Post Session: Quick Review

Witnessing correction for second consecutive session, local equity markets ended Monday’s trade with losses of over half a percent, which dragged Sensex and Nifty below their psychologically crucial 26,000 and 7,750 levels respectively. Heavy drubbing in blue chip stocks, like Reliance Industries (RIL), HDFC twins, ICICI Bank, among others mainly led to downtrend of markets for yet another session despite slew of good earnings from industry’s big-wigs like HUL, Bank of Baroda among others. Meanwhile, broader indices too contributed to this gut and ended the session with losses in the range of 0.45%-0.75%.

Profit-booking in F&O expiry week ahead of holiday mainly took a toll on markets in absence of any positive trigger and mixed global cues. In the extremely disappointing session of trade, markets kept losing ground and halted only at day’s low point. There came no respite from reports of Moody’s maintaining stable outlook on country’s sovereign credit rating. Brokerage firm Morgan Stanley expects country’s sovereign rating to remain stable over the next twelve months period and asserted that a decisive and timely action by the government to reduce the fiscal deficit through lower expenditure, moderate rural wage growth in line with productivity, and reduced energy subsidies would trigger a rating upgrade for the country.

On the global front, Asian shares ended mixed early Monday, with Japan and Australia nearing the break-even mark. Chinese shares ended around seven-month high on Monday on fresh signs of a recovering economy and growing expectations that Beijing will accelerate reforms in the country's banking sector. Official data released Sunday showed that profits at China's largest industrial firms rose 17.9% in June from a year earlier, up sharply from an 8.9% rise in May. Meanwhile, European stocks were trading mostly higher in early trade on Monday, regaining their poise after a drop in the previous session, with Ryanair surging 5% after the airline boosted its annual profit outlook.Closer home, in the broad-based selling pressure, most of the sectoral indices on BSE capitulated to selling pressure, however stocks from Information Technology, Fast Moving Consumer Goods and healthcare counters outperformed as traders adjusted their portfolio in the favour of defensives ahead of F&O expiry. Gains of HUL, otherwise mainly supported FMCG counter, while depreciation of rupee worked in the favour of IT stocks. On the flip side, stocks from Realty, Metal and Public Sector Undertaking (PSU) counters were the worst performers of the session.

On the earnings front, while HUL shares spurted 4% on reporting better than expected 4% rise in Q1FY15 net profit, Dabur India slid over half a percent after consolidated net profit increased by 13% at Rs 211 crore against Rs 186 crore, Y-o-Y. Meanwhile, Central Bank of India rallied over 7% on reporting around nine fold jump in its net profit for the quarter ended June 30,2014, Bank of Baroda strengthened over half a percent registered a rise of 16.61% in its net profit at Rs 1361.88 crore as compared to Rs 1167.87 crore for the quarter ended June 30, 2013. The overall market breadth on BSE ended in the favour of declines which thumped advances in the ratio of 1665:1189; while 115 ended unchanged. (Provisional)

The BSE Sensex ended at 25991.23, down by 135.52 points or 0.52% after trading in a range of 25900.25 and 26181.83. 9 stocks advanced against 21 stocks declining ones on the index. ( Provisional)

The broader indices too concluded with sharp losses; the BSE Mid cap index was down by 0.42%, while Small cap index down by 0.70 %.( Provisional)

The gaining sectoral indices on the BSE were Consumer Durables up by 0.57%, FMCG up by 0.38%, IT up by 0.37%, TECK up by 0.18% while, Realty down by 2.69%, Metal down by 1.51%, Oil & Gas down by 1.29%, PSU down by 1.07%, Auto down by 0.78% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hindustan Unilever up by 3.69%, Sun Pharma Inds. up by 1.33%, BHEL up by 1.17%, Wipro up by 0.86% and Dr. Reddys Lab up by 0.52%. On the flip side, Coal India down by 3.14%, Hindalco down by 2.06%, Tata Motors down by 1.89%, Tata Steel down by 1.72% and ICICI Bank down by 1.65% were the top losers. (Provisional)

Meanwhile, in a bit of relief if not cheer, brokerage firm Morgan Stanley expects country’s sovereign rating to remain stable over the next twelve months period. However, the brokerage firm asserted that a decisive and timely action by the government to reduce the fiscal deficit through lower expenditure, moderate rural wage growth in line with productivity, and reduced energy subsidies would be required to trigger an upgrade.

India's sovereign is currently rated ‘BBB-‘by all rating agencies, barring S&P which has a negative outlook for India. While the rating agency has not detailed specific triggers for a downgrade, it is looking for stronger growth, fiscal account consolidation and lower inflation to revise the outlook to stable.
Meanwhile, to score well on Morgan Stanley forecast, the country needs to show considerable improvement in inflation, fiscal balance and current account deficit to potentially be upgraded.

Morgan Stanley expects India's inflation rate to be reduced to 6.5% over the next 12 months. While this is an improvement from the current level, it still compares unfavorably with the average of 4.8% for ‘BBB-rated’ EM sovereign and average of 2.6% for ‘A and above’ EM sovereign rated countries. Similarly, India's fiscal balance expectation of -6.4% of GDP by this fiscal compares unfavourably with EM sovereigns rated BBB (-1.9% of GDP) and A (-2.1% of GDP).
Additionally, the report by brokerage firm also underscored that the country could boost productivity and improves its sovereign rating by targeting factors like reducing inflation, cutting the fiscal deficit, and encouraging FDI inflows.

The CNX Nifty ended at 7748.70, down by 41.75 points or 0.54% after trading in a range of 7722.65 and 7799.90. 14 stocks advanced against 36 stocks declining one’s on the index. (Provisional)

The top gainers on Nifty were Hindustan Unilever up by 3.47%, HCL Tech. up by 2.02%, Cairn India up by 1.96%, PNB up by 1.74% and BHEL up by 1.23%. On the flip side, DLF down by 5.08%, Coal India down by 3.36%, BPCL down by 2.84%, Ambuja Cement down by 2.76% and Ultratech Cement down by 2.63% were the top losers. (Provisional)

European Markets were trading mostly positive; with UK’s FTSE 100 rising by 9.86 points or 0.15% to 6,801.41; France’s CAC gaining by 14.97 points or 0.35% to 4,345.52, however Germany’s DAX was trading lower by 10.76 points or 0.11% to 9,633.25

The Asian markets concluded Monday’s trade mostly in green, with China taking the lead after data showed a robust jump in profits earned by industrial firms in the world’s second-largest economy. Indonesia market was closed today on account of ‘Idul Fitri’ festival holiday while Malaysia and Singapore market were closed today on account of ‘Hari Raya Puasa’ holiday. The National Bureau of Statistics stated that profits earned by Chinese industrial firms rose 17.9% in June to 588.08 billion yuan ($94.98 billion) from a year earlier, up sharply from an 8.9% rise in May. The recent data have reinforced market expectations that the Chinese economy is powering through its recent soft patch as the government uses targeted stimulus measures to support growth. China has cut reserve requirements for some banks, accelerated infrastructure spending and loosened property curbs as Premier Li Keqiang seeks to keep growth from falling below his 7.5% target. Japan’s National Core CPI fell to a seasonally adjusted 3.3%, from 3.4% in the preceding month.