Markets extend southward journey for sixth straight session

Prolonging their southward moment for sixth straight session, Indian equity benchmarks ended the volatile day of trade at their lowest levels in almost 5 weeks with key gauges breaching their crucial 26,500 (Sensex) and 8,050 (Nifty) levels, albeit by small margins. It was a choppy day of trade where markets swung between negative and positive terrain throughout the session, as investors opted a cautious approach ahead of key macro data slated to be announced later in the week. Overall sentiments remained down-beat after Moody’s said a weak monsoon is likely to be credit-negative for India as it is expected to push up food inflation as well as government deficits. IMD had revised its monsoon forecast for 2015 from below normal to deficit.

Meanwhile, Prime Minister Narendra Modi has said that India must quickly expand its irrigation network and improve water usage to offset the impact of less monsoon rainfall than usual, while Agriculture Minister Radha Mohan Singh said that sustaining 4 percent growth in the farm sector is a challenging task though it remains one of the top priorities of the government. However, some support came after Paris-based think tank Organisation for Economic Cooperation and Development (OECD) has said that Indian economy is witnessing “stable growth momentum” and mixed trends are seen in other parts of the world including China and the US. Pegging the growth rate at 7.4 percent for 2016, the OECD said that decline in oil prices would reduce pressures on the current account deficit, inflation and subsidies.

Global cues too remained sluggish with European counters were trading lower in early deals with investors awaiting U.K. trade data for April and the second estimate of Eurozone first-quarter GDP figures for further clues to the region's economic recovery. Asian markets ended in red terrain amid worries about Greece.

Back home, sentiments remained dampened on report that foreign institutional investors were net sellers in Indian equities worth Rs 749 crore on Monday. Selling in realty counter too weighed on sentiments, led by Unitech which plunged around 8% after the National Consumer Disputes Redressal Commission (NCDRC) asked the real estate major to pay buyers compensation at the rate of 12% per annum for delay in delivery of flats.

However, buying in banking space provided some strength to markets after the Reserve Bank of India (RBI) announced that banks can undertake a strategic debt restructuring of a stressed assets by converting loan dues into equity shares. There was some buzz in the oil & gas sector after Finance Ministry returned an Oil Ministry proposal to allow market price for part of the natural gas produced by firms like ONGC and Reliance Industries from difficult fields, while ONGC lost 1.5%, RIL too ended marginally in red.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below the psychological 8,050 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over forty points to end below its crucial 26,500 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of over quarter of a percent. The market breadth remained in favor of decliners, as there were 1,057 shares on the gaining side against 1,577 shares on the losing side while 114 shares remain unchanged.

Finally, the BSE Sensex lost 41.84 points or 0.16% to 26481.25, while the CNX Nifty declined by 21.75 points or 0.27% to 8,022.40.

The BSE Sensex touched a high and a low of 26604.65 and 26438.32, respectively. The BSE Mid cap index was down by 0.32%, while Small cap index down by 0.33%.

The gaining sectoral indices on the BSE were Consumer Durables up by 0.97%, Metal up by 0.81%, Power up by 0.35%, INFRA up by 0.28% and Bankex up by 0.24% while, Realty down by 1.54%, Healthcare down by 1.41%, Auto down by 0.73%, IT down by 0.70% and TECK down by 0.66% were the losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 3.11%, Hindalco up by 1.57%, ICICI Bank up by 1.36%, GAIL India up by 1.30% and Tata Motors up by 1.06%. On the flip side, Cipla down by 3.35%, Dr. Reddys Lab down by 2.34%, Sun Pharma down by 2.05%, Wipro down by 1.76% and Bajaj Auto down by 1.60% were the top losers.

Meanwhile, Prime Minister Narendra Modi with looming first drought like situation in six years has said that India must quickly expand its irrigation network and improve water usage to offset the impact of less monsoon rainfall than usual. He said that said that the 'challenge' should be converted into an 'opportunity' for looking at other avenues of irrigation.

PM pushed for a brief, intensive effort to increase the number of farm ponds, adding that falling groundwater levels in some Indian states could force an urgent shift in crop patterns. Prime Minister office had earlier asked officials to ensure quick results for farmers by reviewing administrative mechanisms, financial arrangements and technology use in irrigation.

Modi said that the irrigation plans need to be worked out at the district level, and young officers from the civil services should be asked to propose district-level irrigation plans. He further added that Expansion of irrigation has to be linked with a comprehensive evaluation of cropping patterns across states, as well as a judicious mix of modern and micro irrigation systems such as drip and sprinkler irrigation.

Indian farmers largely depend on the monsoon rains that run from June to September. This year, the rains are forecast to be 88 percent of the long-term average, which could drastically crimp farm output.

The CNX Nifty touched a high and low of 8,057.15 and 8,005.15 respectively.

The top gainers on Nifty were Vedanta up by 2.32%, Hindalco Industries up by 1.40%, ICICI Bank up by 1.32%, Power Grid Corporation of India up by 1.27% and GAIL (India) up by 1.26%. On the flip side, Cairn India down by 4.34%, Cipla down by 3.95%, Bosch down by 3.37%, Wipro down by 2.59% and Dr. Reddy's Laboratories down by 2.35% were the top losers.

European Markets were trading in the red; Germany's DAX was down by 1.38%, UK's FTSE was down by 0.55% and France's CAC down by 0.92%.

Asian markets closed in red on Tuesday, following another batch of data highlighting ongoing weakness in China’s economy. China’s consumer inflation eased while producer prices stayed stubbornly in deflation in May, bolstering the case for fiscal stimulus as the world's second-largest economy shrugs off monetary easing. Chinese PPI remained unchanged at an annual rate of -4.6% while Chinese CPI fell to an annual rate of 1.2%, from 1.5% in the preceding month. A bigger-than-expected slide in China’s imports in May also strengthened expectations that more policy stimulus may be needed to avert a sharp slowdown in the world's second-largest economy. A cooling buying sentiment exacerbated the area of new homes sold in Shanghai last week to an eight-week low but demand for medium to high-end projects stayed strong. New houses totaling 266,200 square meters were sold across the city last week, a plunge of 37.4 percent from the previous seven-day period. Japanese Household Confidence rose to a seasonally adjusted annual rate of 41.4, from 41.5 in the preceding month. Japan’s M2 Money Stock rose to a seasonally adjusted 4.0%, from 3.6% in the preceding month.