Benchmarks witness bloodbath ahead of Fed’s policy meet

Extending their previous session’s southward journey, Indian barometer gauges witnessed bloodbath on Tuesday with both the major indices losing over a percentage point and ending below their crucial 7,950 (Nifty) and 26,500 (Sensex) levels. Investors booked their profits ahead of the two-day US Fed meet which could provide cues of an interest rate hike in the US. Further, selling by foreign funds in the previous session also weighed on market sentiment. Foreign funds sold index futures worth Rs 1,394 crore and Rs 74.59 crore in the cash segment on September 15, as per provisional exchange data. 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, public sector undertaking and infrastructure.

Sentiments remained down-beat after Reserve Bank of India governor Raghuram Rajan signalled that he would keep interest rates unchanged at the month-end monetary policy announcement. Rajan has said the inflation is coming down and the macro indicators are improving, however there is still some way to go before it can be declared that we are out of the woods. Sentiments also remained dampened after India’s export growth slipped to 2.35 per cent at $26.95 billion in August, pushing up trade deficit to $10.83 billion, as imports of gold surged 176 percent after policy makers eased shipment curbs.

Selling got intensified as European markets made an awful start with CAC, DAX and FTSE were trading with a cut of around half a percent amid concerns about the referendum in Scotland. Investors also look to the Federal Reserve’s monetary policy announcement later this week. Asian markets ended mostly in the red with Japanese shares ending their five-day winning streak, while Shanghai Composite remained the top loser in the region as weak economic data continued to weigh on market sentiment.

Back home, Stocks related to Capital Goods counter failed to draw any solace from the reports suggesting the government has approved a Rs 930 crore scheme to enhance the competitiveness of the capital goods sector in order to boost the economy. Moreover, public sector oil marketing companies (OMCs) edged lower on reports suggesting India would decide on ending government control on diesel pricing after elections in two states next month even though local prices of the fuel were higher than the global rates, making a case for a cut in retail prices. Additionally, telecom stocks remained in limelight after Department of Telecom (DoT) has filed a petition in the Supreme Court (SC) against telecom tribunal’s verdict that allowed Airtel, Idea and Vodafone to offer 3G services under a roaming arrangement in areas where not all of them own 3G spectrum.

The NSE’s 50-share broadly followed index Nifty tumbled by around one hundred and ten points to end below the psychological 7,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over three hundred and twenty points to finish below its psychological 26,500 mark. Broader markets too witnessed blood-bath and ended the session with a cut of around four percent. The market breadth remained in favor of decliners, as there were 803 shares on the gaining side against 2,230 shares on the losing side while 85 shares remain unchanged.

Finally, the BSE Sensex plunged by 324.05 points or 1.21%, to 26492.51, while the CNX Nifty dropped by 109.10 points or 1.36% to 7,932.90.

The BSE Sensex touched a high and a low of 26861.29 and 26464.03, respectively. The BSE Mid cap index was down by 3.42%, while the Small cap index was down by 3.99%.

The top gainers on the Sensex were Dr. Reddys Lab up by 1.15%, Hindustan Unilever up by 0.47%, ITC up by 0.38%, Infosys up by 0.37% and Sun Pharma up by 0.31%. On the flip side, Tata Power down by 5.85%, Tata Steel down by 3.45%, Axis Bank down by 3.14%, ONGC down by 2.98% and Larsen & Toubro down by 2.79% were the top losers in the index.

On the BSE Sectoral front Realty down by 3.42%, Power down by 3.26%, PSU down by 3.12%, Infrastructure down by 3.05% and Capital Goods down by 2.70% were the top losers, while there were no gainers in the space.

Meanwhile, in what could be termed as first step in the direction of ‘made in India’ concept announced by Prime Minister Narendra Modi, the government on Monday approved a Rs 930 crore scheme to enhance the competitiveness of the capital goods sector in order to boost the economy. The scheme on enhancement of competitiveness in the Indian capital goods sector which will be implemented in the 12th Plan period and spill over to the 13th Plan period, requires an estimated outlay of Rs 930.96 crore. However, the gross budgetary support (GBS) from the government for the scheme would be Rs 581.22 crore and the balance Rs 349.74 crore would be contributed by the stakeholder industries.

Further, the scheme would cover sub sectors like machine tools, textile machinery, construction and mining machinery, and process plant machinery. However, for the scheme to be implemented, issue of technological depth creation in the capital goods sector and creation of common industrial facility centres would have to be addressed.

The scheme basically has five components to be achieved including creation of advanced centres of excellence for R&D and technology development, integrated industrial infrastructure facilities or machine tool parks and setting up common engineering facility centre for textile machinery. It would also include testing and certification centre for earth moving machineries and setting up of a technology acquisition fund under the Technology Acquisition Fund Programme (TAFP) to help the capital goods industry to acquire and assimilate specific technologies.

Interestingly, the announcement of this scheme comes at a time when Prime Minister is keen to turn India into a manufacturing hub and would also give a fillip to capital goods production that contracted 3.8% in July this year. The sector however provides 9%-12% of the total manufacturing value added, while the consumption of capital goods constitutes a constant share of 17%-21% of the total gross domestic investment in the country.

The CNX Nifty touched a high and low of 8,044.90 and 7,925.15 respectively.

The top gainers of the Nifty were Dr. Reddy's Laboratories up by 0.95%, Sun Pharmaceuticals Industries up by 0.45%, Infosys up by 0.35%, United Spirits up by 0.30% and ITC up by 0.23%. On the other hand, Tata Power Company down by 5.45%, BPCL down by 5.15%, PNB down by 4.09%, Lupin down by 3.95% and Tata Steel down by 3.74% were the top losers.

European markets were trading in red, France's CAC 40 was down by 0.49%, Germany’s DAX was down by 0.36% and United Kingdom's FTSE 100 was down by 0.65%.

Asian markets ended mostly in red on Tuesday ahead of the start of a Federal Reserve policy meeting. The Malaysian market was closed today on account of ‘Malaysia Day’ holiday. China’s stocks tumbled, sending the benchmark index to the biggest drop since March after foreign direct investment sank to a four-year low and investors speculated new share sales will divert funds. China may join other emerging countries in boosting gold reserves as the precious metal makes up a smaller share of its foreign-exchange holdings compared with developed economies. Foreign direct investment into China, a gauge of external confidence, slumped to a four-year low amid antitrust probes into multinational companies that have spurred a letter of complaint from the US. Inbound investment was $7.2 billion in August, down 14 percent from a year earlier. It was the first back-to-back decline of more than 10 percent since 2009. Singaporean Retail Sales rose to a seasonally adjusted 5.5%, from 0.4% in the preceding month.