Post Session: Quick Review

Indian markets got embroiled in global rout, making a weak start of the new week, which dragged the benchmarks lower from their crucial psychological levels of 27700 (Sensex) and 8350 (Nifty). Markets across the globe were concerned about the Greece crisis, as a likely Greek default could open doors for much-debated exit of the nation from the euro zone. Concerns of the market participants increased with Finance Secretary Rajiv Mehrishi’s statement that India is monitoring developments after the breakdown in talks between Greece and its creditors, but does not have a firm plan in place to deal with any significant fallout. Though, the Finance secretary said the fallout from Greece would not have a direct impact on India, but flows would be a potential concern. Meanwhile, there was some cautiousness with Indian and Mauritian officials starting talks on proposed amendments to their bilateral tax treaty. Mauritius has submitted a “draft protocol” with regard to amending the Double Taxation Avoidance Convention (DTAC). A Joint Working Group has been set up to find a mutually acceptable solution towards revision of the pact.

On the global front there was all red in the Asian region with some of the indices losing 2.5-3.5%, as the collapse of Greek rescue talks roiled global markets. Chinese shares entered a bear market even after the government boosted stimulus. The People’s Bank of China reduced the one-year lending rate by 25 basis points to 4.85 percent effective June 28. Reserve-requirement ratios for some lenders, including city commercial and rural commercial banks, will be cut by 50 basis points. The Japanese market too booked second worst loss of the year. The European markets suffered sharp sell-off in the very opening deal, their worst day since 2011 on Greek crisis, after Greece imposed capital controls and shuttered financial markets and closed banks until at least July 6 after cash machines were emptied at the weekend, though the major indices showed some sign of recovery.

Back home, amid the global carnage the local markets showed some recovery during mid day and came off their lowest points, paring over a percent of their losses, on the back of buying at lower levels. Some support seems to have come with the India Meteorological Department (IMD) stating that the South-west Monsoon has covered the entire length and breadth of the country, way ahead of schedule in a year that saw a forecast of deficit rainfall for India. Though, the losses were spread across the street, Indian companies with exposure or units in Europe ended in red despite recovery in last leg of trade, on concerns over lower sales and forex losses in case the Greece defaults. Tata Steel declined by 0.80%, Motherson Sumi Systems lost1.3%, Havells India was down by 1.78% and Bharat Forge plunged by 4%. The infra stocks too were under pressure, with Prime Minister Narendra Modi calling a meeting to review the status of highway projects on July 2. In other scrip specific movement, Tech Mahindra shares fell as much as 7 per cent after the company said that its revenue and profit margin may witness a sequential decline in the first quarter of FY15. While its Q1 revenues could see a marginal fall, its margins would be hit on the back of H1B visa cost.

The BSE Sensex ended at 27645.15, down by 166.69 points or 0.60% after trading in a range of 27209.19 and 27695.32. There were 8 stocks on gainers side against 22 stocks on the decliners side on the index. (Provisional)

The broader indices despite recovering witnessed sharper cuts than the benchmarks; the BSE Mid cap index was down by 1.37%, while Small cap index lost 1.49%.(Provisional)

The lone gaining sectoral index on the BSE was FMCG up by 0.28%, while Realty down by 2.23%, IT down by 1.70%, INFRA down by 1.46%, TECK down by 1.40%, Consumer Durables down by 1.37% were the top losing indices on BSE.(Provisional)

The top gainers on the Sensex were Hindustan Unilever up by 2.10%, Larsen & Toubro up by 0.68%, Dr. Reddys Lab up by 0.50%, ICICI Bank up by 0.42% and HDFC up by 0.34%. On the flip side, Hindalco down by 3.38%, Sun Pharma Inds. down by 1.99%, Maruti Suzuki down by 1.90%, SBI down by 1.87% and Tata Motors down by 1.76% were the top losers.(Provisional)

Meanwhile, the central bank of India clarifying the Governor Raghuram Rajan’s recent comments that referred to the Great Depression of the 1930s and triggered a major global debate, has said that Rajan did not imply or suggest that there was any risk of the world economy, which is in a steady recovery notwithstanding uncertainties like those in the Euro area, slipping into a new Great Depression. The RBI said in a statement that a section has 'mis-characterised Governor Raghuram Rajan’s remarks at the AQR conference at London Business School on June 25.

In its clarification, the RBI said that the Great Depression (in the 1930s, when there was a severe worldwide economic depression) was a period of great turmoil, caused by many factors and not just beggar-thy-neighbour policies. The RBI, however, added Rajan indeed said that “the policies followed by major central banks around the world were in danger of slipping into the kind of beggar-thy-neighbour strategies that were followed in the 1930s”. Beggar-thy-neighbour here means that a country’s attempts to set right its economic problems tend to worsen the economic problems of other countries.

The RBI further said, “What governor Rajan did say… was that the policies followed by major central banks around the world were in danger of slipping into the kind of beggar-thy-neighbour strategies that were followed in the 1930s.

Rajan had asked central banks from across the world to revisit the “rules of the game” in the international monetary system. “I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and much action.”

Rajan, the former IMF Chief Economist, who has earlier warned against competitive monetary policy easing by central banks globally, had also predicted the 2008 financial crisis.

The CNX Nifty ended at 8326.70, down by 54.40 points or 0.65% after trading in a range of 8195.65 and 8329.45. There were 17 stocks advancing against 32 stocks declines on the index.(Provisional)

The top gainers on Nifty were Hindustan Unilever up by 1.92%, PNB up by 1.55%, BPCL up by 1.00%, Larsen & Toubro up by 0.80% and ITC up by 0.44%. On the flip side, Tech Mahindra down by 7.60%, Hindalco down by 3.50%, HCL Tech. down by 2.95%, Sun Pharma Inds. down by 1.98% and SBI down by 1.85% were the top losers.(Provisional)

European Markets were trading in red, Germany’s DAX declined by 370.52 points or 3.22% to 11,121.91, France’s CAC plunged by 166.18 points or 3.28% to 4,892.99 and UK’s FTSE 100 was down by101.14 points or 1.5% to 6,652.56.

Asian markets closed in red on Monday, with Chinese shares extending losses from the past two weeks despite a surprise interest rate cut. The People’s Bank of China cut benchmark interest rates for a fourth time since November and held open the door to more cuts, as the monetary authority steps up policy easing in the face a deepening slowdown. The 25 basis point cuts bring the one-year lending rate down to 4.85% and the equivalent deposit rate to 2% effective June 28. Hong Kong Retail Sales rose to a seasonally adjusted annual rate of -0.1%, from -2.2% in the preceding month.

Bank of Japan Governor Haruhiko Kuroda warned that the central bank is alert to downside risks to its aims to anchor 2% inflation by the first half of fiscal 2016. Japan’s consumer inflation has slipped back to around zero due partly to the temporary influence of low oil prices. The BoJ’s initial plan was to anchor 2% inflation in about two years from April 2013, when the bank launched aggressive easing. The BoJ expanded the easing program to 80 trillion yen in government bond buying annually last October as some board members thought falling energy prices would dampen inflation expectations. Japan’s industrial production fell to a seasonally adjusted -2.2%, from 1.2% in the preceding month. The retail sales fell to a seasonally adjusted annual rate of 3.0%, from 4.9% in the preceding month whose figure was revised down from 5.0%.