Benchmarks make gap-down start on geo-political worries

Pressurized by weak global cues, Indian equity benchmarks have made a gap-down start and are witnessing blood-bath in early deals on Friday with front line gauges declining below their crucial 25,400 (Sensex) and 7,600 (Nifty) levels. Sentiments also remained somber after domestic rating agency India Ratings said that the government will not be able to meet its ambitious fiscal deficit target of 4.1 percent. However, the rating agency has increased its FY15 GDP growth estimate marginally to 5.7 percent from the earlier 5.6 percent, largely on the back of an expected improvement in the industrial activity.

Global cues remained sluggish with the US markets ending lower again after a day of consolidation. The early gains on the back of an unexpected decrease in initial jobless claims in the week ended August 2nd, faded on speculation about the Federal Reserve raising interest sooner than anticipated. The Asian markets too were trading in the red at this point of time with some of the indices witnessing cut in excess to two percent on growing fears that geopolitical tensions in Ukraine and the Middle East would sap global growth. Japanese market was leading the losers list ahead of the nation’s central bank concluding a policy meeting today.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include realty, power and capital goods. The broader indices too were trading in-line with benchmarks, while the market breadth on the BSE was negative; there were 452 shares on the gaining side against 1416 shares on the losing side while 42 shares remain unchanged.

The BSE Sensex opened at 25406.87; around 183 point lower compared to its previous closing of 25589.01, and has touched a high and a low of 25406.87 and 25290.64 respectively. The index is currently trading at 25313.56, down by 275.45 points or 1.08%. There were 3 stocks advancing against 27 declines on the index.

The overall market breadth has made a negative start with 23.66% stocks advancing against 74.14% declines. The broader indices too were trading in the red; the BSE Mid cap index was down 1.42%, while Small cap index was down by 1.79%. 

Realty down by 2.33%, Power down by 2.02%, Capital Goods down by 1.76%, Infrastructure down by 1.67% and Auto down by 1.64% were top losers on the BSE sectoral front, while there was no gainer on the index.

The few gainers on the Sensex were Dr Reddys Lab up by 0.47%, TCS up by 0.44% and Bharti Airtel up by 0.15%. On the flip side, BHEL was down by 2.48%, M&M was down by 2.47%, Tata Motors was down by 2.16%, ICICI Bank was down by 2.06% and Axis Bank was down by 2.02% were the top losers on the Sensex.

Meanwhile, the government has stated that the proposed new indirect tax regime, Goods and Services Tax (GST) is likely to be introduced shortly. The central government in consultation with states had decided to phase out Central Sales Tax (CST) in order to facilitate introduction of GST and to give compensation to the states for revenue loss on this account.

GST, Power and coal minister Piyush Goyal has asserted that in order to help raise electricity generation in the country, Coal India (CIL) will reduce the volume of coal offered through e-auctions by almost 50%.

Coal shortage in the country has become a concern for Indian power sector as coal-fired plants account for 59% of India's installed electricity capacity. Further, power companies need long-term supply assurances from coal producers, thus e-auctions do not fit to their plans. Further, the Minister added that the government is formulating plan for rationalising coal linkages in order to improve efficiency. Currently, coal linkages in the country are completely irrational as fuel is being transported from a far-off place to power plants, which already has nearby coal sources. Piyush Goyal further said that government is making all efforts to increase coal production in the country and presently a study is being carried out on around 200 mines and a report on the same would be ready by Aug 31. Goyal said that the government is mulling a more robust financial restructuring plan to improve the financial health of power distribution companies.

CIL is the only producer of coal in the country and is struggling to meet domestic coal requirements. CIL production fell 4.21 percent short of its production target to 462.53 million tonnes in FY14 amid concerns like shutdown of mining activities in Talcher Coalfields in Odisha. The government has set coal production target at 507 million tonnes for CIL for FY15.

The CNX Nifty opened at 7,588.70; about 61 point lower as compared to its previous closing of 7,649.25, and has touched a high and a low of 7,592.45 and 7,560.05 respectively. The index is currently trading at 7,575.50, down by 73.75 points or 0.96%. There were 5 stocks advancing against 45 declines on the index.

The top gainers of the Nifty were HCL Tech up by 1.24%, Dr Reddys up by 0.93%, TCS up by 0.86%, Bharti Airtel up by 0.60% and Coal India up by 0.49%. On the flip side, Ultratech Cement down by 2.76%, BHEL down by 2.71%, IDFC down by 2.51%, Power Grid down by 2.45% and M&M down by 2.37% were the major losers on the index.

Asian markets were trading in the red; Nikkei 225 tumbled by 392.73 points or 2.58% to 14,839.64, Hang Seng slipped 48.02 points or 0.20% to 24,339.54, KOSPI Index declined by 21.05 points or 1.02% to 2,033.46, Jakarta Composite decreased by 6.79 points or 0.13% to 5,060.18, Straits Times dipped 28.00 points or 0.84% to 3,286.22, FTSE Bursa Malaysia KLCI contracted by 23.15 points or 1.24% to 1,844.17 and Taiwan Weighted was down by 77.43 points or 0.85% to 9,054.01.

On the flip side, Shanghai Composite was up by 5.48 points or 0.25% to 2,193.15.