Markets recover from day’s low; yet weakness persists

Local equity markets, bouncing off day’s low, have partially trimmed their losses as some buying emerged at lower levels despite negative start of European markets. Encouragingly, this recovery was witnessed ahead of September CPI data and RIL’s September quarter earnings. On the macro-front, street widely expects consumer price inflation has probably eased for second straight month in September at 7.20% against 7.80% in August, helped by lower food and fuel costs. Yet, reeling with loss of over quarter of a percent, both Sensex and Nifty were trading below the psychologically crucial 26,250 and 7,850 levels respectively. Meanwhile, broader indices too succumbing to selling pressure were down and out in trade.

On the global front, receiving a negative handover from Asian counterparts, European shares skidded lower on Monday, extending last week's losing streak, as concerns about faltering global economic growth hit equity markets across the world. The European markets have also been hit by a raft of weak economic data, and on Friday credit rating agency Standard & Poor's lowered its outlook on France to “negative” from “stable”.

Closer home, most of the sectoral indices on BSE continued reeling under pressure; however stocks from Technology, Information Technology and Metal counters were showing resilience. Technology stocks gained for the second day after Infosys earnings on Friday that beat expectations. On the flip side, maximum drubbing was witnessed by stocks from Realty, followed by Auto and Capital Goods counters. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1481:1134; while 117 shares remained unchanged.

The BSE Sensex is currently trading at 26229.96, down by 67.42 points or 0.26% after trading in a range of 26092.69 and 26276.57. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.07%, while Small cap index down by 0.27%.

The gaining sectoral indices on the BSE were IT up by 1.18%, TECK up by 0.87% and Metal up by 0.55% while, Realty down by 2.37%, Auto down by 0.83%, Capital Goods down by 0.75%, FMCG down by 0.75% and INFRA down by 0.46% were the losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.74%, Hero MotoCorp up by 1.58%, Coal India up by 1.27%, TCS up by 1.15% and Tata Steel up by 0.96%. On the flip side, Mahindra & Mahindra down by 3.82%, Cipla down by 2.53%, Dr. Reddys Lab down by 2.20%, Bharti Airtel down by 1.50% and BHEL down by 1.34% were the top losers.

Meanwhile, deviating from the recommendations made by the expert committee headed by Deputy Governor Urjit R. Patel, Finance Minister Arun Jaitley has given a nod for a major overhaul of the current monetary policy framework, wherein the Centre will specify ‘inflation targets’ for the Reserve Bank of India (RBI) to achieve. Under the proposed new regime, the RBI will set inflation as its top priority in its policy statements.

Headed by Reserve Bank Deputy Governor Urjit R. Patel, an expert committee of the RBI was appointed to examine monetary policy, which had recommended that the monetary policy decision-making should be vested with a monetary policy committee, chaired by the RBI governor. Among other recommendations, it suggested apex bank to adopt new Consumer Price Index (CPI) as the measure of the nominal anchor for monetary policy and that the RBI set the target CPI inflation level at 4 per cent (+/- 2 per cent) to be achieved through its monetary policy tools.

However, Modi government has decided to take the onus of fixing the inflation targets as it felt that RBI shouldn’t’ set it for itself an inflation target of ‘4% for all times to come. In 2014-15 budget speech Mr. Jaitley said the Modi government was keen on moving to a modern monetary policy framework to meet the challenges of an increasingly complex economy.

RBI, in its fourth bi-monthly monetary policy stance and rationale, expressed upside risk to its target to bring consumer inflation down to 6% by January 2016, which continued to warrant policy preparedness to contain pressures if the risks materialized. However, the central bank highlighted that its immediate target in containing the consumer price index (CPI) inflation at 8% by January 2015, looked achievable.

The CNX Nifty is currently trading at 7838.65, down by 21.30 points or 0.27% after trading in a range of 7796.00 and 7848.20. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Jindal Steel & Power up by 2.28%, Infosys up by 1.93%, Hero MotoCorp up by 1.62%, HCL Tech up by 1.52% and Indusind Bank up by 1.48%. On the flip side, DLF down by 5.08%, Mahindra & Mahindra down by 3.92%, Cipla down by 2.62%, Dr. Reddys Lab down by 2.11% and BHEL down by 1.85% were the top losers.

Asian markets were trading lower; with Taiwan Weighted down by 255.05 points or 2.84% to 8,711.39; Nikkei 225 down by 178.38 points or 1.15% to 15,300.55; Hang Seng down by 77.85 points or 0.34% to 23,010.69; Jakarta Composite down by 35.66 points or 0.72% to 4,927.30; Straits Times down by 24.63 points or 0.76% to 3,199.24; KOSPI Index down by 13.71 points or 0.71% to 1,927.21 and FTSE Bursa Malaysia KLCI down by 5.08 points or 0.28% to 1,803.80.

European markets were trading mostly lower; with Germany’s DAX down by 216.21 points or 2.4% to 8,788.81; UK’s FTSE 100 down by 91.88 points or 1.43% to 6,339.97 and France’s CAC down by 67.74 points or 1.64% to 4,073.71.