Post Session: Quick Review

The first day of the July series proved to be a disappointing one for the markets, with benchmarks paring some of their last session’s gains. Fatigue appeared in the markets and benchmarks found it difficult to enter the green lacking conviction and while benchmarks defended the 8350 (Nifty) and 27800 (Sensex) they found stiff resistance to breach the 8400 and 27900 marks, trading mostly in a range. The markets lost ground in the very early hours of trade and barring few futile attempts never looked confident to enter the green, finally closing down by about a quarter percent. In the early trade markets came under pressure after the RBI Governor Raghuram Rajan asked central banks from across the world to define 'new rules of the game' warning that the global economy may be slipping into problems similar to the Great Depression of the 1930s. He said 'We need rules of the game in order to effect a better solution. I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action.' Though, Rajan stressed that seven years on from the economic crisis, the central banks have done a lot during as well as post-crisis.

On the global front, following the weak trend of the US markets, the Asian markets too ended mostly in red with the Chinese market suffering sharpest plunge in last five months of over seven percent for the day, on concern that the markets were overbought with nation’s longest-ever bull market. The European markets too made a soft start, declining for the third straight session as euro-area leaders told their finance ministers to find a solution to the Greek debt impasse at last-ditch weekend talks. Finance ministers reconvene Saturday after the failure of Thursday’s negotiations.

Back home, the markets once managed to enter the green in the second half but the gains were momentary and the indices were dragged down in red on profit booking on the final trading day of the week. The major drag for the day was banking pack after the Financial Stability Report (FSR) June 2015 showed private banks are likely to see a significant jump in bad loans. The report warned about Indian banks' high levels of bad loans that have worsened their ability to repay debt. Further stating that the falling profit margins and decreasing debt repayment capabilities of the corporate sector add to these concerns, the report said that macro stress tests suggest that current deterioration in the asset quality of SCBs may continue for few more quarters. In non sectoral gauge the media pack was in jubilant mood on report that the government is discussing a proposal for increasing FDI limit in the media sector from the current 26 per cent to attract foreign investments, TV18 Broadcast surged by over 6%, ENIL was up by about 3% and Zee Entertainment was up by about a quarter percent. The IT pack bucked the trend and surged after global management consulting, technology services and outsourcing giant Accenture raised its full year revenue growth forecast for the third time in a year. 

The BSE Sensex ended at 27803.17, down by 92.80 points or 0.33% after trading in a range of 27675.16 and 27921.86. There were 12 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices made a mixed closing; the BSE Mid cap index was down by 0.05%, while Small cap index ended up by 0.16%.(Provisional)

The gaining sectoral indices on the BSE were Consumer Durables up by 1.57%, IT up by 1.35%, Realty up by 0.75%, TECK up by 0.71%, Auto up by 0.38%, while Capital Goods down by 1.15%, Metal down by 0.96%, Oil & Gas down by 0.93%, INFRA down by 0.89%, Bankex down by 0.74% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were TCS up by 1.81%, Bajaj Auto up by 1.62%, NTPC up by 1.51%, Cipla up by 1.46% and Infosys up by 1.45%. On the flip side, GAIL India down by 3.32%, Vedanta down by 2.89%, Bharti Airtel down by 2.29%, BHEL down by 2.05% and Tata Steel down by 1.65% were the top losers. (Provisional)

Meanwhile, the Reserve Bank of India in its Financial Stability Report (FSR) June 2015, the eleventh issue of its half yearly publication has cautioned that banks' leverage has increased, which will further strain a sector groaning under bad loans. Reserve Bank of India (RBI) Governor Raghuram Rajan also warned of a 2013 rupee plunge repeat, adding that India needs to reduce its inefficiencies if it wants to insulate itself from the possible tightening by the US Federal Reserve. The report however said that India is better prepared this time round.

The report has warned about Indian banks' high levels of bad loans that have worsened their ability to repay debt. Adding that the falling profit margins and decreasing debt repayment capabilities of the corporate sector add to these concerns, though overall leverage level in Indian economy is comfortable when compared to other jurisdictions. The report said that macro stress tests suggest that current deterioration in the asset quality of SCBs may continue for few more quarters, and PSBs may have to bolster their provisions for credit risk from present levels, to meet the ‘expected losses’ if macroeconomic environment were to deteriorate under assumed stress scenarios.

Regarding the securities and commodities markets, the report highlighted that concerns emanating from rapid rise in algorithm trading in recent years draws need for caution for India’s securities markets. It said that the agricultural insurance needs urgent focus in the wake of frequent episodes of weather related calamities and their impact, particularly on small and marginal farmers.

The report highlighted that “A combination of global factors and concerted domestic policy decisions have helped, to a considerable extent, in improving the macroeconomic fundamentals of our economy as also in building additional buffers against future uncertainties. Stating that there has been significant improvement in the macroeconomic environment and going forward, economic performance is expected to be better.

The CNX Nifty ended at 8382.00, down by 16.00 points or 0.19% after trading in a range of 8339.70 and 8408.55. There were 22 stocks advancing against 27 stocks declining on the index.(Provisional)

The top gainers on Nifty were HCL Tech. up by 3.33%, Ultratech Cement up by 1.85%, Indusind Bank up by 1.83%, Bajaj Auto up by 1.63% and TCS up by 1.57%. On the flip side, Cairn India down by 3.25%, GAIL India down by 3.09%, Vedanta down by 2.56%, Bharti Airtel down by 2.14% and BHEL down by 1.91% were the top losers.(Provisional)

European Markets were trading in red, Germany’s DAX declined by 72.62 points or 0.63% to 11,400.5, UK’s FTSE 100 was down by 66.16 points or 0.97% to 6,741.66 and France’s CAC was lower by 30.04 points or 0.6% to 5,011.67.

Asian markets closed mostly in red on Friday with China’s Shanghai Composite index closing with a cut of more than 7 percent amid on margin trading concerns thereby increasing worries that the country’s bull-run is running out of steam. Japan’s national core consumer price index rose 0.1% on year in May for the 24th straight year-on-year increase and above the flat result expected, but still a slowdown from April's 0.3% gain. The data however may be of little comfort for the Bank of Japan as it watches for signs households and businesses expect higher prices that bring it closer to a 2% inflation target around the first half of fiscal 2016. Japanese Household Spending rose to a seasonally adjusted 4.8%, from -1.3% in the preceding month. The percentage of the total work force in Japan that is unemployed and actively seeking employment during the previous month remained unchanged at a seasonally adjusted 3.3%, compared to the preceding month. Singaporean Industrial Production rose to an annual rate of -2.3%, from -8.7% in the preceding month.