Earnings disappointment drags markets lower

Indian equity benchmarks ended the choppy day of trade with a cut of around half a percent on Thursday with frontline gauges ending below their crucial 28,400 (Sensex) and 8,600 (Nifty) levels on the back of weak Q1 earnings from high profile companies. Markets, after a positive start, entered into negative terrain as sentiment remained down-beat after Rajya Sabha once again getting adjourned today. The upper house could not transact any business for the second successive day on Wednesday as treasury and opposition benches stuck to their positions, with opposition parties aggressively pressing for the resignation of external affairs minister Sushma Swaraj along with Rajasthan and Madhya Pradesh chief ministers. Markets tried to regain their positive terrain couple of times in second half of trade but every attempt was reciprocated with profit booking.

Traders remained worried on fear that the Reserve Bank of India (RBI) will leave the interest rates unchanged in its August 4 policy review meet given the acceleration in June headline CPI inflation and increase in core CPI for the third consecutive month. Markets failed to get any sense of relief from report that foreign direct investment (FDI) in the country rose to four-month high of $3.85 billion in May 2015, up by 7 percent compared to $3.60 billion in the same month of last year. Significantly, the FDI figures for May 2015 are the highest since January 2015, when foreign equity investment was at $4.48 billion.

On the global front, a raft of forecast-beating corporate results kept European equities afloat in early deals on Thursday. Asian markets ended mixed as investor focus turned increasingly to earnings, including disappointing results from Apple Inc. and turmoil in the commodities market.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee weakened 18 paise to 63.76 against the US dollar at the time of equity markets closing at the Interbank Foreign Exchange following gains in the American currency against major currencies globally. Disappointing Q1 earning from high profile companies too contributed towards markets downfall. Lupin missed Q1 street estimates, reporting a net profit of Rs 525 crore on sales of Rs 3,074 crore in the June quarter. Bajaj Auto’s first quarter profit surpassed street expectations, boosted by other income but the topline and operating profit missed forecast.

On the sctoral front, shares of consumer goods companies edged higher on hopes of passage of the Goods and Services Tax (GST) Bill during the present Monsoon session as the consumer durables sector is likely to remain as the biggest beneficiary of GST. Additionally, jewellery stocks rose as gold prices extended recent fall to hit five-year low on July 22, 2015.

The NSE’s 50-share broadly followed index Nifty ended lower by over forty points to end below its psychological 8,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex edged lower by over one hundred and thirty points to decline below the psychological 28,400 mark. The broader markets too struggled to get some traction and ended the session mixed. The market breadth remained in favour of advances, as there were 1,531 shares on the gaining side against 1,311 shares on the losing side while 126 shares remain unchanged.

Finally, the BSE Sensex plunged by 134.09 points or 0.47% to 28370.84, while the CNX Nifty declined by 43.70 points or 0.51% to 8589.80.

The BSE Sensex touched a high and a low 28578.33 and 28315.37, respectively. The BSE Mid cap index was down by 0.16%, while Small cap index up by 0.51%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.59%, Auto up by 0.49%, Oil & Gas up by 0.48%, Realty up by 0.36% and Infrastructure up by 0.32%, while TECK down by 0.79%, Bankex down by 0.71%, Capital Goods down by 0.67%, IT down by 0.65% and Metal down by 0.52% were the losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.11%, Dr. Reddys Lab up by 1.62%, Mahindra & Mahindra up by 1.25%, Maruti Suzuki up by 1.11% and NTPC up by 0.77%. On the flip side, Lupin down by 5.23%, Bajaj Auto down by 5.02%, Tata Steel down by 3.58%, TCS down by 1.59% and Bharti Airtel down by 1.56% were the top losers.

Meanwhile, with an aim to boost the food processing sector, the government has approved 13 proposals for setting up of mega food parks, which provides different facilities to food processors, farmers, retailers and exporters in various parts of the country including rural areas, during the current Five Year Plan period. Consequently, each of these mega food parks is likely to create direct and indirect employment for about 30,000 persons. These mega food parks are currently in the process of implementation.

The states where these mega food parks will come up are Andhra Pradesh, Bihar, Gujarat, Himachal Pradesh, Jammu & Kashmir, Madhya Pradesh, Odisha, Rajasthan and Uttarakhand (one each) and Chhattisgarh and Maharashtra (two each). 

Earlier, the government had approved some modifications in the guidelines of the mega food park scheme to increase investment in the food processing sector. The modifications, which include allowing the central government agencies to hold more than 26% equity in the mega food park, would streamline the implementation of the scheme.

In March 2015, the government had allocated the development of 17 mega food parks across the country to state governments and private firms at a cost of Rs 2,030 crore, of which the central government grant was estimated at Rs 850 crore.

The CNX Nifty touched a high and low 8,654.75 and 8,573.80 respectively.

The top gainers on Nifty were Cairn India up by 6.17%, Tata Motors up by 3.32%, Dr. Reddys Lab up by 2.01%, Mahindra & Mahindra up by 1.32% and Maruti Suzuki up by 1.00%. On the flip side, Bajaj Auto down by 5.23%, Lupin down by 5.21%, Zee Entertainment down by 2.92%, Hindustan Unilever down by 1.69% and HCL Tech down by 1.68% were the top losers.

European Markets were trading in the green; UK's FTSE was up by 0.22%, Germany’s DAX was up by 0.16% and France’s CAC was up by 0.18%.

Asian markets closed mixed on Thursday, as sentiments were on up-beat mood in view of the Greek parliament approving a contentious bailout package. Chinese vice finance minister stated that China will pursue a pro-active fiscal policy to stabilize investment growth and boost domestic consumption in the world’s second-largest economy. Liu Kun notified that an active fiscal policy was part of six crucial areas that the ministry was focused on, alongside lifting growth in investment and consumption. Other priorities were helping companies to move up the production value chain, strengthening environmental protection controls, accelerating the development of logistic networks, and deepening reforms of food and agricultural product subsidies.  Japan’s trade balance fell to a seasonally adjusted -0.25T, from -0.16T in the preceding month whose figure was revised up from -0.18T. South Korean GDP rose to a seasonally adjusted 0.3%, from 0.8% in the preceding month. Taiwanese Industrial Production rose to a seasonally adjusted annual rate of -1.35%, from -3.18% in the preceding month.