Post Session: Quick Review

Putting an end to eight consecutive sessions’ bull-run, local equity markets succumbing to selling pressure, concluded with cut of over half a percent which dragged both Sensex and Nifty below the psychologically crucial 26,100 and 7,800 levels respectively by close of trade as bears woke-up from their slumber. Sustained selling by funds and retail investors at higher levels on last trading session of the week in the backdrop of graft of disappointing earnings, mainly led to down-session of trade. Sentiment took a hit for the worst after, Wipro shares tanked over 4% after India's third-largest IT services exporter reported quarterly revenue growth in its key U.S. market that lagged its larger rivals. The company’s IT services revenue from the United States grew 0.8% in the June quarter from the previous quarter, lower than the 3.7% growth for Infosys and 5.5% growth for Tata Consultancy.

Besides, markets also failed to draw some relief from Finance Minister’s assurance of stable tax regime, who ruled out imposition of long term capital gain tax on debt mutual funds retrospectively, terming it as unproductive. With this, debt Mutual Funds tax changes will now be implemented from July 11, 2014 and units sold (not purchased) between April 1 and July 10 will attract the erstwhile 10 percent tax.

On the global front, Asian shares managed to end mostly higher on Friday after a mostly flat day on Wall Street, though a fresh S&P closing record and upbeat U.S. employment data underpinned sentiment. A survey on Thursday from China showing factory activity expanded at its fastest in 18 months in July also continued to give cautious markets a lift. Meanwhile, European shares were trading lower in early deals after a German business sentiment index by the Ifo think tank showed a third consecutive monthly fall. The July index slipped to a figure of 108.0, below last month's figure of 109.7.

Closer home, on the sectoral front, while stocks from Healthcare and FMCG counters showed resilience, stocks from Realty, Metal down by 2.43% and Power counters were the major losers in the space.  In stock-specific action, Retail Stocks, Trent, Shoppers Stop and Future Retail lost steam after trade minister Nirmala Sitharaman asserted that government has not decided its stance on a policy in place to allow foreign direct investment in supermarkets. Besides, shares of jewellery retailers too ended downbeat after government underscored that it does not have any current proposal to cut the record 10% import duty on gold.

On the earnings front, besides Wipro, Punjab National Bank shares lost around half a percent despite reporting better than expected Q1 net profit of Rs 1,405 crore , which was up by 10.20% on yearly basis on account of fall in provisions. In yet other disappointing earnings, Colgate-Palmolive slipped over 2% after the company reported 27.16% decline in net profit at Rs 134.91 crore for the first quarter ended June 30, 2014. The company had posted a net profit of Rs 185.22 crore during the same period of the previous fiscal on the back of 'exceptional item' of Rs 70.64 crore in the Q1 of 2013-14. The market breadth on the BSE remained in the favour of decliners; advances and declining stocks were in a ratio of 974:1939, while 97 scrips remained unchanged. (Provisional)

The BSE Sensex declined 171.30 points or 0.65% to settle at 26100.55. The index touched a high and a low of 26300.17 and 26007.31 respectively. 8 stocks gained against 22 declines on the index. (Provisional)

The BSE Mid cap and Small cap indices too ended in the red, the BSE Midcap was down by 1.28%, while the BSE Small cap index was lower by 1.94%. (Provisional) 

On the BSE sectoral front, Healthcare up by 1.72% and FMCG up by 0.74% were the only gainers, while Realty down by 2.77%, Metal down by 2.43%, Power down by 1.98%, PSU down by 1.79% and Auto down by 1.68% were the major losers in the space. (Provisional)

The top gainers on the Sensex were Sun Pharma up by 4.45%, HUL up by 2.91%, HDFC up by 2.42%, Hero MotoCorp up by 1.60% and Dr Reddys was up by 1.09%. On the flip side, Tata Motors down by 5.89%, Wipro down by 4.67%, BHEL down by 3.93%, Hindalco down by 3.29% and Tata Power down by 2.71% were the major losers. (Provisional)

Meanwhile, concerned over the cascading impact of doubling of gas rates on power tariff, urea cost and retail price of CNG and piped cooking gas, the government has planned to set up a panel to review natural gas pricing, including the UPA-approved Rangarajan Formula. The panel will be headed by former power minister Suresh Prabhu and submit its report by August 31.

