Late hour sell-off drag benchmarks lower; Nifty ends below 8,400 level

Wednesday turned out to be a disappointing session for the Indian equity indices which got pounded by around half a percent as investors opted to book profit in index heavyweight. Weakness in the global markets too weighed on the sentiments. Markets traded near neutral lines for most part of the day’s trade but, sharp sell-off in last leg of trade dragged domestic bourses below their crucial levels of 8,400 (Nifty) and 28,100 (Sensex). Sentiments also remained dampened after hopes of rate cut were faded after Raghuram Rajan, said that India will focus on sustainable economic growth and developed economies should do the same. These comments came a day after Finance Minister Arun Jaitley, pitching for a rate cut, underscored that lower cost of capital would provide a good fillip to the economy.

Meanwhile, markets failed to draw any sense of relief from reports that Moody’s revised its outlook on India’s corporate sector to stable from negative on expectations of economic recovery and enhanced access to global capital markets. The report also factors in successful implementation of pro-market policies that will likely lead to improved corporate cash flows. Traders also shrugged off Organisation for Economic Cooperation and Development’s forecast that Asia’s third-largest economy would grow by 6.6% in 2015, up from its last forecast of 5.7% growth in May. Meanwhile, global rating agency Fitch Ratings said that India’s economic growth is expected to pick up to 5.6 percent in the current fiscal on account of structural reforms being rolled-out by the government.

On the global front, European markets were trading mixed in early deals on Wednesday. Asian markets ended mixed, paring early gains, as resource shares were hit by fall in oil and other commodity prices and as Chinese shares lost momentum as investors continued to take profits after Monday’s launch of the landmark Hong Kong-Shanghai trading link. Meanwhile, Japanese Nikkei ended lower, giving up early gains, as investors booked profits after Prime Minister Shinzo Abe delayed a tax hike and said he would call a snap election to seek a fresh mandate for his economic policies.

Back home, depreciation in Indian rupee too dampened the sentiments. Rupee were trading near 62 a dollar mark at the time of equity markets closing compared with its previous close of 61.74, due to dollar demand from oil marketing companies and importers. Sentiments also remained dampened on reports that foreign portfolio investors (FPIs) sold shares worth a net Rs 101.98 crore on November 18, 2014. However, Pharma shares ended mixed on the back of a probe initiated by the US legislature against Sun Pharma and Dr Reddy’s over the steep increase of their drug prices in the US market is set to intensify. Though, shares related to FMCG counter gained as falling inflation raised hopes of higher spending and margins.

The NSE’s 50-share broadly followed index Nifty lost over forty points to end below the psychological 8,400 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over one hundred and thirty points to end below the psychological 28,100 mark. Broader markets too struggled to get any traction and ended the session in red with a cut of over half a percent. The market breadth remained in favour of decliners, as there were 1216 shares on the gaining side against 1840 shares on the losing side while 95 shares remain unchanged.

Finally, the BSE Sensex plunged by 130.44 points or 0.46%, to 28032.85, while the CNX Nifty dropped by 43.60 points or .52% 8,382.30.

The BSE Sensex touched a high and a low of 28294.01 and 27963.51, respectively. The BSE Mid cap index was down by 0.63%, while the Small cap index was down by 0.65%.

The top gainers on the Sensex were Dr. Reddys Lab up by 2.45%, Hindustan Unilever up by 1.19%, HDFC up by 1.01%, Bajaj Auto up by 1.01% and Bharti Airtel up by 0.89%. On the flip side, Tata Steel down by 3.08%, Sesa Sterlite down by 2.75%, GAIL India down by 2.30%, Tata Motors down by 2.29% and BHEL down by 1.99% were the top losers in the index.

On the BSE Sectoral front IT up by 0.21%, TECK up by 0.12% and Healthcare up by 0.07% were the only gainers, while Metal down by 2.14%, Power down by 1.80%, PSU down by 1.51%, Infrastructure down by 1.44% and Oil & Gas down by 1.35% were the top losers in the space.

Meanwhile, Raghuram Rajan, the governor of India’s Apex Bank, which is under corporate and government pressure to bring down interest rates and boost economic growth, recently underscored that country should focus on achieving sustainable economic growth and also suggested developed economies of doing the same. He further added that economies across the world should focus on sensible, sustainable sources of growth.

India's economy has grown at less than 5% for the last two years and picked up some momentum to grow 5.7% in the June quarter, but this figure is still way below the near double-digit growth last seen in 2008.

Notably, RBI’s governor’s comments come just a day after Finance Minister Arun Jaitley, pitching for a rate cut, underscored that lower cost of capital would provide a good fillip to the economy. He nudged Reserve Bank of India to cut interest rates to boost growth at a time when inflation, especially food inflation had come down substantially over the past few months and global fuel prices ebbed to four-year low.

Cajoling India’s apex bank, FM averred that RBI, which is a highly professional organization, if in its wisdom decides to cut down interest rates then this will give a good impetus to the Indian economy. However, Rajan has been focused on achieving 6% inflation by January 2016 and has often emphasized that sustained economic growth requires inflation to fall and stay low.

Nevertheless, in order to cut down on growing clamor of rate cut, RBI Deputy Governor S S Mundra emphasized the central bank revises rate, but not on 'popular demand' and further stated that it only does when there is a clear conviction in doing so.

The CNX Nifty touched a high and low of 8,455.65 and 8,360.50 respectively.

The top gainers on Nifty were Dr. Reddy's Laboratories up by 2.49%, HCL Technologies up by 2.02%, Tech Mahindra up by 1.59%, DLF up by 1.41% and ZEEL up by 1.36%. On the flip side, Jindal Steel & Power down by 3.73%, Tata Steel down by 3.15%, GAIL (India) down by 2.92%, Cairn India down by 2.81% and SSLT down by 2.81% were the top losers.

Most of European markets were trading in green, France’s CAC 40 was up by 0.19% and Germany’s DAX was up by 0.40%, while United Kingdom’s FTSE 100 was down by 0.17%.

Asian markets ended mixed on Wednesday, with Chinese market extending losses amid fading interest in the equity-trading link with Hong Kong. The Bank of Japan board voted 8 to 1 to leave the policy target unchanged with board member Takahide Kiuchi arguing that the pace of monetary easing before the October 31 expansion was more appropriate. The board maintained its cautious growth and inflation outlook presented some three weeks ago. It added that inflation as measured by the core CPI, excluding the direct impact of sales tax increase, is likely to stay around the current level of 1% for the time being. The BoJ didn’t have any idea about when consumer prices will begin to pick up. The BoJ will continue to increase its purchases of Japanese government bonds at an annual pace of about Y80 trillion. Japan’s index of leading economic indicators rose to a seasonally adjusted 105.6, compared to the preceding month. Japan’s All Industries Activity Index rose to a seasonally adjusted 1.0%, from -0.1% in the preceding month.

Indonesia’s total foreign outstanding debt rose 11% to $292.3 billion at the end of September from $262.9 billion in the same period last year, on back of rising private sectors debts that bears lower interest rates abroad compared to domestic loans. The private sector bore $159.3 billion of offshore debts, up 14% from $139.7 billion in 2013. Bank Indonesia raised its key interest rate by 25 basis points to 7.75% and lending facility rate by 50 basis points to 8%, to anchor inflation expectations after the government increased the price of subsidized fuel by more than 30%.