Markets get spooked lacking any major announcement in the Rail Budget

Indian markets went into tailspin on Thursday as the Rail Budget failed to live up to the high expectations. Suresh Prabhu, while presenting his maiden rail budget kept the passengers fares unchanged but increased the freight charges for various commodities, which led to sharp selling in the markets. The railway budget was basically a forward looking statement with no announcement of any immediate new rails, extension or addition. There was some major announcement in the rail Budget like, Rs 8.5 lakh crore investment over next five years, provision of Rs 120 crore for lifts, escalators at major stations, Rs 96182 crores for capacity expansion and keeping the Operating ratio for FY16 at 88.5% against 91.8% for FY15. There was some additional pressure in the market with Global rating agency Moody's stating that fiscal policies and structural reforms will determine India's sovereign credit profile and not recent revisions to the economic growth data.

The global cues were mostly positive but the domestic markets remained embroiled in their own affairs, unable to get any support. Though, the US markets made a flat closing overnight, the Asian markets made mostly a higher closing. The Chinese stocks surged on hopes for more measures by the government to stimulate the economy, while the Japanese market ended up on yen weakness. The European stocks too edged higher to fresh seven-year highs on Thursday.

Back home, apart from the F&O series expiry there was disappointments of the Rail budget that led the markets into dumps. There was across the board selling pressure that took the major indices below their nearest support levels and the major averages snapped the series lower by over 3 percent. The markets looked in somber mood from the very beginning and lacked courage to move higher ahead of the Rail budget and expiry of the series. Trade despite in negative territory remained steady but once the rail budget was announced, markets started selling in a knee-jerk reaction. Even, the positive statement of the Standard & Poor's (S&P), terming India as the “bright spot” in Asia Pacific, failed to encourage the market mood. S&P sharply revised upwards country's GDP forecast to 7.9 per cent next fiscal and even higher 8.2 per cent in the year after. The major rail stocks made mostly a lower close on the BSE, Texmaco Rail  declined by 2.51%, Kalindee Rail Nirman plunged by 4.05%, Stone India slumped by 6.07%, Simplex and BEML were down by 1.65%. On the other hand Titagarh Wagons gained 0.50%, while Kernex Micro ended flat. Rail budget not only impacted the rail stocks but also the cement, urea and steel stocks after the announcement of hike in freight rates. Freight rates have been hiked by 0.8% for Iron & Steel, 6.3% for coal, 10% for urea and 2.7% for cement. ACC and Ambuja Cements lost over half a percent, while UltraTech Cements was down by over 2 percent.

The NSE’s 50-share broadly followed index Nifty slumped by over eighty points, below the psychological 8,700 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex ended lower by over 260 points and below the psychological 29,000 mark. Broader markets suffered similar cut and were down by around a percent. On the F&O series expiry, the total market turnover surged to third highest ever of 9.38 lakh crores.

The market breadth remained in favour of decliners, as there were 1,736 shares on the declining side against 1,087 shares on the gaining side, while 108 shares remained unchanged.

Finally, the BSE Sensex plunged by 261.34 points or 0.90% to 28,746.65, while the CNX Nifty witnessed cut of 83.40 points or 0.95% to 8,683.85.

The BSE Sensex touched a high and a low of 29069.13 and 28693.82, respectively. The BSE Mid cap index was down 0.79%, while Small cap index lost 0.81%. There were 6 stocks advancing against 24 stocks declining on the index.

The gaining sectoral indices on the BSE were Realty up by 0.33%, INFRA up by 0.18%, Oil & Gas up by 0.04%, while Auto down by 1.43%, IT down by 1.43%, Capital Goods down by 1.31%, TECK down by 1.21%, Metal down by 0.96% were the losing indices on BSE.

The top gainers on the Sensex were NTPC up by 4.90%, GAIL India up by 1.57%, ONGC up by 0.63%, Bharti Airtel up by 0.47% and HDFC up by 0.35%. On the flip side, BHEL down by 3.47%, Sun Pharma Inds down by 2.85%, Infosys down by 2.53%, Cipla down by 2.51% and Hindalco down by 2.48% were the top losers.

Meanwhile, accelerating the process of achieving grid tariff parity for solar power and also to help reduce consumption of kerosene and diesel, the government has approved the setting up of 15,000 MW grid-connected solar photo voltaic power projects through state-run NTPC under the National Solar Mission.

The scheme will be executed by NTPC Vidyut Vyapar Nigam (NVVN), an arm of NTPC, in three tranches and the capacity allotted to each such state will be set up through developers, to be selected through international competitive bidding by NTPC/NVVN.

As per the cabinet approval, the bundled power will be allotted to various states that offer to provide land for setting up the solar power projects, and to those which would purchase a major portion of the bundled solar power for consumption within the state and ensure connectivity to the solar power project. Initially, 1000 MW capacity out of the 3000 MW under the bundling scheme will be set up on land already identified in Andhra Pradesh, while the he balance 2000 MW capacity under the Bundling Scheme will be allotted in other interested states that come forward.

The first Phase of the National Solar Mission (2010-2013) had a target of 1,100 MW for grid connected solar power generation capacity, against which 1,685 MW was set up in the country under various schemes. Further capacity addition of 9,000 MW comprising 3,000 MW under central schemes and 6,000 MW under state initiatives and other mechanisms were envisaged in the second phase of the Mission (April 2013-March 2017) and further there will be Phase 3 (2017-22).

The CNX Nifty touched a high and low of 8,840.65 and 8,751.40 respectively. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were NTPC up by 5.00%, DLF up by 2.07%, Lupin up by 2.00%, Cairn India up by 1.51% and GAIL India up by 1.28%. On the flip side, BHEL down by 3.56%, Bank Of Baroda down by 3.27%, Sun Pharma Inds down by 2.81%, Asian Paints down by 2.70% and IDFC down by 2.69% were the top losers.

European Markets were trading in green, UK’s FTSE 100 gained 1.14 points or 0.02% to 6,936.52, France’s CAC was up by 12.05 points or 0.25% to 4,894.27, Germany’s DAX was higher by 17.03 points or 0.15% to 11,227.30.

The Asian markets ended mostly in green on Thursday, on Federal Reserve Chair Janet Yellen’s indication that the US central bank is in no hurry to hike interest rates. Bank of Japan board member Koji Ishida stated that any necessary adjustment to monetary policy should be saved for ensuring longer-term economic stability and should not be made just to hit the 2% inflation target in the near term. He added that it is too early to debate an exit strategy but BoJ will eventually need to go easy on massive stimulus as prices move upward. BOJ Governor Haruhiko Kuroda stated that there was no ceiling on how much the central bank would expand its balance sheet relative to the size of the country’s gross domestic product (GDP). Kuroda added that a median forecast of the BOJ’s nine board members produced in January, which is for core consumer inflation to hit 2.2 percent in fiscal 2016, showed that members of the board expect inflation to hit the central bank’s 2 percent target by the end of that year in March 2017. Malaysian Unemployment Rate remained unchanged at a seasonally adjusted 2.8% compared to the preceding month. Singaporean Industrial Production rose to an annual rate of 0.9%, from -1.9% in the preceding month.