Late hour sell-off leads to a flat close at D-street

Monday’s trading session turned out to be a disappointing one for the Indian equity markets as market participants booked all their initial gains hurt by the sharp sell-off in metal counter. The domestic benchmarks traded jubilantly for most part of the session but a sharp wave of selling, which emerged in last leg of trade, dragged the key gauges near their neutral lines. Earlier, markets traded at their fresh all time highs as sentiments remained up-beat after Finance Minister Arun Jaitley underscored that there would be huge opportunities for the corporate sector to invest once the country reached the take-off stage of economic advancement. But, sentiments turned negative after Supreme Court said coal blocks allocated via screening panel since 1993 are illegal.

The Supreme Court said that guidelines were breached in coal block allocations during the UPA regime and the terms of allotment were illegal. The court also disallowed exploitation of captive coal mines by Ultra Mega Power Projects (UMPPs). Sentiments also remained down-beat after latest Reserve Bank of India (RBI) report stated that foreign direct investment inflows into India have fallen sharply from $23.47 billion in 2011-12 to $18.29 billion in 2012-13 and further to $16.05 billion in 2013-14.

Domestic investors also shrugged off positive opening in European counter where CAC and DAX were trading with a gain of around a percent in early deals with market sentiment improving after comments by European Central Bank President Mario Draghi raised expectations of further policy easing. Moreover, Asian markets too ended mostly in the green with Japanese shares gaining the most led by exporter shares after the yen weakened against the US dollar.

Back home, some support came from report that the foreign portfolio investors bought shares worth a net Rs 302 crore on August 22, as per provisional data from the stock exchanges. However, selling in metal stocks mainly dragged the markets lower after Supreme Court cancelled all coal blocks allocated since 1993 observing that the allocation done by screening committee was ‘not fair and transparent’. Power stocks, which edged higher after reports suggested that government has started the process for setting up four new ultra mega power projects in Bihar, Jharkhand and Odisha, which will together add 16,000 MW capacity to the country's power generation, succumbed to selling pressure by close of trade.

The NSE’s 50-share broadly followed index Nifty dipped by around seven points to hold its psychological 7,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by around twenty points to finish above the psychological 26,400 mark. Broader markets, however, ended in the red with a cut of around half a percent. The market breadth remained in favour of decliners, as there were 1393 shares on the gaining side against 1624 shares on the losing side while 82 shares remain unchanged.

Finally, the BSE Sensex added 17.47 points or 0.07%, to 26437.02, while the CNX Nifty lost 6.90 points or 0.09% to 7,906.30.

The BSE Sensex touched a high and a low of 26630.74 and 26401.64, respectively. The BSE Mid cap index was down by 0.64%, while the Small cap index lost 0.42%.

The top gainers on the Sensex were TCS up by 2.42%, Hindustan Unilever up by 2.09%, Dr. Reddys Lab up by 2.04%, Hero MotoCorp up by 1.88% and Maruti Suzuki up by 1.71%. On the flip side, Hindalco down by 9.56%, Tata Steel down by 4.79%, Sesa Sterlite down by 3.89%, Tata Power down by 3.42% and ICICI Bank down by 1.52% were the top losers in the index.On the BSE Sectoral front, FMCG up by 1.02%, IT up by 0.97%, TECK up by 0.73%, Healthcare up by 0.49% and Auto up by 0.42% were the top gainers, while Metal down by 4.34%, Realty down by 2.01%, INFRA down by 1.24%, Power down by 1.24% and Bankex down by 0.89% were the top losers in the space.

Meanwhile, in a move, which would make imports unviable and may lead to jump in domestic sugar prices, government hiked the import duty on both raw and refined sugar to 25% from the existing 15%. The rise in cost, which ultimately would have to be borne by consumer, would definitely help revive the business of cash-starved mills that owe farmers around Rs 6,800 crore. However, this hike is way lower than the one reported earlier by Food Minister Ram Vilas Paswan, who in June, underscored that import duty could be raised to 40% from 15%, if mills pay farmers' dues, estimated at nearly Rs 50 billion.

Presently, sugar mills are facing cash crunch as domestic prices have slipped below the cost of production, ultimately hurting profitability. Currently, domestic sugar prices are ruling stable in the range of Rs 34-40 per kg in view of surplus stocks, as per the data maintained by the Consumer Affairs Ministry. Mills in Uttar Pradesh are selling sugar at Rs 30.50 per kg, while the cost of production remains at Rs 37 per kg. Similarly, mills in Maharashtra are selling the commodity at Rs 28.50 per kg as against the cost of production of Rs 31.

Despite this, in the current sugar year to September, India is likely to import just 30,000 tonnes compared with 680,000 tonnes a year earlier. The country in total consumes around 23 million tonnes of sugar annually.

The CNX Nifty touched a high and low of 7,968.25 and 7,897.95 respectively.

The top gainers of the Nifty were TCS up by 2.33%, Hindustan Unilever up by 2.13%, Maruti Suzuki India up by 2.00%, BHEL up by 1.76% and Cipla up by 1.74%. On the other hand, Jindal Steel & Power down by 15.13%, Hindalco Industries down by 9.97%, Tata Steel down by 5.11%, SSLT down by 4.22% and Tata Power Company down by 3.68% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 1.02% and Germany's DAX was up by 1.01%.

Asian markets ended mostly in green on Monday, as investors weighed earnings reports and comments from central bankers for clues to monetary policy. China’s stocks fell, capping the benchmark index’s biggest loss in a week, as concern that new bank lending isn’t picking up. While the International Monetary Fund has urged China to curb its credit expansion, last month’s loan figures sparked investor concern that growth in the world’s second-largest economy will falter without monetary stimulus. Bank of Japan Governor Haruhiko Kuroda stated at the symposium that the nation’s monetary policy was having its intended effect and that central banks must fight deflation by any and all means. He added that Japan should consider using foreign workers to help mitigate labor-force shortages. Hong Kong Trade Balance rose to a seasonally adjusted -42.1B, from -43.1B in the preceding month. Malaysian Unemployment Rate fell to a seasonally adjusted 2.80%, from 2.90% in the preceding month.