Benchmarks end lower on Monday on weak global cues

Pressurized by weak global cues, Indian equity benchmarks ended the Monday’s trade with a cut of over half a percent. Sentiments remained dampened after Greece and international creditors failed to come to an agreement over debt payments raised fears of Greece’s exit from the euro zone. Investors also remained concerned over 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. 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.

Domestic bourses made a gap-down start and the indices even went on to test important psychological 27,200 (Sensex) and 8,200 (Nifty) levels, but the key gauges got some support near those intraday low levels, as they trimmed most of their losses from thereon as investors continued hunt for fundamentally strong stocks. Some support seems to have come with the India Meteorological Department (IMD) stating that the South-west Monsoon 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.

Global cues too remained sluggish with European counters trading lower in early deals on Monday, with Southern European banks especially badly hit, after Greece closed its banks and imposed capital controls as a result of its debt problems. Asian markets ended lower on lingering concern over Greece, while fears of slowdown in the Chinese economy also seem to have weighed with the global investors.

Back home, selling was both brutal and wide-based as none of sectoral indices, barring FMCG, on BSE were spared. Counters, which featured in the list of worst performers, include realty, software, infrastructure and auto. Depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 63.89 per dollar at the time of equity markets closing compared with its previous close of 63.64 per dollar. Sentiments also remained dampened after foreign portfolio investors sold shares worth a net Rs 203.74 crore during the previous trading session, as per provisional data released by the stock exchanges.

Selling in software counter too weighed on sentiments after Tech Mahindra warned about its April-June quarter (Q1FY16) results. 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. Additionally, metal companies remained under pressure, with the National Stock Exchange (NSE) CNX Metal index hitting fresh 52-week lows in intra-day trades.

The NSE’s 50-share broadly followed index Nifty declined by over sixty points to end below the psychological 8,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over one hundred and sixty points to finish below its psychological 27,700 mark. Broader markets too witnessed blood-bath and ended the session with a cut of around one and a half percent. The market breadth remained in favor of decliners, as there were 870 shares on the gaining side against 1,809 shares on the losing side while 118 shares remain unchanged.

Finally, the BSE Sensex declined by 166.69 points or 0.60% to 27645.15, while the CNX Nifty lost 62.70 points or 0.75% to 8318.40.

The BSE Sensex touched a high and a low 27695.32 and 27209.19, respectively. The BSE Mid cap index was down by 1.37% and Small cap index was down by 1.49%.

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%, Infrastructure  down by 1.46%, TECK down by 1.40% and Consumer Durables down by 1.37% were the losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.10%, NTPC up by 0.80%, ITC up by 0.53%, Larsen & Toubro up by 0.44% and HDFC up by 0.34%. On the flip side, Hindalco down by 3.55%, SBI down by 2.08%, Sun Pharma down by 2.03%, Maruti Suzuki down by 1.93% and Tata Motors down by 1.76% were the top losers.

Meanwhile, the Bank for International Settlements (BIS) has raised the red flag over interest rates remaining “extraordinarily low” and said that easy monetary regimes are resulting in a build-up of financial vulnerabilities. In its annual report, BIS said globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark.

The global banking regulators' body has said that globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark. 'Such low rates are the most remarkable symptom of a broader malaise in the global economy: the economic expansion is unbalanced, debt burden and financial risks are still too high, productivity growth too low, and the room for maneuvering in macroeconomic policy too limited.

BIS has stated that this malaise also reflects the failure to come to grips with financial booms and busts that leave deep and enduring economic scars. It added that “The international monetary and financial system has spread easy monetary and financial conditions in the core economies to other economies through exchange rate and capital flow pressures, furthering the build-up of financial vulnerabilities.'

BIS also said that there should be increased reliance on structural policies rather than demand management policies, adding that such an approach would help “abandon the debt-fuelled growth model that has acted as a political and social substitute for productivity-enhancing reforms.” The BIS report, for April 2014 to March 2015, said central banks outside the major advanced economies were left to factor these very accommodative, but increasingly divergent, monetary policies into their own policy decisions.

 The CNX Nifty touched a high and low 8329.45 and 8195.65 respectively.

The top gainers on Nifty were Hindustan Unilever up by 1.92%, PNB up by 1.55%, BPCL up by 1.00%, L&T 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 down by 1.98% and SBI down by 1.85% were the top losers.

European Markets were trading in the red; UK's FTSE was down 1.70%, Germany’s DAX was down by 3.48% and France’s CAC was down by 3.58%.

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%.