Post Session: Quick Review

The Indian markets extended their downtrend on Friday, tracking muted trends across most of the global markets. Disappointing quarterly earnings from some bluechip companies too weighed on the sentiments and prompted funds and investors to go for selling on the final session of the week. Traders were concerned with the Parliament heading towards a washout for the fourth consecutive day. Lok Sabha was adjourned till Monday, while Rajya Sabha witnessed continuous adjournments. Adding to the woes, a private poll report stated that India's economic prospects have dimmed since April due to the government's inability to pass much-needed reforms. Growth forecasts too were nudged down from April owing to concerns the government still faces substantial challenges in kick-starting a reform-driven growth cycle.

On the global front, after the US markets ended in red the Asian markets followed the trend and ended in sea of red. The Chinese market that had shown some resistance in early trade on stimulus hope, too gave up and ended with loss of over a percent. The preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics was at 48.2 for July, down from 49.4 the previous month. The European markets made a cautious start, with some of the indices trading in red, as drop in a Chinese manufacturing gauge threatened to worsen a commodity rout. Meanwhile, a flash reading of the German manufacturing purchasing managers' index for July fell to 51.5 from 51.9 the previous month, PMI data for France showed the sector fell back into contraction territory in July.

Back home, the markets after witnessing volatility in last session, extended their disappointments, with ears taking the full control, keeping the benchmarks in red throughout the day, there was hardly any attempt of recovery, while the selling aggravated in the final hours dragging the benchmarks below the 28300 (Sensex) and 8550 (Nifty) level, closing near the lows of the day. There was some concern in the market with the Finance Ministry coming up with a revised draft of the Indian Financial Code seeking stakeholders’ comments on the same by August 8. Going by the revised draft of the Indian Financial Code, the government is moving to take over powers to set the monetary policy. It has also proposed taking away the RBI governor’s authority to veto the interest rate decision of the Central bank’s monetary policy committee. Back on street, while the broader markets too remained in somber mood, most of the sectoral indices ended in red, barring the defensive FMCG. On the losers side, capital goods and realty took the lead, while Metal followed the weak global trend on faltering Chinese growth concern. Stock-specific action was visible, as slew of companies reported their June quarter numbers during the trading session. On the same time, stocks of IDFC surged nearly 3 per cent in trade after the non-banking financial company received a banking licence from the Reserve Bank of India (RBI). On the other hand Jaiprakash Associates plunged by over 8%. The company’s total bank loans and long-term non-convertible debentures (NCD) worth Rs 29,303.40 crore were reduced to default rating due to delay in servicing of debt by the company and poor liquidity.

The BSE Sensex ended at 28123.53, down by 247.31 points or 0.87% after trading in a range of 28083.76 and 28402.64. There were 10 stocks in green against 20 stocks in red on the index.(Provisional)

The broader indices too ended in red; the BSE Mid cap index was down by 0.57%, while Small cap index lost 0.60%.(Provisional)

The gaining sectoral indices on the BSE were FMCG up by 0.17%, Consumer Durables up by 0.15%, while Capital Goods down by 1.56%, Realty down by 1.40%, Metal down by 1.20%, Bankex down by 1.15%, Auto down by 1.12% were the major losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma Inds. up by 1.02%, Hero MotoCorp up by 0.76%, Cipla up by 0.62%, TCS up by 0.61% and Bajaj Auto up by 0.49%. On the flip side, Wipro down by 3.79%, ICICI Bank down by 3.76%, Lupin down by 2.93%, Tata Motors down by 2.70% and SBI down by 2.34% were the top losers. (Provisional)

Meanwhile, the Finance Ministry has come up with a revised draft of the Indian Financial Code (IFC) and sought stakeholders’ comments on the same by August 8, 2015. The Draft IFC, which has been revised in the light of the comments received from the public at large and all stakeholders through a Press Release on 6th June 2013, includes modifications mainly related to the strengthening the regulatory accountability of financial agencies, removing the provision empowering FSAT to review Regulations, rulemaking and operational aspects of capital controls, monetary policy framework and composition of the Monetary Policy Committee (MPC), regulation of systematically important payment system and others, removing the provision of special guidance etc.

Government has further stated that the modifications have taken into consideration the enactments subsequent to the submission of the FSLRC report; namely The Pension Fund Regulatory and Development Authority Act, 2013 (PFRDA Act) and Securities Laws (Amendment) Act, 2014. The government has also said that the modifications in the revised draft IFC remain consistent with the overall structure and philosophy of the FSLRC report.

The most striking feature of the Draft IFC is that Monetary Policy making will become a government affair rather than being a preserve of the Reserve Bank of India. The draft, put out by the Finance Ministry, among other things recommends setting up a seven-member Monetary Policy Committee (MPC) to decide on the policy rate by majority vote. Crucially, four of these members are to be appointed by the government and three members from the RBI side. The government has proposed taking away the RBI governor’s authority to veto the interest rate decision of the Central bank’s monetary policy committee. Currently, the governor consults a technical advisory committee, but does not necessarily go by the majority opinion while deciding on the monetary policy stance.

The CNX Nifty ended at 8521.55, down by 68.25 points or 0.79% after trading in a range of 8513.50 and 8589.15. There were 16 stocks on gainers side against 34 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 2.20% and Bank Of Baroda up by 1.96% and Sun Pharma Inds. up by 0.89% and Hero MotoCorp up by 0.84% and Cipla up by 0.73%. On the flip side, ICICI Bank down by 3.93%, Wipro down by 3.79%, Lupin down by 3.25%, Tata Motors down by 2.77% and SBI down by 2.52% were the top losers.(Provisional)

European Markets were trading in green, Germany’s DAX was up by 6.28 points or 0.05% to 11,518.39, UK’s FTSE 100 added 12.11 points or 0.18% to 6,667.12 and France’s CAC was higher by 22.05 points or 0.43% to 5,108.79.

Asian markets closed in red on Friday, as tumbling commodities prices and weak Chinese manufacturing data aggravate worries about the global economy. Japan’s factory output and household spending probably grew at a tepid rate in June, raising some concerns about a possible economic contraction in the second quarter as exports slumped and consumers tightened purse strings. Annual core consumer inflation was seen grinding to a halt in June, reflecting cheaper oil prices, and keeping the Bank of Japan under pressure as to meet it 2 percent inflation target. China’s factory sector contracted by the most in 15 months in July as shrinking orders depressed output, a preliminary private survey showed, a worse-than-expected result that comes on the heels of a stock market crash which began in June. The flash Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) dropped to 48.2, the lowest reading since April last year and a fifth straight month below 50, the level which separates contraction from expansion. South Korean Consumer Confidence rose to 100, from 99 in the preceding month. Singaporean Industrial Production fell to an annual rate of -4.4%, from -1.7% in the preceding month whose figure was revised up from -2.3%.