The government doesn't want to add to already high inflation, which may accelerate due to a below-normal monsoon and a spike in oil prices due to geo-political tensions. If the Rangarajan formula is implemented without changes, power tariff will rise by about Rs 2 per unit and CNG rates will jump by over Rs 12 per kg in national capital Delhi. Earlier, the government had decided to implement Rangarajan formula from April 1 but with general elections being declared it was postponed by three months to July 1. Further, new government had on June 25 deferred implementation of the Rangarajan formula and asked gas producers to keep selling at the old price of $4.2 per unit until the end of September.

In June 2013, the previous government had approved the Rangarajan formula under which domestically produced gas was to be priced at an average of the price prevailing at international gas trading hubs and the actual cost of importing liquid gas (LNG). Under the Rangarajan formula, the gas prices were to double to $8.8 per million British thermal unit from the current price at $4.20 per mbtu that would have put excessive burden on consumers. Gas prices were to be revised on the quarterly basis and price for each quarter, prices were to be calculated based on the 12-month trailing average price with a lag of one quarter. Natural gas pricing formula was planned to be implemented for a period of five years. The prices were to be uniformly implemented to all public and private sector producers such as ONGC and Reliance Industries. Further, the Rangarajan formula was expected to benefit the government by around $2.2 billion incremental revenue by way of higher taxes.

India VIX, a gauge for markets short term expectation of volatility declined 3.39% at 14.22 from its previous close of 14.72 on Thursday. (Provisional)

The CNX Nifty ended lower by 40.15 points or 0.51% to settle at 7,790.45. The index touched high and low of 7,840.95 and 7,748.60 respectively. 16 stocks ended in the green against 34 stocks ending in red. (Provisional)

The major gainers of the Nifty were Sun Pharma up by 4.62%, Lupin up by 3.07%, HUL up by 2.97%, Asian Paints up by 2.89% and HDFC was up by 2.49%. On the flip side, the key losers were Tata Motors down by 5.77%, Cairn down by 4.43%, DLF down by 4.42%, Wipro down by 4.41% and Jindal Steel down by 4.10%. (Provisional)

European markets were trading mostly in the red; Germany's DAX was down by 0.31% and France's CAC 40 was down by 0.67%, while UK's FTSE 100 was up by 0.04%.

The Asian markets concluded Friday’s trade mostly in green, with Tokyo up as inflation data was in line with expectations. A survey on Thursday from China showing factory activity expanded at its fastest in 18 months in July also continued to give cautious markets a lift. However, ongoing unrest in the Middle East and Ukraine continued to keep investors alert for any developments that could have a wider impact on risk sentiment and markets. The International Monetary Fund lowered its outlook for global growth this year as expansions weaken from China to the US and military conflicts raise the risk of a surge in oil prices. The IMF stated that China’s economy is seen expanding 7.4% this year, less than the 7.5% forecast in April. The growth in the world’s second-largest economy will slow to 7.1% next year, less than its forecast in April for 7.3%. The IMF report reflected a world rattled by geopolitical risks that have risen since April, including the potential for sharply higher oil prices because of recent Middle East unrest.

Japan’s National Core CPI fell to a seasonally adjusted 3.3%, from 3.4% in the preceding month while Tokyo’s core CPI, which excludes fresh food costs, remained unchanged at an annualized rate of 2.8%. Singaporean Industrial Production rose to an annual rate of 0.4%, from -1.9% in the preceding month whose figure was revised up from -2.5%.