Post Session: Quick Review

Indian markets were butchered on Monday, making an awful start of the F&O series expiry week. The double whammy of SIT’s proposal on P-Notes and plunge in the Asian markets weighed heavily on the local indices, which on their one way slide ended at the lowest point of the day, losing many crucial psychological levels. Both the major indices witnessed triple digit cuts, with red across the street. The weakness in the markets was expected from the beginning, with Supreme Court-appointed Special Investigation Team (SIT) recommending tighter norms on a popular investment route called P-notes into Indian markets. The SIT suspects that the P-note route is being used for the purpose of tax evasion and also asked Sebi to compulsorily identify real owners of foreign funds coming through the controversial P-Note route and also prosecute those using equities for tax evasion. The slump was obvious, as investments through P-notes into India's capital market were at a whopping Rs 2.75 lakh crore at the end of June, over 11 per cent of total foreign institutional investment (FII) into the Indian markets. Government’s prompt attempt to soothe the sentiments too remained unheard, the Revenue Secretary Shaktikanta Das said that the government was yet to take a call on the special investigation team’s report on the instrument which is believed to facilitate investment of slush money into Indian financial markets. He said that Government will study those recommendations and then will take a decision after due consultation with all stakeholders. Later Finance Minister Arun Jaitley too said that the government will not react in a “knee-jerk” manner on a report by a special investigations team that suggested greater oversight of money laundering in stocks

On other markets, there was global selloff triggered by the Asian markets and the China’s stocks tumbled, with the benchmark index losing over 8.5%, its biggest loss since June 2007 after Chinese industrial company profits declined amid concern a three-week rally sparked by unprecedented government intervention is unsustainable. Later the European markets followed the trend with a weak start, meanwhile the IMF and European Commission said that representatives of Greece's creditors will begin talks in Athens on a third bailout package to the debt-swamped Greek government.

Back home, the damage control measures of the government were of no impact to the markets and the major bourses kept on declining till the last, posting their worst intraday fall in over a month. Traders were also concerned about the Monsoon Session of Parliament resuming with continuation of the stand-off between the government and the Opposition and the Rajya Sabha getting adjourned for the day. Marketmen even ignored the report that Foreign Portfolio Investors (FPIs) have pumped in over Rs 8,400 crore in the Indian capital markets so far this month, primarily on account of easing of foreign investment norms and positive global cues. Bulls kept looking for shelter throughout the day, while bears were in full control from the beginning. There was complete sea of red on the street with broader markets too not being spared. On the sectoral front, capital goods, infra, metal and banking were the major losers on the BSE, down by over 2% each.

The BSE Sensex ended at 27561.38, down by 550.93 points or 1.96% after trading in a range of 27529.57 and 28117.65. There were just 2 stocks in green against 28 stocks in red on the index. (Provisional)

The broader indices though suffered less than benchmarks but they too ended with big losses; the BSE Mid cap index was down by 1.38%, while Small cap index lost 1.07%. (Provisional)

The top losing sectoral indices on the BSE were Capital Goods down by 2.80%, INFRA down by 2.75%, Metal down by 2.29%, Bankex down by 2.28%, Power down by 2.26%. (Provisional)

The top gainers on the Sensex were Bajaj Auto up by 0.70% and TCS up by 0.04%. On the flip side, Tata Steel down by 5.13%, Hero MotoCorp down by 4.86%, Hindalco down by 4.59%, Axis Bank down by 4.27% and ONGC down by 4.12% were the top losers. (Provisional)

Meanwhile, Reserve Bank of India (RBI), before offering licence for small and payment banks has asked the I-T department to get a ‘tax angle’ verification done for corporate entities seeking licence to operate small finance and payment banks in the country. The inputs sought relate to financial and tax history of close to four dozen entities, their owners and senior executives who have applied for getting RBI's licence.

RBI Governor Raghuram Rajan had recently written to the Central Board of Direct Taxes (CBDT), the apex policy making body of the Income Tax department, to expedite the matter and provide the banking regulator with inputs about individuals at the helm of these entities with businesses spread across the country and abroad. CBDT on its part has asked its investigation and regular assessment ranges across the country to “quickly” collect the data and submit them so that RBI can take a final view on the grant of licences to eligible parties. In case there is no adverse finding, the I-T department will send an all okay report. On the same time any adverse record or observation about financial dealings of these entities, found out either by way of an earlier action by the taxman or through regular mechanism of intelligence and data gathering, should be reported.

The objective of licencing small banks is to promote financial inclusion by offering saving vehicles and credit to small business units and other unorganised sector entities. The RBI had received 72 applications for small finance bank licences and 41 applications for payment bank licences and governor Rajan had earlier said that RBI would be able to announce new sets of bank licences, or at least one set of them, by the end of August.

The CNX Nifty ended at 8361.00, down by 160.55 points or 1.88% after trading in a range of 8351.55 and 8492.20. There were only 4 stocks on gainers side against 46 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 2.14%, Zee Entertainment up by 0.63%, Bajaj Auto up by 0.44% and Asian Paints up by 0.18%. On the flip side, Tata Steel down by 5.60%, Hero MotoCorp down by 5.16%, Hindalco down by 4.53%, Axis Bank down by 4.21% and ONGC down by 4.01% were the top losers. (Provisional)

Asian markets closed in red on Monday with China stock markets plunging over 8%, marking their biggest one-day drop in more than eight years, raising questions about the government’s ability to prevent a crash. Investors are worried about a possible withdrawal of stock market support by Beijing, and signs of a sharper slowdown in China’s economy. Japanese policymakers must be mindful of the potential negative impact that China’s economic slowdown could have on Japanese exports. Japan’s central bank Deputy Governor Hiroshi Nakaso warned of the risk that an expected interest rate hike by the US Federal Reserve could heighten global market volatility and hurt emerging markets vulnerable to capital outflows. He added that while China’s economy is expected to stabilize on stimulus measures taken so far, its slowdown may be prolonged by the huge slack in output and the property market. Japan’s Corporate Services Price Index (CSPI) fell to a seasonally adjusted annual rate of 0.4%, from 0.6% in the preceding month. Singaporean Industrial Production fell to an annual rate of -4.4%, from -1.7% in the preceding month.

Indonesia’s foreign direct investment (FDI) grew at the fastest pace since 2013 on yearly basis in the second quarter - a bright spot in an otherwise weak economic outlook. Annual growth in Southeast Asia’s largest economy was only 4.71% in the first quarter, the slowest since 2009, and Bank Indonesia predicted second quarter growth to be just as weak as domestic consumption wanes and exports fall. Last year was an election year, which tended to reduce investment and consequently its contribution to economic growth. But in April to June Indonesia recorded 92.2 trillion rupiah of realized FDI, up 18.2% from a year ago, and accelerating from 14% growth in the prior three months.