Sell-off in late trade drag markets lower; Sensex breaches 28,900 mark

Wednesday turned out to be a disappointing session for the Indian equity indices which got pounded by around half a percent, extending their southward journey for fourth straight session. After a positive opening, the domestic bourses traded choppy for most part of the session but, sharp decline in late trade dragged key gauges below their crucial 28,900 (Sensex) and 8,750 (Nifty) levels. Sentiments turned pessimistic in last leg of trade after Reserve Bank of India’s (RBI) Governor Raghuram Rajan said that inflation was still a concern but added the deflationary global environment gave the central bank some elbow room with monetary policy.

However, losses remained capped after the HSBC India Services PMI Business Activity Index-tracking changes in activity at Indian services companies on a month-by-month basis, came at 52.4 in January, up from 51.1 in December, signaling a solid expansion in business activity. Some support also came with the statement of Prime Minister Narendra Modi, who pitching India growth story before global investors has promised them a fair, predictable and consistent tax system and growth-focused economic policies. The Reserve Bank on its part has decided to liberalise FDI norms by allowing greater flexibility in the pricing of instruments with a view to attract more investments from overseas.

On the global front, European markets made an awful start and were trading in the red in early deals amid mixed corporate results and ahead of the release of business activity data from the euro zone and the United States. Asian markets ended mostly in the green after oil prices jumped to one month high overnight.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee was at 61.74 per dollar at the time of equity markets closing as compared to 61.67 per dollar level on Tuesday. Sentiments also remained down-beat on report that foreign institutional investors continued to remain net sellers to the tune of Rs 264 crore on February 3, as per provisional stock exchange data.

Meanwhile, banking shares extended losses for the second straight session after Raghuram Rajan decided to leave repo rate unchanged at its credit policy meet on January 3, 2015. Besides, Auto stocks edged lower after reporting their monthly sales figures. On the flip side, buying witnessed in healthcare space led by, over 3% spurt in Wockhardt after the pharmaceutical firm’s third consolidated net profit increased 14% year-on-year to Rs 347 crore led by strong operational income and other income. Additionally, sugar stocks, like Shree Renuka Sugar, Bajaj Hindustan, Balrampur Chini, Eid Parry, soured in trade after ISMA reported that sugar production grew by 15% at 13.48 mt, adding to the surplus stocks situation.

The NSE’s 50-share broadly followed index Nifty declined by over thirty points to end below the psychological 8,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by around one hundred and twenty points to finish below its psychological 28,900 mark. Broader markets too struggled to get any traction and ended the session mixed. The market breadth remained in favor of decliners, as there were 1,346 shares on the gaining side against 1,557 shares on the losing side while 110 shares remain unchanged.

Finally, the BSE Sensex plunged by 117.03 points or 0.40%, to 28883.11, while the CNX Nifty dropped by 32.85 points or 0.38% to 8,723.70.

The BSE Sensex touched a high and a low of 29133.62 and 28824.68, respectively. The BSE Mid cap index was down by 0.25%, while the Small cap index was up by 0.05%.

The top gainers on the Sensex Hindalco up by 3.89%, Tata Power up by 3.32%, Sesa Sterlite up by 2.87%, Coal India up by 2.57% and ONGC up by 2.53%. On the flip side, Axis Bank down by 4.64%, BHEL down by 4.01%, SBI down by 2.32%, Larsen & Toubro down by 1.90% and Tata Motors down by 1.69% were the top losers.

On the BSE Sectoral front Metal up by 2.10%, Realty up by 0.97%, Healthcare up by 0.93%, Oil & Gas up by 0.27% and PSU up by 0.19% were the top gainers, while Capital Goods down by 1.88%, Bankex down by 1.23%, Power down by 1.14%, Consumer Durables down by 1.12%, Auto down by 1.09% were the top losing indices on BSE.

Meanwhile, recovering from last month's fall, the HSBC India Services PMI Business Activity Index-tracking changes in activity at Indian services companies on a month-by-month basis, came at 52.4 in January, up from 51.1 in December, signaling a solid expansion in business activity. It has been above 50 level since May 2014, which denotes growth.

The new business sub-index - which measures demand - climbed to 52.1 from 51.8. The survey also showed firms' confidence regarding future business grew at the fastest pace since June last year. Based on survey responses, the latest increase in activity reflected further growth of new business during the month. Among the monitored sub-sectors, activity rose quickest in 'Other Services', while the sharpest reduction occurred in Financial Intermediation. The composite output of the private sector, comprising both manufacturing and services, signaling further growth of private sector output in January, extended the current sequence of expansion to nine months to 53.3 from 52.9. Manufacturing output continued to rise faster than service sector activity at the start of 2015.

Volumes of work-in-hand at Indian service providers increased for the fourth month running in January, while input costs faced by Indian services firms rose for the second straight month in January, having fallen for the first time in more than five-and-a-half years in November. Similarly, private sector input costs increased at the quickest pace since August, contrasting with weaker cost pressures at goods producers. However, despite solid growth of activity and new business, payroll numbers in the Indian service sector rose only fractionally in January. Moreover, the rate of job creation was slower than the historical average. Staffing also increased marginally at goods producers and across the private sector overall.

The most important fact was that the Indian service providers were the most upbeat regarding the 12-month outlook for activity since mid-2014 in January. Private sector new business expanded for ninth straight month and Business sentiment led by anticipated improvements in demand and new commercial initiatives, rose to a seven- month high.

The CNX Nifty touched a high and low of 8,792.85 and 8,704.40 respectively.

The top gainers on Nifty were Hindalco Industries up by 3.62%, Cairn India up by 3.44%, Tata Power Company up by 3.03%, ONGC up by 2.38% and Coal India up by 2.23%. On the flip side, Axis Bank down by 4.45%, Bharat Heavy Electricals down by 3.97%, Zee Entertainment Enterprises down by 2.71%, Tech Mahindra Bank down by 2.59% and State Bank of India down by 2.58% were the top losers.

European Markets were trading in the red; Germany's DAX was down by 0.66%, UK's FTSE 100 was down by 0.69% and France's CAC was down by 0.53%.

The Asian equity benchmarks ended mostly in green on Wednesday, following rallies in Europe on hopes that Greece will be able to thrash out a new debt deal with creditors. China’s services sector grew at the slowest pace in six months in January raising expectations that policymakers will need to unveil more stimulus measures to avert a sharper slowdown in the world’s second-largest economy. The HSBC/Markit Services Purchasing Managers’ Index (PMI) fell to 51.8 last month - the lowest since July 2014 - from December’s 53.4. But it remained above the 50-point level that separates contraction from growth in activity on a monthly basis.

The International Monetary Fund (IMF) lowered its forecast for Thailand’s economic growth to 3.5% in 2015, and 0.5% growth in 2014, amid concerns over political stability, weak export demand and slow consumption. Thailand’s military government has struggled to revive growth in Southeast Asia’s second-largest economy since seizing power in May to end prolonged political unrest that hurt tourism, investment and consumption. Japan’s Average Cash Earnings rose to a seasonally adjusted 1.6%, from 0.1% in the preceding quarter whose figure was revised up from -1.5%.