Markets continue to trade in red; IT bounce back

Markets continue to reel under pressure in the early noon session with benchmarks losing around half a percent, trading near their crucial psychological levels. There was anxiety with continued capital outflows by foreign funds on persistent concerns of foreign investors on tax claims, despite the minister of state for finance Jayant Sinha's clarification on the Minimum Alternate Tax (MAT) on foreign funds. Investors are worried, even though the minister stated that funds invested through Mauritius and Singapore-countries with which India has treaty for tax exemption on capital gains-will be untouched. Trade was also being weighed down by the rupee depreciation, which was trading near its three months low. On the sectoral front, the defensive FMCG index was trying hard to remain in green with modest gains. On the other hand maximum cut was being witnessed in realty, consumer durables, capital goods and metals. Realty was being dragged by the index heavyweight DLF which continuing its decline was down by around 4% after BSE decided to move out the stock from Group A category, comprising top 300 companies. Though, the IT sector trading cautiously has moved into green ahead of Infosys - India's second largest outsourcer’s earnings announcements. Infosys numbers are likely to set the direction of stock markets.

The BSE Sensex is currently trading at 27634.88, down by 100.14 points or 0.36% after trading in a range of 27510.90 and 27829.11. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.02%, while Small cap index lost 1.71%.

The gaining sectoral indices on the BSE were IT up by 0.34%, FMCG up by 0.15%, TECK up by 0.13%, while Consumer Durables down by 2.74%, Realty down by 2.42%, Capital Goods down by 1.48%, Metal down by 1.41%, Bankex down by 0.92% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.05%, ITC up by 1.27%, Maruti Suzuki up by 1.11%, ONGC up by 0.75% and Sun Pharma Inds up by 0.59%. On the flip side, Sesa Sterlite down by 3.02%, Cipla down by 2.95%, Hindalco down by 2.52%, Axis Bank down by 2.26% and HDFC down by 1.99% were the top losers.

Meanwhile, soothing the nerves after weak monsoon predictions, Moody’s Investor Service has underscored that its rating action on India wasn’t dependent on one particular monsoon, though a 'monsoon shock' represents a near-term risk. This development came right after India Meteorological Department predicted below normal monsoon for second successive year. It predicted that monsoon was likely to be below normal in the current year at 93% with parts of north-western and central India being the mostly affected areas.

The agency highlighted that rating incorporates policies to address these vulnerabilities to monsoon. However, it did warn that India was unique among countries in term of impact that drought had on inflation and growth. In related terms, global rating agency noted that a growth rate of more than 7.5% may not be 'sustainable' for India in the present scenario and the country was required to resolve tax issues that are impacting its investment climate. It also stated that rise in inflation could pose a potential risk to the country’s sovereign rating.

The rating agency asserted that it was confident of the government putting in motion policies to address these vulnerabilities to monsoon and that it was inability to pursue these policies in terms of irrigation, infrastructure and food distribution that could impact the rating of the country. Further, it outlined that political shift reversing policy efforts, sharp rise in commodity prices could act as risk to rating outlook. Lastly, it also suggested India to direct its policy efforts towards lowering inflation, improving infrastructure and regulatory environment and fiscal consolidation. Moody's has a 'Baa3' rating on India, with a positive outlook.

The CNX Nifty is currently trading at 8357.55, down by 40.75 points or 0.49% after trading in a range of 8319.45 and 8413.30. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were NMDC up by 2.61%, Lupin up by 2.31%, TCS up by 1.90%, ITC up by 1.43% and HCL Tech. up by 1.32%. On the flip side, Sesa Sterlite down by 3.03%, Cipla down by 3.01%, Hindalco down by 2.59%, Zee Entertainment down by 2.51% and Axis Bank down by 2.41% were the top losers.

The Asian markets were mostly in red, barring Jakarta Composite which was up by 1.19 points or 0.02% to 5,437.40, FTSE Bursa Malaysia KLCI up by 12.41 points or 0.67% to 1,858.49 and Taiwan Weighted higher by 115.79 points or 1.18% to 9,913.28.

On the other hand, Nikkei 225 slumped by 167.61 points or 0.83% to 20,020.04, Shanghai Composite lost 33.32 points or 0.75% to 4,381.19, KOSPI Index declined by 13.61 points or 0.63% to 2,159.80, Hang Seng was down by1.28 points or 0% to 27,826.42 and Straits Times was lower by 1.01 points or 0.03% to 3,501.74.