Benchmarks end lower as rate cut euphoria fizzles out

Wednesday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 8,950 (Nifty) and 29,400 (Sensex) levels as rate cut euphoria fizzled out in later trade. Initially, markets made a gap-up opening as Reserve Bank of India (RBI) surprised the markets with an early post-budget repo rate cut of 25 bps (basis points) to 7.5% from 7.75% which was again outside of central bank’s scheduled policy review meetings as the earlier rate cut effected on January 15. Sentiments also remained jubilant on reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 772.92 crore on March 3, 2015, as per provisional data.

Some support also came after services sector expanded rapidly in February at the fastest growth rate in eight months on the back of significant rise in new business orders even as jobs fell marginally in the sector. Indicating a robust expansion across the sector, HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a monthly basis, rose to an eight-month high of 53.9 in February as against 52.4 in the previous month. However, the markets lost ground in late noon deals with the benchmark indices failing to sustain at higher levels as investors opted to book profit after markets hitting historic highs of 30,000 (Sensex) and 9,100 (Nifty) levels.

On the global front, European markets were trading mostly in the red in early deals, with investors turning cautious after underwhelming euro zone PMI data and ahead of central bank meetings. Asian markets ended mostly in the red as investors grew cautious before upcoming central banks meetings and US jobs data.

Back home, depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 62.10 per dollar at the time of equity markets closing compared with its previous close of 61.91. Some concern came with Chief Economic Adviser Arvind Subramanian’s statement that the ambitious 8.1-8.5 percent economic growth projected for the next fiscal in Finance Minister Arun Jaitley's Budget is more like a 'statistical and not a real number’.

Meanwhile, banking stocks came under pressure during late noon trades as traders booked profits at higher levels. However, RBI rate cut may encourage large lenders to cut their lending rates boosting demand for home and auto loans and provide funds for various stalled and new projects. Many stalled projects across the country are waiting for cash to restart work. However, stocks related to telecom space edged higher as the biggest ever auction of spectrum by the Department of Telecommunications (DoT) started today in the morning where government expects to garner Rs 80,000-1lakh crore from the sale of spectrum.

The NSE’s 50-share broadly followed index Nifty declined by over seventy points to end below the psychological 8,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and ten points to end below its crucial 29,400 mark. Broader markets too butchered badly and ended the session with a cut of over a percentage point. The market breadth remained in favor of decliners, as there were 1004 shares on the gaining side against 1,887 shares on the losing side while 115 shares remain unchanged.

Finally, the BSE Sensex plunged by 213.00 points or 0.72% to 29380.73, while the CNX Nifty dropped by 73.60 points or 0.82% to 8,922.65.

The BSE Sensex touched a high and a low of 30024.74 and 29289.05, respectively. The BSE Mid cap index was down by 1.06%, while Small cap index was down by 1.28%.

The top gainers on the Sensex were Sun Pharma up by 6.62%, ITC up by 0.89%, Bharti Airtel up by 0.63%, Bajaj Auto up by 0.28% and HDFC up by 0.08%. On the flip side, Sesa Sterlite down by 4.11%, Hindalco down by 3.32%, Tata Power down by 3.21%, Axis Bank down by 3.19% and SBI down by 2.82% were the top losers.

The top gaining sectoral indices on the BSE were Healthcare up by 1.25%, FMCG up by 0.90% and Realty up by 0.02% while Metal down by 2.42%, Bankex down by 1.77%, PSU down by 1.75%, Oil & Gas down by 1.33% and Power down by 1.30% were the losing indices on BSE.

Meanwhile, after the successful auction of coal blocks in its first round, the government is likely to garner around Rs 82,000 crore to Rs 1 lakh crore through the auction for spectrum airways with eight telecom companies including Bharti Airtel, Vodafone, Idea Cellular, Reliance Communications and Reliance Jio expected to bid aggressively. The Department of Telecom will start the biggest ever spectrum auction on Wednesday with the eight companies placing their bids to acquire radio-waves in the four bands.

The government plans to sell 380.75 MHz of spectrum in three bands, the premium 900 MHz band, 1800 MHz and 800 MHz, besides 5 Mhz in the 2100 Mhz band across 17 out of 22 telecom areas in the country.

Most of the spectrum being put up for the auction is presently held by Airtel, Vodafone, Idea Cellular and Reliance Telecom. Since their licences are expiring in 2015-16 and they seek renewal of their licence. Mobile licences for Idea Cellular's 9 circles, 6 circles of Airtel and 7 circles each of Vodafone and Reliance Telecom are coming up for renewal.

In all there are 29 licences in 18 service areas which expire in 2015-16, holding 184 MHz spectrum in the 900 MHz band and 34.2 MHz in 1800 MHz band.  The government is likely to garner Rs 17,555 crore  at a minimum auction start price for the 2,100 Mega-Hertz band or 3G spectrum, while it will get Rs 64,840 crore from the he reserve price for auction of 2G spectrum in 800 MHz, 900 Mhz and 1800 MHz bands.

The CNX Nifty touched a high and low of 9,119.20 and 8,893.95 respectively.

The top gainers on Nifty were Sun Pharmaceuticals Industries up by 6.57%, DLF up by 1.85%, ITC up by 1.04%, HCL Technologies up by 0.43% and HDFC up by 0.29%. On the flip side, SSLT down by 4.75%, NMDC down by 4.34%, Bank of Baroda down by 3.74%, Cairn India down by 3.71% and Hindalco Industries down by 3.59% were the top losers.

Most of European Markets were trading in the red; Germany's DAX was down by 0.21% and UK's FTSE 100 was down by 0.19% while France's CAC was up by 0.22%.

The Asian markets ended mostly in red on Wednesday, as investors grew cautious before upcoming central bank meetings and US jobs data. China’s vice finance minister Zhu Guangyao stated that China’s fiscal policy will remain proactive going forward, but added that deflationary pressure is not as intense as in Europe. The finance ministry is forging ahead with fiscal reforms in a bid to deal with the root cause of local government debt piles that have amounted to more than $3 trillion. Activity in China’s services sector grew modestly in February as new orders rose at their quickest pace in three months, a private survey showed just a few days after the central bank cut interest rates to stimulate the world’s second-largest economy. The HSBC/Markit Services Purchasing Managers’ Index (PMI) picked up to 52.0 last month from January’s 51.8 and remained above the 50-point level that separates contraction from growth in activity on a monthly basis. A sub-index for new orders rose to 52.2 in February from 51.2 in January and the sub-index measuring new business also rose. Taiwanese Industrial Production rose to a seasonally adjusted annual rate of 8.14%, from 7.33% in the preceding month.