Late hour sell-off drag benchmarks lower; Nifty breaches 8,650 mark

Thursday’s trading session turned out to be a disappointing for the Indian equity markets as profit booking emerged during late noon trades in banking and auto shares. The domestic benchmarks traded jubilantly for most part of the trades but a sharp wave of selling, which emerged in last leg of trade, dragged the key gauges below their crucial 8,650 (Nifty) and 28,500 (Sensex) levels. After making a gap-up start markets traded jubilantly as investors reacted positively to the Fed’s monetary policy announcement, viewing its statement as dovish regarding the outlook for interest rates. Fed Chair Janet Yellen noted that removing the word patient from the statement doesn’t mean the central bank is going to be impatient. But, suddenly markets took a U-turn in final hour of trade as market-participants resorted to incremental profit-booking activities at higher levels.

Sentiments remained dampened on report that foreign institutional investors were net sellers in equities to the tune of Rs 457.43 crore on Wednesday, as per provisional stock exchange data. Investors also shrugged off Organisation for Economic Cooperation and Development's (OECD) bullish outlook for India, which in its interim economic assessment report has said that India is poised to grow 7.7 percent this year and 8 percent in 2016 to become the “fastest growing major economy.”

On the global front, European counters made a firm start with CAC, DAX and FTSE were trading in the green terrain in early deals. Asian shares enjoyed their best session in 18 months on Thursday as investors priced in a later start and a slower pace for future US rate rises. At the conclusion of two day’s policy meet, the Federal Reserve sounded less likely to act aggressively in raising interest rates than investors anticipated.

Back home, banking shares ended lower erasing their entire morning gains on the back of profit booking in late trade. Software and technology stocks too remained under pressure for yet another session of rupee’s strength. Additionally, Airlines stocks like Spicejet and Jet Airways ran out of steam after civil aviation ministry tightened the eligibility criteria norms for flying international routes by increasing the domestic flying credits (DFCs) eligibility to 300 DFC from the current 200. According to the new proposal, airlines will have to accumulate DFCs by flying to more cities in India and will have the right to automatically fly overseas once the credits cross a certain threshold.

The NSE’s 50-share broadly followed index Nifty declined by over fifty points to end below its psychological 8,650 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over one hundred and fifty points to finish below the psychological 28,500 mark. Broader markets too dragged in last leg of trade on the back of profit booking and ended the session with a cut of over half a percent. The market breadth remained in favour of decliners, as there were 1,104 shares on the gaining side against 1,730 shares on the losing side while 127 shares remain unchanged.

Finally, the BSE Sensex plunged by 152.45 points or 0.53% to 28469.67, while the CNX Nifty dropped by 51.25 points or 0.59% to 8,634.65.

The BSE Sensex touched a high and a low of 28978.74 and 28411.70, respectively. The BSE Mid cap index was down by 0.59%, while Small cap index was down by 0.58%.

The top gainers on the Sensex were GAIL India up by 2.19%, NTPC up by 1.50%, Tata Steel up by 1.36%, TCS up by 1.32% and ONGC up by 0.95%. On the flip side, Axis Bank down by 2.50%, SBI down by 1.76%, Reliance Industries down by 1.44%, Sesa Sterlite down by 1.37% and ICICI Bank down by 1.33% were the top losers.

The gaining sectoral indices on the BSE were Consumer Durables up by 0.48% and Healthcare up by 0.42% while, Bankex down by 1.76%, Realty down by 1.50%, Capital Goods down by 1.00%, Oil & Gas down by 0.68%, FMCG down by 0.64% were the losing indices on BSE.

Meanwhile, the civil aviation ministry has tightened the eligibility criteria norms for flying international routes by increasing the domestic flying credits (DFCs) eligibility to 300 DFC from the current 200. According to the new proposal, airlines will have to accumulate DFCs by flying to more cities in India and will have the right to automatically fly overseas once the credits cross a certain threshold.

These DFCs can be earned by flying to India's top 20 cities and to smaller cities with airports. The ministry has also proposed a buy-and-sell arrangement under which 25% of such DFCs can be bought from regional airlines or helicopter companies. However, the revised norms, designed to encourage long-haul operations, also stipulate that a new airlines will not be allowed to operate on international routes, which are less than 6 hours away, with 300 DFCs and will require to earn 600 DFCs to fly under six-hour routes.

A meeting of airlines to discuss the proposal of replacing the 5/20 eligibility criteria norm was called and was decided to remove 5/20 eligibility clause for flying international, being replaced through DFCs. A note for inter-ministerial consultation on the issue will be sent to the ministries. The airlines have been asked to respond with their query by March 31, 2015.

Currently, an airline seeking to start overseas flights needs to have an uninterrupted flying experience of five years in the domestic skies and have a minimum fleet size of 20 aircraft. Only three airlines - Air India, Indian Airlines (Indian) and Jet Airways - presently meet the minimum eligibility criteria to operate international flight.

The CNX Nifty touched a high and low of 8,788.20 and 8,614.65 respectively.

The top gainers on Nifty were Lupin up by 2.85%, Asian Paints up by 2.58%, GAIL (India) up by 2.16%, TCS up by 1.67% and NTPC up by 1.41%. On the flip side, PNB down by 4.18%, Bank of Baroda down by 3.79%, Axis Bank down by 3.71%, BPCL down by 2.77% and HCL Technologies down by 2.67% were the top losers.

Most of European Markets were trading in the red; Germany's DAX was down by 0.12% and France's CAC was down by 0.01%, while UK's FTSE 100 was up by 0.10%.

The Asian markets closed mostly in green on Thursday, as investors noted that Federal Reserve has moved to clarify the terms of a widely expected rate hike this year. Chinese cabinet stated that the country will make flexible use of its monetary policy tools to support the economy and employment. The state council added that policymakers will also increase targeted adjustments to policy to bolster growth in the world’s second-largest economy. Japan Automobile Manufacturers Association stated that demand for new cars, trucks and buses is expected to fall 5.4 per cent to 4.99 million vehicles in the fiscal year ending in March 2016. That would mark a second straight year of declines, as car sales continue to suffer from the hangover of a sales take hike in April last year. Japan’s All Industries Activity Index rose to a seasonally adjusted 1.9%, from -0.1% in the preceding month whose figure was revised up from -0.3%.