Benchmarks witness blood-bath on Friday

Indian barometer gauges witnessed bloodbath on Friday with both the major indices losing around one and a half percentage points due to profit-booking by funds and retail investors. The falls marked a sharp retreat from earlier gains of nearly a percent on optimism about the government’s reform agenda after Parliament had on Thursday passed a bill raising foreign investment limits in the insurance sector. Selling was both brutal and wide-based as none of sectoral indices on BSE were spared and key gauges ending below their crucial 8,650 (Nifty) and 28,550 (Sensex) levels. Counters, which featured in the list of worst performers, include banking, power, capital goods and realty.

Sentiments turned down-beat as retail inflation rose to 5.37 percent in February, the third consecutive month of uptick, diminishing hopes of another rate cut by the Reserve Bank. Marketmen failed to draw any sense of relief from report that index for industrial output (IIP) for the month of January came in at 2.6%, way higher than street expectation of 0.50% and also higher compared to 1.7% in December mainly on account of splendid growth of manufacturing sector. Investors also remained on sidelines ahead of data on inflation based on the wholesale price index for February 2015 and Corporate advance tax payment for the fourth and final installment which is due by Sunday, 15 March 2015, could provide clues on Q4 March 2015 corporate earnings.

Investors also shrugged positive global cues with European markets making a positive opening and were trading in the green in early deals as traders added to their bets on an economic recovery in Europe. Asian markets ended mostly in the green after an unexpected drop in American retail sales strengthened the case for keeping interest rates lower for longer.

Back home, traders failed to draw any solace from report that India and Mauritius agreeing to fast-track the long-pending revision of Double Taxation Avoidance Agreement (DTAA) to prevent abuse of the convention. Depreciation in Indian rupee too dampened the sentiments. The rupee was trading at 62.90 at the time of equity markets closing versus its previous close of 62.50.

Meanwhile, Capital Goods stocks were down amid subdued industrial growth in January. FMCG counter too ended lower, led by 2% fall in ITC and Hindustan Unilever each on concerns that higher retail inflation would lead to lower consumer spends and hurt volume growth. Additionally, stocks of tyre manufacturer too edged lower on reports that government plans to raise import duty on natural rubber. On the flip side, telecom stocks continued to rang loud despite reports suggesting of aggressive bidding by telecom companies on eighth day of telecom spectrum auction on Thursday.

The NSE’s 50-share broadly followed index Nifty declined by around one hundred and thirty points to end below the psychological 8,650 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around four hundred and thirty points to end below its crucial 28,550 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around one and half a percent. The market breadth remained in favor of decliners, as there were 900 shares on the gaining side against 1,963 shares on the losing side while 110 shares remain unchanged.

Finally, the BSE Sensex plunged by 427.11 points or 1.48% to 28503.30, while the CNX Nifty dropped by 128.25 points or 1.46% to 8,647.75.

The BSE Sensex touched a high and a low of 29183.76 and 28448.48, respectively. The BSE Mid cap index was down by 1.37%, while Small cap index was down by 1.54%.

The top gainers on the Sensex were Bharti Airtel up by 0.72%, ONGC up by 0.56% and NTPC up by 0.03%. On the flip side, BHEL down by 3.41%, Larsen & Toubro down by 3.11%, Bajaj Auto down by 2.64%, Wipro down by 2.64% and Axis Bank down by 2.51% were the top losers.

The losing sectoral indices on the BSE were Capital Goods down by 2.57%, FMCG down by 1.94%, Bankex down by 1.93%, Power down by 1.81% and Auto down by 1.63%, while there were no gainers.

Meanwhile, in a major boost to the government's reform agenda, the Rajya Sabha on Thursday approved the insurance bill, thereby raising the ceiling for foreign investment in the sector from 26% to 49%. The Insurance Laws (Amendment) Bill, 2015 will replace the ordinance promulgated by the government last year.

The passage of the bill in the Rajya Sabha, with help from Congress, comes as a major relief to the Modi government which had been slamed for the high-handedness with which it had taken the ordinance route to carry out major policy decisions. Further, the passage of the bill, which provides power to Insurance Regulatory Development Authority (IRDA), also brings cheer for insurance agents. As per the Bill, the manner and amount of remuneration, or reward, to be paid or received by way of commission or otherwise, to an insurance agent or an intermediary, will be decided by the regulator.

Notably, Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) was able to get its thing done in the upper House, where it is in a minority, after the Congress decided to support the bill, signalling a rare consensus between the two national political parties on a key economic reform.

However, the passage of this bill in Rajya Sabha also raises hopes of legislative passage for some other crucial bills like the Coal Mines (Special Provisions) Bill and Mines and Minerals (Development and Regulation) Amendment Bill, 2015, which have been referred to a select committee by the house.

The CNX Nifty touched a high and low of 8,849.75 and 8,631.75 respectively.

The top gainers on Nifty were DLF up by 6.19%, ONGC up by 0.90%, Bharti Airtel up by 0.58%, Asian Paints up by 0.46% and NTPC up by 0.25%. On the flip side, Jindal Steel & Power down by 4.14%, Cairn India down by 3.36%, BHEL down by 3.12%, Larsen & Toubro down by 3.05% and Ambuja Cements down by 2.29% were the top losers.

European Markets were trading in the green; Germany's DAX rose 0.15%, France's CAC surged 0.10% and UK's FTSE 100 was up by 0.03%.

The Asian markets ended mixed on Friday, after weak US retail sales alleviated jitters about the Federal Reserve’s timetable for raising interest rates. Confidence at big Japanese manufacturers worsened in the January-March quarter and is seen turning negative in the second quarter as a slumping yen ramped up the costs of raw material imports, complicating Tokyo’s stimulus-driven campaign to revive the economy. Indonesia’s financial services authority aims to boost the local capital market by making it easier for pension and insurance funds to invest in riskier products. Southeast Asia’s largest economy is heavily reliant on offshore funding to meet growth targets and undertake infrastructure projects, with foreign investors holding nearly 40% of 1,292 trillion rupiah ($98 billion) in outstanding government bonds. Businesses see opportunity in the weakening rupiah to boost the Indonesia’s manufacturing exports, and have asked government to expedite the issuance of policies that they say should boost the factories’ global competitiveness. Japanese Household Confidence rose to a seasonally adjusted annual rate of 40.7, from 39.1 in the preceding month. Singaporean Retail Sales fell to a seasonally adjusted -5.0%, from 4.6% in the preceding month whose figure was revised up from 2.6%.