Benchmarks witness bloodbath; Nifty breaches 8,150 mark

Extending their southward journey for second day in a row, Indian equity benchmarks witnessed bloodbath on Wednesday with frontline gauges tumbling below their crucial 8,150 (Nifty) and 26,900 (Sensex) levels with a cut of over a percentage point. After a cautious start, the domestic bourses never looked in recovery mood and ended the trade near intraday lows as sentiments remained downbeat after the Reserve Bank of India (RBI) yesterday hinted that there may not be any more cuts in the near term, even as it cut the interest rate by 0.25 per cent for the third time this year. Selling was both brutal and wide-based as none of sectoral indices, barring information technology, on BSE could manage a green close. Counters which featured in the list of worst performers included realty, fast moving consumer goods and power.

Sentiment of the market participants remained dampened after India’s services activities dropped for the first time in the span of thirteen month, largely due to decline in new order flows amid competitive pressure and natural disasters. Also, deficient monsoon forecast by the Met department, stoking fears of a drought, hit the domestic sentiment.

On the global front, European counters were trading in green in early deals as sentiments remained upbeat on better than expected euro zone inflation data and hopes that Greece will reach a deal with its creditors. However, Asia markets ended mostly in the red on Wednesday as a widespread spike in debt yields dented the allure of risky assets.

Back home, depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 63.95 per dollar at the time of equity markets closing compared with its previous close of 63.82 per dollar. Sentiments also remained dampened on report that foreign portfolio investors sold shares worth a net Rs 594.14 crore on Tuesday, as per provisional data.

Meanwhile, realty shares witnessed a sell-off on concerns of rising inventory levels while high debt levels of some companies also weighed on the sector. Stocks related to FMCG counter too edged lower on concerns that weak monsoons would impact the rural economy leading to lower volume growth. Rate sensitive stocks continued to witness selling pressure after the cautious stance by the RBI which indicated that the further rate cuts could be delayed. Additionally, Index heavyweight and cigarette major ITC slumped over four and a half percent on reports of Maharashtra government’s decision to ban sale of loose cigarettes in the state.

The NSE’s 50-share broadly followed index Nifty declined by over hundred points to end below the psychological 8,150 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over three hundred and fifty points to end below its crucial 26,850 mark. Broader markets too witnessed carnage and ended with a cut of around one and a half percent. The market breadth remained in favor of decliners, as there were 603 shares on the gaining side against 2,127 shares on the losing side while 78 shares remain unchanged.

Finally, the BSE Sensex plunged by 351.18 points or 1.29% to 26837.20, while the CNX Nifty dropped by 101.35 points or 1.23% to 8,135.10.

The BSE Sensex touched a high and a low of 27276.22 and 26698.26, respectively. The BSE Mid cap index was down by 1.38%, while Small cap index down by 1.98%.

The top gainers on the Sensex were Coal India up by 0.81%, Bharti Airtel up by 0.79%, Infosys up by 0.71%, TCS up by 0.40% and NTPC up by 0.22%. On the flip side, Tata Power down by 6.13%, ITC down by 4.59%, ONGC down by 3.81%, Vedanta down by 3.67% and GAIL India down by 3.44% were the top losers.

The gaining sectoral indices on the BSE was IT up by 0.16% while, Realty down by 5.54%, FMCG down by 3.45%, Power down by 2.22%, INFRA down by 2.12% and Oil & Gas down by 2.05% were the losing indices on BSE.

Meanwhile, Services sector growth slipping to its 13 month low has entered the contraction mood. Registering 49.6 in May, from 52.4 in April, the seasonally adjusted HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a month-by month basis - recorded 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.

The seasonally adjusted HSBC India Composite PMI Output Index based on original survey data collected from a representative panel of over 800 companies based in the Indian manufacturing and service sectors, which measures activity in both the manufacturing and services sector fell to a seven-month low of 51.2 in May, from 52.5 in April, indicating that private sector output rose further, but at a weaker rate.

The service providers reported rising cost burdens in May. The increase in input prices gathered pace since April, but was weaker than the long-run survey average. However, undeterred by weaker demand, Indian services companies hired additional workers in May, but at manufacturers, payroll numbers were broadly unchanged from the prior month.

Indian service providers reported rising cost burdens in May. The increase in input prices gathered pace since April, but was weaker than the long-run survey average. The data compiled from monthly replies to questionnaires sent to purchasing executives in around 350 private service sector companies have given reason of higher salaries paid to staff and rising petrol costs for the latest increase in average input prices.

The Services Purchasing Managers' Index came in contrast with the Manufacturing PMI. Although, firms increased prices at their fastest pace since April 2014 as input costs jumped, but the new order growth across private sector remained weakest in last 13-month. There was marginal increase in private sector employment and the sector is expected to see a rebound in coming months.

The CNX Nifty touched a high and low of 8,236.70 and 8,094.15 respectively.

The top gainers on Nifty were Idea Cellular up by 2.06%, Infosys up by 1.16%, Bank of Baroda up by 1.00%, Coal India up by 0.91% and NTPC up by 0.80%. On the flip side, Tata Power Company down by 6.06%, Bosch down by 4.20%, Cairn India down by 4.07%, Oil & Natural Gas Corporation down by 3.53% and GAIL (India) down by 3.34% were the top losers.

European Markets were trading in the green; Germany's DAX was up by 0.61%, UK's FTSE was up by 0.08% and France's CAC up by 0.35%.

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.