices of vegetables, cereals and dairy products pulled down the Consumer Price Index (CPI) to three-month low of 8.28 percent in May. Some support also came from meteorologists statement that it is too early to be worried about a below normal monsoon because monsoon showers could pick up in the coming weeks. However, reversal of trend which took place in second half of trade due to global concerns mainly weighed down sentiments.

The markets cracked further in noon trades, after European counter made a sluggish opening with CAC, DAX and FTSE all trading with a cut of around a percent in early deals, hit by UK rate hike prospects and Iraq turmoil. Meanwhile, Asian markets ended 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, though Hong Kong and Shanghai reversed morning losses following upbeat Chinese data.

Back home, domestic bourses continued to trade in the red after Indian rupee depreciated to its one month low against dollar. The rupee was trading at 59.69 per dollar at the time of equity markets closing versus its previous close of 59.25 per dollar. Meanwhile, selling in oil and gas counter too dampened the sentiments with stocks like ONGC, GAIL and Reliance edging lower as Crude oil hovered near nine-month highs early on Friday, as escalating civil war in Iraq hit risk appetite. Additionally, the Auto stocks, which gained massively in past few trading sessions, plunged during the late noon trades on the account of heavy profit booking with Tata Motors, Baja Auto and Maruti Suzuki all declining between 3-7%.

The NSE’s 50-share broadly followed index Nifty lost over a hundred points to end below the psychological 7,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by around three hundred and fifty points to end below the psychological 25,250 mark. Broader markets too butchered badly during the trade and ended the session in the red with a huge cut of around three percentage points. The market breadth remained in favour of decliners, as there were 935 shares on the gaining side against 2166 shares on the losing side while 68 shares remain unchanged.

Finally, the BSE Sensex was down by 348.04 points or 1.36% at 25228.17, while CNX Nifty settled at 7,542.10, down by 107.80 points or 1.41%.

The BSE Sensex touched a high and a low of 25688.31 and 25171.61, respectively. The BSE Mid cap index was down by 2.51%, while Small cap index down by 3.11%.   

The few gainers on the Sensex were HUL up 0.71%, Dr Reddys up by 0.51%, Infosys up by 0.48% and M&M up by 0.16%. On the flip side, the key losers were Axis Bank down by 4.48%, Hero MotoCorp down by 4.42%, Tata Steel down by 4.40%, NTPC down by 4.30% and Hindalco down by 3.94%.

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.

Meanwhile, in line with recommendations of Nachiket Mor Committee, the RBI will soon come out with India's first payment bank, which will provide deposit and payment services but wouldn’t lend, considering country’s potential for huge financial inclusion.

However, before coming out with the payment bank, the RBI will issue guidelines for it and is also in discussion with government for a framework on differentiated bank licences. Additionally, central bank’s deputy governor, H. R. Khan, highlighted that RBI was in process of issuing guidelines on universal commercial banking licences and will also be floating norms for small banks in the private sector along with mid-sized universal commercial bank.

However, the guidelines on universal commercial banking, will not be based on a single window, but it will be ‘on tap’. The RBI, in April, had given in-principle approval for setting up of banks to IDFC and Kolkata-base micro lender Bandhan. The two banks were selected from the list of 26 applicants, including state-run IFCI and private sector Anil Ambani group and Aditya Birla group, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital, among others.

Further, RBI’s deputy governor announced that the central bank was in discussion with the government to revamp inflation-indexed bonds to attract more retail investors. The bonds, introduced in June last year by the central bank, aimed at giving returns that exceed the rate of inflation to ensure that rising prices don't eat into the value of investor savings, failed to garner required interest from investors, which failed to understand its complex structure. He, further underscored that RBI was in process for improvising the features of these bonds for attracting more retail investors.

The CNX Nifty touched a high and low of 7,678.50 and 7,525.35 respectively.

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%.

European markets were trading in red; UK’s FTSE 100 down by 1.09%, Germany’s DAX down by 0.98% and France’s CAC 40 was down by 0.92%.

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.