Post Session: Quick Review

The first session of new F&O series and last trading session of the week turned out to be tormenting for local equity markets, which witnessing aggressive selling pressure in the last hour of trade, ended with colossal losses of over 1.50% that dragged Sensex and Nifty below the psychologically crucial 25,500 and 7,650 levels respectively. Mixed economic report combined with daunting global set-up mainly weighed on market sentiment. On the macro-front, in encouraging sign, while business activity in Indian manufacturing sector, improving for the ninth consecutive month, expanded at its quickest pace in 17 months, i.e. since February 2013, for the month of July on account of flood of new orders from both domestic and external sources, core sector output in the month of June surged to nine-month high at 7.3% mainly driven by healthy production growth in coal, crude oil, cement and electricity. However, overall sentiment remained downbeat after India’s fiscal deficit crossed half the budget estimate (BE) for 2014-15 in the first three months of the financial year, with Finance Minister Arun Jaitley terming India’s fiscal deficit target as 'daunting'. In a cause of concern, Fiscal deficit at the end Q1FY15 was pegged at 56.1% of the budget estimate of Rs 5.31 lakh crore for the full fiscal year as growth in revenue receipts slowed and interest payments rose. Additionally, sentiments also failed to draw any solace from diesel price being hiked by 56 paise per litre, in a move which would reduce the under-recovery of the diesel. Selling pressure, besides being aggressive also turned out to be broad-based, to which even broader indices succumbed as both Mid-cap and Small-cap index went home with loss of around three fourth of a percent. For the week, both Sensex and Nifty nursed heavy losses of over 2%. On the broader front, while CNX Midcap edged lower 0.30% and BSE Midcap index plunged by over 1.50%.

Negative global set-up mainly endorsed the underlying weakness of local equity markets. On the global front, Asian shares stumbled on Friday after a month-end swoon on Wall Street, even as activity in China's factory sector quickened to a 27-month high in July, a government survey showed on Friday, adding to signs that the economy is regaining momentum after a bust of government stimulus measures. Meanwhile, European equity indexes fell for a third day on Friday, weighed by gloomy corporate outlooks and the prospect of U.S. jobs data, which is expected to shed light on the chances of an early end to the Federal Reserve's ultra-easy monetary policy.

Closer home, in the broad-based selling pressure, all the sectoral indices succumbed to selling pressure, nevertheless, prominent losers turned out to be stocks from Consumer Durables, Oil and Gas and Metal counters. Besides, Auto stocks also collapsed after reporting July sales figures, while banking stocks too were tanking for yet another session after government underscored it was mulling to divest stake in public sector banks in November this year. However, telecom stocks rang loud during the session after Telecom Regulatory Authority of India (Trai) chairman Rahul Khullar said he sees mobile call rates rising by 8-9% over the year as phone companies weed out freebies.

On the earnings front, Union Bank of India rallied over 3% after the bank reported better than expected 19% rise in Q1 net profit from Rs 560 crore a year earlier, owing to lower provisions for bad loans and higher net interest income. On the flip side, JSW Steel lost over half a percent despite turning black for quarter ended June 30, 2014. The market breadth on the BSE remained in the favour of decliners; advances and declining stocks were in a ratio of 1119: 1759, while 117 scrips remained unchanged. (Provisional)

The BSE Sensex declined 414.13 points or 1.60% to settle at 25480.84. The index touched a high and a low of 25862.68 and 25459.13 respectively. 5 stocks gained against 25 declines on the index. (Provisional)

The BSE Mid cap and Small cap indices too ended in the red, the BSE Midcap was down by 80%, while the BSE Small cap index was lower by 0.90%. (Provisional) 

On the BSE sectoral front, Consumer Durables down by 3.27%, Oil and Gas down by 2.16%, Metal down by 1.90%, Capital Goods down by 1.90% and Power down by 1.87% were the major losers in the space, while there were no gainers on the sectoral space. (Provisional)

