Benchmarks reverse gears; slip into negative territory on macroeconomic worries

Local equity markets, reversing gears slipped into negative territory, as increasing oil prices triggered macroeconomic worries for India which imports majority of its crude oil requirements. Increase in crude oil prices have raised concerns of increase in fuel price inflation and increase in India's current account deficit and fiscal deficit. The rupee pared some early gains, with the domestic currency trading at 60.06, also weighed on the sentiment. However, gains in information technology (IT), Consumer Durables and Healthcare stocks have restrained the market to extend losses. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 366.18 crore on June 18, 2014. Meanwhile, IT stocks gained after the US Federal Reserve on June 18, 2014 gave a positive assessment of the world's largest economy and committed to retaining its accommodative monetary policy. Moreover, Railways related stocks were up as the commerce and industry ministry has initiated the exercise to allow 100% FDI in several segments of railways, moving beyond its earlier plan to open select sectors. On the other hand, selling was seen in oil & gas stocks after a report said that the government could allow higher prices on incremental gas output.

In scrip specific development, shares of Engineers India (EIL) rallied after the company won its largest ever consultancy contract for a 20 million tonne oil refinery in Nigeria. Further, Crompton Greaves gained after a report said that the company has put up a part of its land parcel at LBS Marg in the eastern suburbs of Mumbai city for sale. On the flip side, Kotak Mahindra Bank was trading down by 2.33% after Reserve Bank of India (RBI) said in a statement that further purchases by foreign institutional investors (FIIs) in the company need RBI nod, as foreign holding reached trigger limit.

On the global front, Asian markets edged higher on the optimism of Wall Street after the US Federal Reserve gave a positive assessment of the world's largest economy and committed to retaining its accommodative monetary policy. Back home, the market breadth on BSE was positive, out of 2278 stocks traded, 1147 stocks advanced, while 1049 stocks declined on the BSE.

The BSE Sensex is currently trading at 25223.22 down by 23.03 points or 0.09% after trading in a range of 25425.85 and 25223.20. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap and Small cap index were trading up by 0.01% and 0.22% respectively.

The gaining sectoral indices on the BSE were, IT up by 0.79%, Teck up by 0.70%, Consumer Durables up by 0.63%, Healthcare up by 0.39% and Capital Goods up by 0.24%. While, Oil & Gas down by 1.67%, PSU down by 1.16%, Metal down by 0.68%, Bankex down by 0.21% and India Infrastructure Index down by 0.17% were the losing indices on BSE.   

The top gainers on the Sensex were Infosys up by 1.51%, Hindustan Unilever up by 1.07%, Wipro up by 1.03%, Dr Reddys Lab up by 0.69% and BHEL up by 0.68%. On the flip side, ONGC down by 4.60%, Hindalco down by 1.56%, Maruti Suzuki down by 1.12%, Coal India down by 1.04% and Tata Steel down by 0.78%.

Meanwhile, the government has started the exercise to relax foreign investment norms in the railways sector by permitting 100 percent Foreign Direct Investment (FDI) in high-speed train systems and dedicated freight lines.

The Department of Industrial Policy and Promotion (DIPP) under the Commerce and Industry Ministry has circulated a draft cabinet note on the matter for inter-ministerial consultation. After receiving the comments from different ministries, the note will be placed before the Union Cabinet for approval. Besides, there is also a proposal to allow foreign investment in sub-urban corridors and freight lines connecting ports, mines and power installations. However, the government has decided not to open existing passenger and freight network operations to foreign investors.

Railways is an important sector for India and has the potential to raise India's economic growth by over one percent. Therefore, it has become imperative to modernise, strengthen and expand the Indian railway network which would require very large capital investments. However, presently, there is a complete ban on any kind of FDI in the railways sector except mass rapid transport systems. The move will help to attract large foreign investments which in turn will provide impetus to Indian railways sector.

The CNX Nifty is currently trading at 7,545.80 down by 12.40 points or 0.16% after trading in a range of 7,606.45 and 7,544.05. There were 23 stocks advancing against 27 declining on the index.

The top gainers of the Nifty were Infosys up by 1.59%, HUL up by 1.16%, Wipro up by 1.07%, Tech Mahindra up by 1.02% and Tata Motors up by 0.81%. On the flip side, ONGC down by 4.68%, MCDOWELL-N down by 4.51%, Kotak Bank down by 2.33%, BPCL down by 1.66% and Hindalco down by 1.47% were the major losers on the index.

Most of the Asian equity indices were trading in green; Nikkei 225 soared 1.55%, Hang Seng increased by 0.30%, Taiwan Weighted was up by 0.37%, KOSPI Index up by 0.02%, Straits Times surged 0.09% and FTSE Bursa Malaysia KLCI up by 0.05%. On the flip side, Jakarta Composite contracted 0.29% and Shanghai Composite down by 0.49%.