Benchmarks crash like house of card; Sensex breaches 29,000 mark

Extending their previous session’s southward journey, Indian barometer gauges witnessed blood bath on Monday with both the major indices losing around a percent and ending below their crucial 8,800 (Nifty) and 29,000 (Sensex) levels. Selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include consumer durables, oil & gas, realty and fast moving consumer goods. After trading in tight band for most part of the day, domestic gauges crashed like house of card in the last leg of trade as investors remained cautious ahead of the ahead of key events including Economic Survey, Railway Budget and Union Budget, along with the expiry of February series due later during the week.

Markets made a positive start and traded in the green for most part of the day. Sentiments turned down-beat and selling got intensified in last leg of trade after Global rating agency Standard & Poor’s said India’s low income levels and weak fiscal and debt indicators constrain the country’s credit profile. However, the political stability following the general elections last year has created a conducive environment for reforms, which could address these weaknesses. Meanwhile, in his annual speech to mark the beginning of the Budget session of parliament, President of India Pranab Mukherjee, addressing the members of both the Houses of Parliament said that the fundamental tenet of this government is ‘sabka saath, sabka vikas’ which means taking everyone along and development for all.

On the global front, European markets were trading mostly in the green in early deals, with Germany’s share index hitting a new all-time high and Britain’s FTSE trading just below a record peak after euro zone negotiators agreed to extend Greece’s financial rescue package. Most of the Asian counters ended in the green on the first trading day of the Year of the Sheep, buoyed by a bailout deal between Greece and the euro zone last week. However, trading volumes remained light with China, Taiwan and Vietnam still closed for the Lunar New Year holiday.

Back home, sentiments remained dampened with report that, foreign portfolio investors (FPIs) sold shares worth a net Rs 89.41 crore on Friday. Meanwhile, Reliance Industries, Cairn India and shares of Reliance ADA and Jubilant Group companies dropped after one official each of Cairn India, Reliance Industries, Reliance Power, Jubilant Energy and Essar group was arrested by Delhi police, as part of investigations of an alleged scam to steal documents from the oil ministry to sell to consultants and private companies. The Infra stocks edged lower despite the Union Minister Nitin Gadkari unveiling plans for Rs 10 lakh crore investments in highways and shipping sectors by 2019. He has said that government is working on an ambitious plan to build one smart city each at the country's 12 major ports.

The NSE’s 50-share broadly followed index Nifty tumbled by around eighty points to end below the psychological 8,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and fifty points to finish below its psychological 29,000 mark. Broader markets too struggled to get any traction and ended the session with a cut of around half a percent. The market breadth remained in favor of decliners, as there were 1,192 shares on the gaining side against 1,697 shares on the losing side while 125 shares remain unchanged.

Finally, the BSE Sensex declined by 256.30 points or 0.88% to 28975.11, while the CNX Nifty dropped 78.65 points or 0.89% to 8754.95.

The BSE Sensex touched a high and a low of 29362.96 and 28913.16, respectively. The BSE Mid cap index was down by 0.84%, while Small cap index ended lower by 0.32%.

The top gainers on the Sensex were Mahindra & Mahindra up by 0.99%, Sesa Sterlite up by 0.94%, TCS up by 0.76%, Larsen & Toubro up by 0.49% and NTPC up by 0.45%. On the flip side, Reliance Industries down by 2.53%, GAIL India down by 2.22%, Tata Steel down by 2.04%, Axis Bank down by 2.04% and SBI down by 1.99% were the top losers.

The losing sectoral indices on the BSE were Consumer Durables down by 1.99%, Oil & Gas down by 1.91%, Realty down by 1.32%, FMCG down by 1.26%, Bankex down by 0.88%.

Meanwhile, with country’s different regulators investigating companies over a variety of alleged mis-demeanours, Reserve Bank of India (RBI)’s Governor Raghuram Rajan urged for the need of country to find balance between giving government and regulators unchecked power and creating complete paralysis. He suggested that though the country should strengthen its government and regulatory capabilities but it must also resist bringing in 'layers and layers of checks and balances' since this could hinder the state's normal functions. He emphasized that the country should not escape from “License Permit Raj” only to end up in the “Appellate Raj.”

These comments came after some investors raised concerns over government’s excessive zeal. Citing Hitler’s example, Reserve Bank of India (RBI) Governor Raghuram Rajan cautioned that a strong government may not always move in the right direction. He further underscored that Hitler’s so called strong government only took Germany efficiently and determinedly on a path to ruin, overriding the rule of law and dispensing with elections.

He called for economic inclusion and added this should mean easy access to quality education, nutrition, healthcare, finance and markets to all citizens for ensuring sustainable growth. He also suggested that there was greater need of specialist with domain knowledge and experience in many areas of government and regulation.

The Central Bureau of Investigation (CBI) sparked indignation after publicly announcing a probe into industrialist Kumar Mangalam Birla in December 2013 in relation to a coal block allocated to a firm belonging to his Aditya Birla Group and later dropping the case in August citing a lack of evidence.

The CNX Nifty touched a high and low of 8869.00 and 8736.10 respectively.

The top gainers on Nifty were Power Grid up by 1.73%, Kotak Mahindra Bank up by 1.43%, Sesa Sterlite up by 1.04%, TCS up by 0.79% and Mahindra & Mahindra up by 0.74%. On the flip side, Zee Entertainment down by 3.96%, NMDC down by 3.44%, DLF down by 3.17%, Lupin down by 2.51% and Reliance Industries down by 2.48% were the top losers.

European Markets were trading mostly in the green; Germany’s DAX gained 0.46% and France’s CAC was up by 0.40%, while UK’s FTSE 100 was down by 0.17%.

The Asian indices ended mostly in green on Monday, after board minutes from Bank of Japan raised questions about the scope of government bond buying and broad market support. The markets in China and Taiwan remain closed for the Lunar New Year holiday. Some of Bank of Japan board members stated that the pace of massive Japanese government bond buying may need to stop before reaching a 2% sustained inflation goal, according to minutes published of the January meeting. The board members also added that falling oil prices should be reflected in inflation expectations, but that the underlying trend of moving from a deflation mindset is progressing steadily. It was the first time that board members had referred to the feasibility of continuing the key part of its nearly two-year-old quantitative and qualitative easing (QQE). Japan’s All Industries Activity Index fell to a seasonally adjusted -0.3%, from 0.0% in the preceding month whose figure was revised down from 0.1%.