Weak global cues drag benchmarks lower on Wednesday

Extending their southward journey, Indian equity benchmarks ended the session in the red with frontline gauges declining below their crucial 27,100 (Sensex) and 8,100 (Nifty) levels on weak global cues. Investors also remained on sidelines ahead of release of macro-economic data, July factory output and August CPI numbers. The street widely expects Industrial production to grow 1.8% from a year earlier in July, slower than June’s 3.4% increase, while India’s consumer price inflation, closely tracked by the Reserve Bank of India, is expected to come down to 7.80% in August from July’s 7.96%. Depreciation in Indian rupee against dollar too dampened the sentiments. The currency was trading at Rs 60.88 at the time of equity markets closing as compared to its previous close of Rs 60.60.

Selling got intensified as European markets made a sluggish opening ahead of France industrial production report. Industrial production is expected to fall 0.5 percent month-over-month in July after rising 1.3 percent in June. Annually, output is expected to fall 0.3 percent in July following the 0.4 percent drop in June. Asian markets too ended mostly in the red on concerns that foreign funds may start trimming their exposure to emerging markets if the US Federal Reserve hikes interest rates sooner-than-expected.

Back home, selling witnessed in select mining and power related stocks as the Supreme Court, after declaring all 218 coal block allocations since 1993 as illegal, has reserved its decision on their fate. Also in a meeting with Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, and New & Renewable Energy, all the States assured the Centre that they would reduce technical and commercial losses in accordance with the agreed trajectory and those over-achieving will be incentivised.

Moreover, auto stocks which were holding up during the session after data released by the Society of Indian Automobile Manufacturers (SIAM), suggested that domestic passenger car sales grew by 15.16% to 153,758 units in August this year as compared to 1,33,513 units in the same month of 2013, too surrendered to selling pressure by close of trade. Additionally, shares of cigarette companies like ITC, Godfrey Phillips India and VST Industries edged lower on reports that the government may tighten norms to put a check on smoking. On the flip side, shares of companies engaged in shipbuilding business rallied by up to 13% on reports that the government is said to be looking at several options to boost ship building in the country

The NSE’s 50-share broadly followed index Nifty declined by around sixty points to end below the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over two hundred points to finish below the psychological 27,100 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of around half a percent. The market breadth remained in favour of advances, as there were 1741 shares on the gaining side against 1272 shares on the losing side while 94 shares remain unchanged.

Finally, the BSE Sensex plunged by 207.91points or 0.76%, to 27057.41, while the CNX Nifty declined by 58.85 points or 0.72% to 8,094.10.

The BSE Sensex touched a high and a low of 27251.44 and 27018.11, respectively. The BSE Mid cap index was up by 0.08%, while the Small cap index gained 0.60%.

The top gainers on the Sensex were  Sesa Sterlite up by 1.62%, Tata Power up by 1.58%, ICICI Bank up by 1.53%, Bajaj Auto up by 1.12% and Cipla up by 0.42%. On the flip side, Hero MotoCorp down by 2.44%, ITC down by 1.85%, Infosys down by 1.84%, Coal India down by 1.80% and Reliance Industries down by 1.67% were the top losers in the index.

On the BSE Sectoral front Realty up by 0.61% and Power up by 0.11% were the only gainers, while Consumer Durables down by 1.56%, Oil & Gas down by 1.49%, FMCG down by 1.48%, IT down by 1.06% and Capital Goods down by 0.99% were the top losers in the space.

Meanwhile, El Nino Pacific ocean warming event is possible in 2014 as the Australian Met department, in its latest outlook of El Nino, has said that there's a 50 percent chance of the weather pattern developing in the next few months. Australian Met department highlighted that the majority of international climate models surveyed by the bureau indicate Central Tropical Pacific surface temperatures will remain warmer than average, and may exceed El Nino thresholds by the end of the year.

El Nino can impact the agriculture production in the country as EI Nino in winters is often associated with heavy rainfall in the north, north-east and north-west India, and warmer months from December to March, particularly in the north. 

The development of El Nino event would add to the worries about an inadequate monsoon. However, Australia's Bureau of Meteorology has also lowered its prospects from 70 percent to just 50 percent, while American National Weather Service's Climate Prediction Centre has also reduced the chances of an El Nino this winter from 80 percent to 65 percent. Moreover, India Meteorological Department ( IMD) also expects that the odds of a strong El Nino was less this year, and was unlikely to make a huge impact on the Indian weather.

El Nino also known as the El Nino-Southern Oscillation (ENSO) is part of a weather system which couples sea surface temperatures warming in the Pacific with strengthening in trade winds to create El Nino conditions. So far this year the warming of the pacific surface waters has not been matched by changes in the atmosphere that create the sustainable conditions for an El Nino. The CNX Nifty touched a high and low of 8,135.75 and 8,082.10 respectively.

The top gainers of the Nifty were IDFC up by 2.57%, ICICI Bank up by 2.02%, SSLT up by 1.88%, Power Grid Corporation of India up by 1.83% and DLF up by 1.64%. On the other hand, Cairn India down by 2.53%, BPCL down by 2.30%, Hero MotoCorp down by 2.24%, Coal India down by 2.10% and ITC down by 1.95% were the top losers.

Most of European markets were trading in green, France's CAC 40 was up by 0.04%, and United Kingdom's FTSE 100 was up by 0.18%, while Germany’s DAX was down by 0.11%.

Asian markets ended mostly in red on Wednesday, with the benchmark indices poised for its lowest close in four weeks, following a retreat in US equities on concern about the pace of Federal Reserve interest-rate increases. Korean market was closed for the day as Chuseok holidays is extended due to substitute holiday. Bank of Japan Deputy Governor Kikuo Iwata stated that consumer prices are likely to increase further along with wages. The year-on-year rate of increase in the CPI is expected to accelerate moderately, along with increasing wages, against the backdrop of rising inflation expectations as well as improvements in the output gap, given that Japan’s economy is expected to continue growing at a pace above its potential. The majority of the nine-board shared the view that Japan can achieve the 2% price stability target at around fiscal 2015.

Japan’s core machinery orders rose for a second straight month in July, though the data failed to dispel some doubts about the strength of business investment that is needed to propel Japan out of the slump caused by April's sales tax hike. Japan’s Core Machinery Orders fell to 3.5%, from 8.8% in the preceding month. Japan’s Corporate Goods Price Index fell to a seasonally adjusted annual rate of 3.9%, from 4.3% in the preceding month.