The top gainers on the Sensex were Maruti Suzuki up by 2.24%, HUL up by 1.53%, Bharti Airtel up by 1.23%, ICICI Bank up by 0.27% and SBI was up by 0.11%. On the flip side, Hindalco down by 3.60%, Gail India down by 2.94%, Cipla down by 2.91%, RIL down by 2.88% and Tata Power down by 2.81% were the major losers. (Provisional)

Meanwhile, business activity in Indian manufacturing sector, improving for the ninth consecutive month, expanded at its quickest pace in 17 months, i.e. since February 2013, for the month of July on account of flood of new orders from both domestic and external sources. The HSBC Manufacturing Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, rose to 53.0 in the month of July from 51.5 in June. The reading, which remained above the crucial 50 mark for the ninth consecutive month that separates growth from contraction, signaled a solid improvement in business conditions.

A surge in new orders in July helped drive the solid improvement in business conditions. The new orders sub-index soared to 55.9, it’s highest since February last year, which was the biggest monthly jump in the measure of eight months. Although, all the three monitored categories witnessed a rise in output and order flows, intermediate goods sub-sector indicated marked rise of new work intakes.

Encouraged over the growing new work, Indian manufacturers also raised their quantity of purchases in the reported month. Buying activity increased at the fastest pace since February 2013 leading to high pre-production inventories. However, the rate of accumulation was moderate overall. Likewise, stocks of finished goods expanded fractionally in July. In both cases, inventory accumulation was recorded in the consumer and intermediate goods sectors, while stocks were depleted in the capital goods category.

However in a sign of caution, the survey suggested steep rise in input prices on account of higher price paid for metals, plastics, textiles, packaging, food and energy, with the rate of cost inflation being at the quickest since February, thereby indicating inflation may remain elevated in coming months as companies seek to pass on the higher costs although that is not something they did to a large extent last month.

The survey further points that though the pace of recovery would be encouraging, but steep rise in input price would be cause of worry for Reserve Bank of India (RBI), which will review its third bi-monthly policy on August 5, 2014. its last policy review in June, the RBI had kept the repo rate -- at which it lends to the banks -- unchanged at 8%.

India VIX, a gauge for markets short term expectation of volatility declined 0.46% at 13.82 from its previous close of 13.82 on Thursday. (Provisional)

The CNX Nifty ended lower by 118.40 points or 1.54% to settle at 7,602.60. The index touched high and low of 7,716.70 and 7,593.90 respectively. 10 stocks ended in the green against 40 stocks ending in red. (Provisional)

The major gainers of the Nifty were Bank of Baroda up by 2.43%, Maruti Suzuki up by 2.18%, DLF up by 2.14%, Ultratech Cement up by 2.11% and Bharti Airtel was up by 1.74%. On the flip side, the key losers were Hindalco down by 3.81%, Reliance Industries down by 3.03%, Sun Pharma down by 3.02%, Cipla down by 3.01% and Jindal Steel down by 3.00%. (Provisional)

European markets were trading in the red; Germany's DAX was down by 1.40%, France's CAC 40 was down by 2.20% and UK's FTSE 100 was down by 1.36%.

The Asian markets concluded Friday’s trade in red, with Hong Kong benchmark index ending eight-day winning streak, amid a rout that saw a gauge of worldwide equities slump the most in six months. Activity in China's vast factory sector expanded at the fastest pace in 27 months in July, while industry surveys across Asia showed a pick-up in export orders that hinted at a long-awaited revival in global trade. China's official manufacturing purchasing managers' index (PMI) rose to 51.7 in July - the strongest since April 2012 and up from 51 in June. The upbeat result was echoed in the HSBC/Markit China measure of manufacturing which climbed to an 18-month peak of 51.7, from June's 50.7. South Korean Trade Balance fell to a seasonally adjusted 2.52B, from 5.50B in the preceding quarter. South Korean CPI fell to a seasonally adjusted annual rate of 1.6%, from 1.7% in the preceding month. Thai CPI fell to a seasonally adjusted annual rate of 2.16%, from 2.35% in the preceding month.