Benchmarks extend southward journey for third day in a row

Extending their southward journey for third straight day, Indian equity benchmarks ended the volatile day of trade in red on Friday. The key gauges, lacking any significant upside triggers, displayed lackluster performance through the day. However, the psychological 7,500 (Nifty) and 25,100 (Sensex) levels proved as strong supports as the key gauges managed to settle above those levels by the end. Sentiments remained down-beat with United States announcing to send upto 300 military advisers to help Iraq fight insurgents of the Islamic State of Iraq and the Levant (ISIS). The United States will also lead a diplomatic effort to work with countries in the region to bring stability to Iraq.

Sentiments also remained dampened as investors remained cautious on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 420.51 crore on June 19, 2014, as per provisional data from the stock exchanges. Also, a weather office data has showed that rainfall was 45 per cent below average for the week ended June 18, compared with 48 percent below average the previous week. Though, the monsoon has covered half of India’s landmass four days behind the usual schedule. However, losses remained capped as some comfort came in with Petroleum Minister Dharmendra Pradhan’s statement that fuel supplies will not be impacted by the conflict in Iraq, nation’s second largest crude oil supplier. He has said that crude supplies to India from Iraq come from the Basra oilfields which are situated well away from the conflict zone in the north-eastern part of Iraq and loading of ships continues normally. Also, a survey has stated that India Inc believes the country's economy is likely to grow 5-6 per cent in the current financial year.

On the global front, European markets made a positive opening as dovish comments from Federal Reserve Chairwoman Janet Yellen earlier in the week continued to push indexes closer to multiyear highs. Asian markets ended mostly in the red with the decline in materials and technology stock following the deteriorating situation in Iraq.

Back home, Oil& Gas counter edged lower ahead of Oil Minister Dharmendra Pradhan's meeting with Prime Minister, Narendra Modi on gas pricing issue. On the flip side, shares of gems and jewellery companies viz. Rajesh Exports, Gitanjali Gems, Tara Jewels, C Mahendra Exports, Shrenuj & Co, Tribuhovandas Bhimji Zaveri (TBZ) and Shree Ganesh Jewellery House edged higher after the Gems and Jewellery Export Promotion Council (GJEPC) statement that gems and jewellery exports is likely to rise to $44 billion during this financial year if there are positive policy changes.

The NSE’s 50-share broadly followed index Nifty declined by around thirty points to end below the psychological 7,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by above ninety points to end below its crucial 25,200 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around half a percent. The market breadth remained in favor of decliners, as there were 1,297 shares on the gaining side against 1,671 shares on the losing side while 97 shares remain unchanged.

Finally, the BSE Sensex plunged by 96.29 points or 0.38%, to 25105.51, while the CNX Nifty declined by 29.25 points or 0.39%, to 7,511.45.

The BSE Sensex touched a high and a low of 25276.31 and 25056.18, respectively. The BSE Mid cap index was down by 0.39%, while Small cap index lost 0.83%.  

The top gainers on the Sensex were Axis Bank up by 1.35%, Bajaj Auto up by 0.70%, Bharti Airtel up by 0.52%, TCS up by 0.50% and Infosys up by 0.10%. On the flip side, the key losers were Mahindra & Mahindra down by 2.87%, Tata Power down by 2.74%, Hindalco Inds down by 2.18%, Sun Pharma down by 2.01% and SSLT down by 1.08%.

On the BSE Sectoral front, Consumer Durables up by 3.47%, Realty up by 0.52%, Teck up by 0.06% and IT up by 0.04% were the only gainers in the space, while Healthcare down by 0.95%, Auto down by 0.91%, PSU down by 0.87%, Capital Goods down by 0.84% and Power by 0.78% were the top losers in the space.

Meanwhile, global rating agency Moody's underscored that sovereign credit outlook for India, would not depend on whether the Narendra Modi-led government keeps fiscal deficit target for 2014-15 below or above 4.1% of GDP set by the previous government, but will be based on measures outlined in next month's full budget to address lower revenue base, high current expenditure and exposure to global commodity prices. In a report titled, ‘‘frequently asked questions on India's fiscal position and the forthcoming budget', Moody’s underscored that India’s excessive budget increases macroeconomic imbalances and thus exposes the economy to shocks. It further warned that in absence of measures to reduce the fiscal deficit, the future high-growth rates many forecast for India may not be achieved.

The rating agency pointed that July budget will indicate whether fiscal constraints on India's sovereign credit profile will ease over the coming years. Moody's presently has assigned a 'Baa3' rating to India, with a stable outlook.

In, report that outlines the reasons behind India's high fiscal deficits, provides a comparison between recent fiscal developments in India and in other similarly rated countries Moody's noted that other countries with low per capita income had avoided deficits as large as India's, suggesting that fiscal discipline could improve budget outcomes despite structural challenges. Moody’s, blamed large population and low per capita income levels of the country as some of the reasons behind country’s higher fiscal deficit. It cited that low income levels was the factor for limiting the government's tax revenue base and at the same time driving socio-political pressure to increase government spending on subsidies and economic development.

The CNX Nifty touched a high and low of 7,560.55 and 7,497.30 respectively.

The major gainers of the Nifty were United Spirits up by 3.61%, Cairn India up by 1.32%, Axis Bank up by 1.26%, Kotak Mahindra Bank up by 1.23% and DLF up by 1.06%. On the flip side, the key losers were Mahindra & Mahindra down by 3.07%, Tata Power Company down by 2.69%, Hindalco Industries down by 2.53%, BPCL down by 2.49% and Sun Pharmaceuticals Industries down by 1.95%.

Most of the European markets were trading in green, Germany's DAX was up by 0.24% and United Kingdom's FTSE 100 was up by 0.28%, while France's CAC 40 was down by 0.01%.

The Asian markets concluded Friday’s trade mostly in red, with Nikkei ending slightly lower as investors tended to lock in gains from recent surges, despite optimism over the global economy. Moody’s Investors Service stated that the prolonged effects of China’s property market slowdown could hurt economic growth, but reforms to balance the economy will offset the negative impact. China’s gross domestic product growth may slow to 5-6 percent from 7-7.5 percent this year if property sales and building construction both fall by 10%. Indonesia’s outgoing finance minister stated that the next president will need to discard election rhetoric and focus on raising fuel prices and luring foreign investment to address the budget and current- account deficits. Southeast Asia’s biggest economy is struggling to contain a persistent current-account deficit that helped make the rupiah Asia’s worst performer last year, while ballooning fuel subsidy costs have increased the 2014 budget shortfall and forced a reduction in state spending. Japan’s All Industries Activity Index fell to a seasonally adjusted -4.3%, from 1.5% in the preceding month.