Weak WPI, global cues drag benchmarks lower

Extending their previous session's southward journey, Indian equity benchmarks ended the Monday’s session in the red, pressurized by rising crude oil prices coupled with higher than expected inflation numbers. Domestic bourses made a choppy start and the indices even went on to test important psychological 25,100 (Sensex) and 7,500 (Nifty) levels, but the key gauges got some support near those intraday low levels as they trimmed their losses from thereon as investors continued hunt for fundamentally strong stocks. Some support also came on report that foreign portfolio investors (FPIs) bought shares worth a net Rs 1,099.92 crore on Friday, as per provisional data from the stock exchanges.

Overall, sentiments remained dampened after the annual rate of inflation, based on monthly WPI, came in at highest level since December 2013, at 6.01% for month of May 2014, as compared to 5.20% in April and 4.58% during corresponding month in the previous year, driven by costlier protein-based items, fuel and some manufactured products. Meanwhile, India’s services exports in the first month of 2014-15 stood at $13.63 billion, marginally lower than $14.32 billion in March 2014. However, services imports in April 2014 also were lower at $ 8.06 billion, from its previous month, when it stood at $8.49 billion in March. For the previous fiscal, India's services exports stood at $167.01 billion while imports were at $88.19 billion.

Global cues too remained sluggish with European markets opening mostly in the red with CAC, DAX and FTSE were trading in the red in early deals. Most of the Asian markets ended in the red as crude extended gains and tested nine-month highs on fears the insurgency in Iraq could spread - disrupting oil exports. Meanwhile, Japanese Nikkei stock average ended down by over a percent to two-week low, dragged lower by fears of higher materials costs.

Back home, the rupee weakened to 60 to a dollar in morning deals, its lowest in more than a month, as strong demand for the greenback from oil marketing companies weighed after global crude prices surged to nine-month highs on Friday. The rupee was at 60.06 per dollar at the time of equity markets closing as compared to 59.76 per dollar level on Friday. Selling in banking counter too dampened the sentiments after higher headline inflation data dampened the chances of RBI slashing key policy rates in its monetary policy in August. Meanwhile, global rating agency Fitch said that state-run banks are likely to face asset quality woes despite recent fall in non-performing loans. On the flip side, shares of public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC, erasing their entire early morning losses, bounced back in trade after the government said under-recovery on high speed diesel declined further to Rs 1.62 per litre from Rs 2.80 per litre earlier.

The NSE’s 50-share broadly followed index Nifty lost around ten points to end below the psychological 7,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by around forty points to end below the psychological 25,200 mark. Broader markets, however, outperformed benchmarks and ended the session in the green with a gain of around half a percent. The market breadth remained in favour of decliners, as there were 1377 shares on the gaining side against 1576 shares on the losing side while 116 shares remain unchanged.

Finally, the BSE Sensex declined by 37.69 points or 0.15%, to 25190.48, while the CNX Nifty was down by 8.55 points or 0.11%, to 7,533.55.

The BSE Sensex touched a high and a low of 25268.41 and 25063.93, respectively. The BSE Mid cap index was up by 0.35%, while Small cap index gained 0.31%.   

The top gainers on the Sensex were Gail India up by 3.95%, Sun Pharma up by 2.49%, TCS up by 2.43%, Infosys up by 1.90% and Tata Power up by 1.69%. On the flip side, the key losers were Axis Bank down by 2.58%, Mahindra & Mahindra down by 2.34%, L&T down by 2.08%, RIL down by 1.61% and Tata Motors down by 1.58%.

On the BSE Sectoral front, Realty up by 1.70%, IT up by 1.54%, Teck up by 1.24%, Consumer Durables up by 0.86% and Healthcare up by 0.73% were the top gainers, while Capital Goods down by 1.16%, Auto down by 1.07% and Bankex down by 0.52% were the only losers in the space.

Meanwhile, the global rating agency Fitch, in its latest report, has highlighted that a strong government at the Centre and stability in macro economic factors are likely to keep country's public sector banks' outlook stable in the near term.

Fitch further noted that the election of new government with a decisive mandate has abated the macroeconomic and political risks and improved business and investors’ sentiments in the country. Though, downside risks have contained, India will take time to achieve a full recovery for the economy and for the banks as well. Fitch added that long term rating of Indian PSU banks continues to be at 'BBB-'.

Indian banking industry is the most dominant segment of the country’s financial sector and plays an imperative role in the economic development of the country. Over the past two fiscal years, Indian economy has been struggling with slowdown and growth remained below 5 percent for the second time in a row at 4.7 percent during FY14. Industry, being highly correlated to economic scenario, is under pressure due to prevailing economic downturn leading to rise in NPAs of banks. The state-owned banks have been the most affected in terms of rise in their non-performing assets. The top 36 banks of India have reported gross NPAs of Rs 2,34,014 crore by March 2014, a 36 percent jump from Rs 1,71,853 crore on year-on-year basis.

The CNX Nifty touched a high and low of 7,548.60 and 7,487.55 respectively.

The major gainers of the Nifty were GAIL (India) up by 4.77%, BPCL up by 3.29%, TCS up by 2.55%, Sun Pharmaceuticals Industries up by 2.43% and DLF up by 2.42%. On the flip side, the key losers were Mahindra & Mahindra down by 2.94%, Axis Bank down by 2.54%, Larsen & Toubro down by 2.32%, HDFC down by 2.01% and Tata Motors down by 1.97%.

The European markets were trading in red, France's CAC 40 was down by 0.43%, Germany's DAX was down by 0.22% and United Kingdom's FTSE 100 was down by 0.22%.

The Asian markets concluded Monday’s trade mostly in red, as concerns over escalating violence in Iraq weighed on sentiment. Markets continued to monitor events in Iraq as militants linked to al-Qaeda threatened to take Baghdad after capturing key cities elsewhere in the country over the weekend. The number of private homes sold by developers in Singapore in May was the highest monthly figure in almost a year. Developers sold 1,470 units last month, a 0.8 percent rise compared to 1,459 units in May 2013. The level of sales was nearly double April’s figure of 749 and was the highest since June 2013 when 1,806 units were sold. Singapore has taken steps to cool the housing market, and property prices have fallen for the past two quarters. Hong Kong’s gross national income rose 3.5% year-on-year to $537.3 billion in the first quarter, while Gross Domestic Product grew 4.6% to $530 billion. Hong Kong’s GNI was larger than its GDP by $7.3 billion, representing a net external primary income inflow of the same amount, and equivalent to 1.4% of GDP in that quarter.