Benchmarks end lower for third straight day; sluggish European cues weigh sentiments

Extending their southward journey for the third day in a row, Indian equity benchmarks ended the session in the red with frontline gauges ending below their crucial 25,400 (Sensex) and 7,600 (Nifty) levels as investors opted to book profit at higher levels even as the Finance Minister Arun Jaitley in his maiden budget focussed on stimulating economic growth. Earlier, markets made a cautious start and entered into red terrain ahead of budget, but showed strong recovery in the second half after Finance Minister fired on all cylinders to bolster growth by reviving the manufacturing and the infrastructure sector. In last leg of trade, markets pared entire gains amid negative opening in European markets.

Meanwhile, Finance Minister focussed on reviving structural problems of the ailing economy. FM added that fiscal prudence will lead to fiscal consolidation and aimed at a sustained growth of 7-8 percent in next three-four years. The fiscal deficit for the FY15 was seen at 4.1% of GDP and 3.6% for the next financial year and further lower at 3% in FY17. Nevertheless, lack of proper-roadmap on retrospective taxation and hope of workable solution for GST issue this year, turned out to be bit of worry for investors. On the personal taxation front, the personal income tax has been hiked to Rs 2.5 lakh from Rs 2 lakh, while for senior citizens the tax limit has been hiked to Rs 3 lakh from Rs 2.5 lakh. The Budget has also proposed hike in investment under 80C to Rs 1.5 lakh from Rs 1 lakh and exemption on self occupied property to Rs 2 lakh from Rs 1.8 lakh earlier. The PPF limit has also been hiked to Rs 1.5 lakh from Rs 1 lakh earlier.

On the global front, European markets made a sluggish start with CAC, DAX and FTSE all trading with a huge cut on account of more weak economic data and fresh worries over Portugal’s banking sector leave the recent multiyear highs on major indices looking overstated. French industrial output for May fell 1.7 per cent, much worse than the 0.2 per cent increase forecast and underlining the faltering nature of the country’s economic recovery. However, Asian markets ended mostly in the green on Thursday. 

Back home, shares of real estate companies ended higher after the Finance Minister Arun Jaitley proposed to increase interest cap limit to Rs 2 lakh from Rs 1.5 lakh on self-occupied houses and the proposal to set up real estate investment trusts. Meanwhile, Wind turbine maker gained after the budget proposed to cut customs duty on some wind power generation equipment to 5%, while power companies rose after the budget proposed a 10-year tax holiday for such companies that start operations before FY2017. Additionally, shares of defence companies and financial services companies, with interests in insurance, rose on Thursday after Jaitley raised the cap for foreign direct investment (FDI) in these sectors to 49%.

The NSE’s 50-share broadly followed index Nifty slipped by around twenty points to end below the psychological 7,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over seventy points to finish below its psychological 25,400 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of over half a percent. The market breadth remained in favor of advances, as there were 1,625 shares on the gaining side against 1,250 shares on the losing side while 88 shares remain unchanged.

Finally, the BSE Sensex lost 72.06 points or 0.28%, to 25372.75, while the CNX Nifty declined by 17.25 points or 0.23%, to 7,567.75.

The BSE Sensex touched a high and a low of 25920.46 and 25117.00, respectively. The BSE Mid cap index was up by 0.60%, while Small cap index gained 0.76%.

The top gainers on the Sensex were Hindalco up 3.16%, Tata Power up by 2.72%, GAIL up by 1.54%, Coal India up by 1.50% and HDFC up by 0.91%. On the flip side, the key losers were Hero MotoCorp down by 3.99%, TCS down by 2.06%, Bharti Airtel down by 1.71%, M&M down by 1.44% and SBI down by 1.31%.

On the BSE sectoral front, Realty up by 4.96%, Infrastructure up by 1.97%, Power up by 1.12%, Metal up by 0.94% and PSU up by 0.39% were the few gainers, while Consumer Durables down by 3.11%, Auto down by 0.91%, IT down by 0.89%, TECk down by 0.87% and Bankex down by 0.63% were the top losers in the space.

Meanwhile, concerned over the rising food inflation in the country, Food Minister Ram Vilas Paswan has asserted that the government will control price rise despite below normal monsoon. Food Minister has said that there is no shortage of supplies and the government has already initiated measures to deal with hoarders and black-marketers. To restrain rising food inflation in the country, the government has recently taken measures such as de-listing of fruits and vegetables from Agricultural Produce Marketing Committee Act, bringing onion and potato under the Essential Commodities Act, fixing minimum export price of $500 per tonne and $450 per tonne on export of onion and potato respectively. Further, an additional 50 lakh tonnes of rice has been allocated for distribution towards Below Poverty Line (BPL).

Food inflation can increase in near term as weak monsoon rains would impact the performance of Indian agriculture sector. The Indian Meteorological Department (IMD) had highlighted that southwest monsoon may remain below normal with the country likely to receive 93 percent of the long-period average (LPA) rainfall. Till June 17, the country has received 45 percent less rainfall in the first spell. WPI inflation rose to five month high at 6.01% y-o-y in the month of May as against 5.20% in April. Inflation in food articles increased by 9.50% y-o-y in May as compared to 8.64% in April.

The CNX Nifty touched a high and low of 7,731.05 and 7,479.05 respectively.

The major gainers of the Nifty were DLF up 9.31%, IDFC up by 8.10%, Tata Power up by 3.06%, Hindalco up by 2.73% and MCDOWELL-N up by 2.50%. On the flip side, the key losers were Hero MotoCorp down by 3.46%, M&M down by 2.25%, TCS down by 2.18%, Tech Mahindra down by 2.17% and SBI down by 2.07%.

European markets were trading in red; UK’s FTSE 100 down by 0.73%, Germany’s DAX down by 1.39% and France’s CAC 40 was down by 1.37%.

The Asian markets concluded Thursday’s trade in green, with Indonesian stocks rising to a one-year high and the rupiah touching the strongest level in seven weeks after Joko Widodo stated that unofficial counts at polling booths showed him winning presidential race. The Confidence among China’s bankcard owners climbed in the past month due to relatively strong travel demand. The Bankcard Consumer Confidence Index climbed 0.56 in June from a month ago to 85.27 points as expenditures on dining, entertainment and travel picked up ahead of the summer. Chinese Trade Balance fell to 31.60B, from 35.92B in the preceding month.

Bank of Korea, South Korea’s central bank, downgraded its 2014 growth outlook to 3.8% from an earlier forecast of 4%, citing the delayed recovery of consumer sentiment caused by the deadly ferry disaster. The BOK froze its benchmark interest rate for 14 straight months in July, but it was not a unanimous decision. The top central banker made dovish comments due to worries about the delayed recovery. The BOK raised concern that downside risks prevailed over the upside risks in the economy’s future growth path, citing the prolonged weakening of sentiment among consumers and companies as well as rising volatility in the won/dollar exchange rate. 

Japanese Household Confidence rose to a seasonally adjusted annual rate of 41.1, from 39.3 in the preceding month while Japan’s Core Machinery Orders fell to -19.5%, compared to -9.1% in the preceding month. Japan’s Corporate Goods Price Index rose to a seasonally adjusted annual rate of 4.6%, from 4.4% in the preceding month. Japanese tertiary industry activity index rose to a seasonally adjusted 0.9%, from -5.4% in the preceding month. Malaysian Industrial Production rose to a seasonally adjusted annual rate of 6.0%, from 4.2% in the preceding month. Philippines Industrial Production rose to a seasonally adjusted annual rate of 13.8%, from 12.9% in the preceding month whose figure was revised up from 12.8%.