Markets slump widens ahead of the key economic data; Nifty ends near the lowest point of the day

Friday was a very volatile day of trade for the Indian markets and the major benchmarks that were moving in and out of the red for most part of the session, suffered sharp selling towards the end to finish lower by about a percent. Although after a flat start the markets showed some strength but the latter part of the trade was only repetition of what has been happening for last few sessions, traders opting to book profit at every upmove, dragging the markets lower. There was some cautiousness ahead of major macro data announcements of Consumer Price Index (CPI)-based inflation for the month of November and Index of Industrial Production (IIP) data for the month of October, later in the day. The IIP for the month of September which had came in at 2.5 percent against 0.4 percent in August is likely to once again contract for the month of October, while the CPI is likely to cool down further. The continued weakness in the domestic currency too weighed on the market sentiments, which slipped further to its ten months low.

The global cues though remained positive as the US markets ended higher after getting some upbeat economic data; while the Asian markets ended mostly in green Japanese markets despite fluctuating ahead of the weekend’s election managed a close of decent gains. Polls show Prime Minister Shinzo Abe is heading for a landslide victory in the election on Dec. 14. Chinese market too ended in green, as slowing growth in industrial production boosted speculation the government will take more steps to support the economy. The European markets made a weak start with UK stocks sliding for a fifth day, amid prospects of a snap parliamentary election in Greece.

Back home, disappointment continued on the Dalal Street with another day of gloom and markets found it hard to protect their crucial support levels, fearing policy logjam even with the new government, after the states rejected the draft of Goods and Services Tax (GST) Bill, underscoring that it does not address their concerns, particularly on entry tax and taxation of petroleum products. Though, the government was looking hopeful of bringing the bill in the very winter session of the parliament on initiative of the finance minister Arun Jaitley. Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan has said that India needs to provide more tax breaks to individuals so as to encourage savings. He has also said that the RBI will start talks with the government for an 'appropriate timeline' to ensure the economy is within a medium term inflation target of 2-6 per cent. Savings rate in the country has sharply declined in last two-three years due to high inflation. Back on street, there was hardly any attempt of recovery for the markets during the session and bulls were running for shelter amid the widespread selling. All the sectoral indices barring the defensive healthcare, ended in red led by consumer durables, capital goods, oil & gas and realty which suffered cuts of over two percent each on the BSE. The telecom stocks that were buzzing in early trades on report that government may include one slot for 3G services in spectrum auction, too made a mixed closing. Incremental spectrum will ease pressure on incumbents witnessing licence renewals. It was reported that the Defence Ministry has agreed to vacate some 5 lots in the 2100 MHz band category spectrum. Bharti Airtel was up by over 1%, while RCom lost over 3% and Idea Cellular was down by over 1%.

Finally, the BSE Sensex plunged by 251.33 points or 0.91%, to 27,350.68, while the CNX Nifty lost 68.80 points or 0.83% to 8,224.10.

The BSE Sensex touched a high and a low of 27692.32 and 27320.05, respectively. The BSE Mid cap index was down by 1.28%, while the Small cap index plunged by 1.50%.

The top gainers on the Sensex were Maruti Suzuki up by 1.30%, Bharti Airtel up by 1.19%, Infosys up by 0.96%, Sun Pharma Inds. up by 0.78% and Coal India up by 0.44%. On the flip side, GAIL India down by 4.63%, Tata Steel down by 3.95%, ONGC down by 3.55%, Sesa Sterlite down by 2.91% and BHEL down by 2.87% were the top losers.

On the BSE Sectoral front, while Healthcare up by 0.19% was the lone gainer, the top losing sectoral indices were Oil & Gas down by 2.63%, Realty down by 2.47%, Consumer Durables down by 2.28%, Capital Goods down by 2.00% and PSU down by 1.51%.

Meanwhile, in a big setback to government aiming to implement GST soon, states rejected the draft of Goods and Services Tax (GST) Bill, underscoring that it does not address their concerns, particularly on entry tax and taxation of petroleum products.

During a meeting, the government’s plan to bring petroleum goods under GST regime was strongly opposed by the Empowered Committee of State Finance Ministers. The states also objected to the Constitutional Amendment Bill saying it does not contain provisions for giving states compensation against any possible loss of revenue after GST roll-out for five years. The state governments want to keep the entry tax and petro tax out of the ambit of the GST. The GST roll out has missed several deadlines because of lack of consensus among Centre and states over certain crucial issues like CST compensation. However, the government is taking steps to build consensus among states and centre for GST rollout. Finance Minister Arun Jaitley had recently announced that the government will soon release Rs 11,000 crore towards Central Sales Tax (CST) compensation and balance amount will start being paid from the next financial year.

The proposed GST is one of the biggest taxation reforms in India and will replace existing state and federal levies such as excise duty, service tax and value-added tax (VAT) and will integrate State economies and boost overall growth. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. The industry is awaiting its introduction, as GST would boost revenues and aid economic growth.

The CNX Nifty touched a high and low of 8,321.90 and 8,216.30 respectively.

The top gainers on Nifty were Bharti Airtel up by 1.35%, Ambuja Cement up by 1.23%, Maruti Suzuki up by 1.14%, Ultratech Cement up by 1.09% and Sun Pharma Inds up by 1.02%. On the flip side, GAIL India down by 4.39%, Tata Steel down by 3.83%, Cairn India down by 3.55%, ONGC down by 3.53% and Sesa Sterlite down by 2.73% were the top losers.

European markets were trading with sharp cuts in early deals, Germany’s DAX declined by 130.06 points or 1.32% to 9,732.47, UK’s FTSE 100 plunged by 111.87 points or 1.73% to 6,349.83 and France’s CAC was lower by 62.81 points or 1.49% to 4,163.05.

The Asian equity benchmarks ended mostly in green on Friday, as optimism was boosted by US data on retail sales, while the Japanese shares gained ahead of the weekend’s election. China’s economy showed further signs of fatigue in November, with factory growth slowing more than expected and investment expansion hovering near a 13-year low, putting pressure on policymakers to unveil stronger stimulus measures. A deluge of weak data this week has reinforced the view that annual economic growth may weaken further from 7.3% in the third quarter - already the lowest since the great financial crisis and further straining the fragile global economy. China’s leaders will keep growth on track next year by applying a prudent monetary stance with a balance between loosening and tightening. China’s economy is adjusting to a new normal of slower growth -- a phrase President Xi Jinping has used several times recently.

Chinese Industrial Production fell to 7.2%, from 7.7% in the preceding month. Chinese Retail Sales rose to an annual rate of 11.7%, from 11.5% in the preceding month. Chinese Fixed Asset Investment fell to a seasonally adjusted 15.8%, from 15.9% in the preceding month. Japan’s industrial production rose to a seasonally adjusted 0.4%, from 0.2% in the preceding month.