Post Session: Quick Review

There was no respite for the Indian equity markets on Wednesday with benchmarks losing their long held crucial support levels in a very disappointing session of trade. In just two sessions Sensex has lost close to 1000 points while the Nifty is down by around 300 points. There was no resistance from any corner and barring some short covering in final hours, markets never looked confident with bulls running for cover, extending their plunge for the second consecutive day. Markets showed signs of consolidation in early deals and things looked stablising after a sharp fall of previous session, but benchmarks kept losing ground gradually and by the noon selling aggravated, dragging the Sensex below 27000 mark, while Nifty slipped below 8100 mark intraday.

On the global front, while the US markets ended lower overnight, the Asian markets ended mostly in red, the Chinese market which showed some strength in early deals amid optimism government stimulus measures will buoy the economy, too ended lower. However, the European markets made a positive start but were trading flat in early deals as investors awaited the outcome of Greek debt talks and the European Central Bank’s monthly interest-rate announcement.

Back home, markets continued their free fall with no support in sight amid slew of disappointing developments from the economy front, after RBI indicated a pause in further rate cuts, met department forecasted a deficient southwest monsoon, now an HSBC survey stated that India's services sector activity contracted for the first time in 13 months in May, largely due to decline in new order flows amid competitive pressure and natural disasters. HSBC India Services Business Activity Index came at 49.6 in May, from 52.4 in April, below the crucial 50.0 threshold level for the first time in 13 months and falling back into contraction mood after experiencing growth for six successive months. Rupee that was showing some inert move to the equity markets, too gave up gains in tandem to equity and was trading lower at the time of equity market closing. Stocks of debt-heavy companies crashed in trade today, these high beta and highly-leveraged companies had surged on hopes that sustained rate cut would help them to improve their balance sheets, but after RBI at its monetary policy review signaled that it would await data on monsoon forecast to decide on further rate cut, it led to a selloff in the whole pack. JP Associates crashed 21%, Unitech was down 35%, IVRCL ended lower by 17%, Suzlon lost 10% and Reliance Power was down by 11%.  Adani Enterprises  too adjusted to Rs.110 as it separates its transmission business and spins it off into a separate entity. According to the arrangement, the ports business of Adani Enterprises will be folded into Adani Ports and Special Economic Zone and all its power assets will be merged with Adani Power. On sectoral front, IT saved the face with a modest gains otherwise realty lost over 5%, FMCG was down by over 3%, oil & gas and power lost over 2% for the day.

The BSE Sensex ended at 26880.62, down by 307.76 points or 1.13% after trading in a range of 26698.26 and 27276.22. There were just 7 stocks on gainers side against 23 stocks on the decliners side.

The broader indices too ended deep in red; the BSE Mid cap index was down by 1.22%, while Small cap index lost 1.80%.

The lone gaining sectoral index on the BSE was IT up by 0.27%, while Realty down by 5.31%, FMCG down by 3.49%, Power down by 2.12%, INFRA down by 2.06%, Oil & Gas down by 1.99% were the major losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.01%, Infosys up by 0.98%, Coal India up by 0.89%, Bharti Airtel up by 0.72% and TCS up by 0.41%. On the flip side, Tata Power down by 6.13%, ITC down by 4.83%, ONGC down by 3.79%, GAIL India down by 3.17% and SBI down by 3.02% were the top losers.

Meanwhile, the met department has downgraded its forecast for India’s June-September monsoon from 93% to 88% Long Period Average (LPA), with north-west region of the country expected to be hit the most. Although, the latest prediction, has an error margin of 4 percentage points either way but a rainfall of less than 90% is considered to be a drought year.

In April, the Indian Meteorological Department (IMD) had forecast that monsoon rains would be 93% of the average, which is categorised as “below normal”. Now, with the revised projection of 88%, the monsoon is categorised as “deficient”.

The North-West region which includes Delhi NCR, Haryana, Western Uttar Pradesh and Rajasthan will be affected as per the forecast with it receiving around 85% of rainfall of the LPA. The season rainfall is likely to be 90% of LPA over Central India, 92% of LPA over South Peninsula, and 90% of LPA over North-East India all with a model error of plus or minus 8% The projection of low rainfall, which may be attributed to the El-Nino phenomena, is likely to trigger fears about drought situation in some parts of the country.

The rains are vital not only for agriculture and rural incomes but also the broader economy, the Southwest monsoon which begins its four-month journey across India on June 1 in Kerala, is also crucial for power, drinking and irrigation. After missing its normal date of onset, Southwest Monsoon is now expected to hit Kerala coast on June 5. An advanced government estimate of winter output made before the recent unseasonal rains had already projected a 2.6% decline due to effects of a late drought.

The CNX Nifty ended at 8135.10, down by 101.35 points or 1.23% after trading in a range of 8094.15 and 8236.70. 9 stocks advanced against 41 stocks declines on the index.

The top gainers on Nifty were Idea Cellular up by 1.59%, Coal India up by 0.98%, Bharti Airtel up by 0.62%, Infosys up by 0.61% and Bank Of Baroda up by 0.53%. On the flip side, Tata Power down by 5.60%, Bosch down by 4.53%, ITC down by 4.47%, Cairn India down by 4.04% and ONGC down by 3.89% were the top losers.

The European markets were trading in green, Germany’s DAX was up by 65.66 points or 0.57% to 11,392.23, UK’s FTSE 100 was up marginally by 2.91 points or 0.04% to 6,931.68 and France’s CAC was higher by 16.66 points or 0.33% to 5,022.08.

Asian markets closed mostly in red on Wednesday, with Shanghai edging down after climbing more than 2 percent in the previous two days. Bank of Japan board member Sayuri Shirai ruled out the chance of an imminent expansion of monetary stimulus, but warned of risks to the price outlook that will keep pressure on the central bank as it seeks to hit an ambitious inflation target. Shirai stated that a broad uptrend in inflation was taking hold, and steady improvements in the economy would help lift wages and consumer prices. But she warned that wage rises have been modest and companies may be slow in raising prices of their goods if underlying inflation remained subdued for too long. Pan Gongsheng, a deputy governor of the People’s Bank of China stated that China’s economy still faces many uncertainties and the authorities face a difficult task in implementing macro-adjustments and reforms. Activity in China’s services sector accelerated in May as new business rose at the fastest pace in three years, a rare piece of good news for policymakers struggling to reviving a cooling economy. Manufacturing activity in Singapore rose more-than-expected last month. Singaporean PMI rose to 50.2, from 49.4 in the preceding month.