Benchmarks end lower for third straight session as RBI maintains status quo

Extending their southward journey for third straight day, Indian equity benchmarks ended the volatile day of trade with a cut of around half a percent, dragged down by selling in rate-sensitive counters such as real estate and banking after the central bank kept the policy rates unchanged, while some weak corporate earnings also dampened the sentiment. After a positive opening, markets pared all their gains and entered into negative terrain post Reserve Bank of India’s (RBI) monetary Policy announcement. Though, losses remained capped as 29,000 and 8,750 proved to be the strong support levels for Sensex and Nifty, respectively.

Overall sentiments remained down-beat after the RBI held the interest rates steady at 7.75 per cent after easing the monetary policy just three weeks ago, leaving its next move probably until after the government presents its annual budget at the end of this month. However, RBI reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0% to 21.5% of their NDTL with effect from the fortnight beginning February 7, 2015. Sentiment also took a hit after the index of eight core sectors, which contribute to 38% of the industrial production slowed to three month low of 2.4% in December from 6.7% in November 2014. Major drag came from slowdown in steel output, which occupies 6.88% in the overall index. The index declined by 2.4% in December, 2014.

On the global front, European markets made a firm start, lifted by hopes for an agreement on the Greek debt standoff after the country’s new government dropped calls for a write-off of its foreign debt and proposed swapping debt for growth-linked bonds. Asian markets ended mostly in the green, led by Chinese benchmarks, up by around two and a half percent on hopes for fresh economy-boosting measures by its leaders.

Back home, sentiments remained dampened on reports that overseas investors sold Indian shares worth Rs. 630 crore on February 2, 2015, after buying $2.9 billion so far this year and 11 continuous days of buying, provisional exchange and regulatory data showed. Disappointing set of Q3 earning from PNB too dampened the sentiments. Shares of Punjab National Bank tanked over 7% after the bank’s gross NPAs as a percentage to total advances rose to 5.97% from 4.96% in the same quarter a year ago. Meanwhile, the country’s second largest public sector bank by assets had reported net profit of Rs 755.41 crore for the October- December quarter of the 2013-14 financial year.

On the sectoral front, massive drubbing was witnessed by stocks from banking, Realty and Infrastructure counters after RBI maintained status quo stance at sixth bi-monthly monetary policy review. However, software and technology stocks remained on buyers’ radar with the development in US, where the Republican leadership has opposed US President Barack Obama’s move to tax overseas earnings. Additionally, shares of oil exploration and production (E&P) companies advanced as global crude oil prices rose.

NSE’s 50-share broadly followed index, Nifty declined by over forty points to end below the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex slipped by over one hundred and twenty points but managed to end hold its psychological 29,000 mark. Broader markets too struggled to get any traction and ended the session with a cut of over quarter a percent. The market breadth remained in favour of decliners, as there were 1,332 shares on the gaining side against 1,530 shares on the losing side while 119 shares remain unchanged.

Finally, the BSE Sensex plunged by 122.13 points or 0.42%, to 29,000.14, while the CNX Nifty dropped by 40.85 points or 0.46% to 8,756.55.

The BSE Sensex touched a high and a low of 29253.06 and 28900.41, respectively. The BSE Mid cap index was down by 0.29%, while the Small cap index was down by 0.26%.

The top gainers on the Sensex  Sesa Sterlite up by 6.23%, Bharti Airtel up by 3.42%, Reliance Industries up by 3.25%, ONGC up by 2.64% and TCS up by 1.67%. On the flip side, Axis Bank down by 4.95%, Tata Power down by 4.12%, Bajaj Auto down by 3.74%, Mahindra & Mahindra down by 3.52% and HDFC down by 2.98% were the top losers.

On the BSE Sectoral front Oil & Gas up by 1.99%, FMCG up by 1.06%, Metal up by 0.80%, Consumer Durables up by 0.50% and TECK up by 0.39% were the top gainers, while Bankex down by 2.61%, Realty down by 1.43%, INFRA down by 0.92%, Power down by 0.68% and Auto down by 0.66% were the top losing indices on BSE.

Meanwhile, a government memorandum has notified that a panel to determine technical eligibility of bidders for coal mines in the upcoming auction will soon be constituted. The six-member panel will be headed by State Vigilance Commissioner, West Bengal, K S Ramasubban. It will have members from Central Electricity Authority, Power Ministry and National Institute of Secondary Steel Technology, Steel Ministry, among others. Five members include Punjab National Bank chairman and managing director SS Kohli.

The committee also comprises Major Singh, member planning in the Central Electricity Authority, and RK Bagchi, director in the steel ministry. Other members are Mohan Chuttani, economic advisor in the department of industrial policy and promotion and RK  Chopra, director in Coal India's technical arm Center Mine Planning and Design Institute. As many as 200 companies have registered themselves for the coal block bidding process and the panel will help joint secretary in the coal ministry Vivek Bhardwaj, who is the nominated authority for coal block auction, in evaluating technical qualification of bidders for the auction.

The government has decided to auction 46 coal blocks to private companies in auctions scheduled between February 14-22. Under the schedule II (producing mines) category, 23 blocks will be put on offer, the bids will be evaluated and the selected qualified bidders will participate in the e-auction for the 23 operational mines beginning February 14, while another set of 23 mines will be auctioned between February 25 and March 5 under the Schedule III (ready to produce mines) category. The Coal Ministry has already started the process for allocation of 36 mines to PSUs, of which 35 will go to power PSUs, while the remaining one has been earmarked for a steel PSU.

The CNX Nifty touched a high and low of 8,837.30 and 8,726.65 respectively.

The top gainers on Nifty were SSLT up by 5.90%, Bharti Airtel up by 4.09%, Cairn India up by 4.03%, Reliance Industries up by 3.11% and ONGC up by 2.67%. On the flip side, PNB down by 8.32%, Axis Bank down by 5.13%, Tata Power Company down by 4.11%, Kotak Mahindra Bank down by 3.85% and Bajaj Auto down by 3.80% were the top losers.

European Markets were trading in the green; Germany's DAX was up by 1.10%, UK's FTSE 100 was up by 1.16% andFrance's CAC was up by 1.22%.

The Asian equity benchmarks ended mostly in red on Monday, after the latest gauge of China’s factory sector activity raised concerns about the world’s second-largest economy. Malaysian markets were closed today on account of ‘Malaysia - FT Day’ holiday. Activity in China’s factory sector shrank for the second straight month in January, as the New Year got off to a rocky start for the world’s second-largest economy. The slack performance, including a 15th month of shrinking factory employment, will add to the debate over how and whether Beijing will accelerate policy easing, with most bank economists calling for a combination of rate cuts and increased liquidity to spur productive investment. The final HSBC/Markit Purchasing Managers’ Index (PMI) for January came in at 49.7 on a seasonally adjusted basis, just below the 50.0 level that separates growth from contraction. The number was slightly lower than a preliminary flash reading of 49.8 but higher than the final 49.6 in December. Hong Kong Retail Sales fell to a seasonally adjusted annual rate of -3.9%, from 4.1% in the preceding month. Indonesian Trade Balance rose to a seasonally adjusted 0.19B, from -0.42B in the preceding month. Thai CPI fell to a seasonally adjusted annual rate of -0.41%, from 0.60% in the preceding month.