Benchmark extend southward journey for fourth straight session

Extending their losing streak to fourth straight session, Indian equity benchmarks ended the choppy day of trade with a cut of one third of a percent on Tuesday as investors remained on sidelines ahead of the July month’s expiry in the derivatives segment on Thursday coupled with fears of foreign money leaving Indian shores after government proposed to look into the Special Investigative Team’s stringent norms on participatory notes (P-notes). Markets turned choppy after a positive start with benchmarks moving in and out of the red, but selling which emerged in last leg of trade, dragged the major indices below their crucial 8,350 (Nifty) and 27,500 (Sensex) levels.

The investors remained jittery over the reports that the central bank might keep the interest rates unchanged during its next bi-monthly policy review meeting, which will be held on August 4 on account of poor monsoon season so far. Sentiments also remained dampened after washout of the first week of the monsoon session in Parliament. However, losses remained capped after Finance Minister Arun Jaitley’s assurance that the government will not take any action that may jeopardise investment climate and the government would apply its mind on the recommendations in due course and would avoid any decision that could hurt investor sentiment. Meanwhile, President Pranab Mukherjee has expressed his hope that given the macro economic prospects, Indian economy will regain growth rate of over 8% soon, as the macroeconomic parameters like inflation and external sector balance have improved in the past year. Appreciation in Indian rupee too provided some support. Rupee was trading at 63.94 per dollar at the time of equity markets closing compared with its previous close of 64.16.

On the global front, European markets were trading in green in early deals for the first time in six days amid signs of a pickup in corporate takeovers, while earning season remained in full swing. Asian markets ended mostly in red, with Chinese market slumping again even though Chinese regulators said they were prepared to buy shares to stabilise the stock market, while the central bank injected cash into money markets and hinted at further monetary easing.

Back home, sentiments remained dampened on reports that foreign portfolio investors sold shares worth a net Rs 859.94 crore on July 27, 2015, as per provisional data released by the stock exchanges. Selling in metal counter too weighed down sentiments on the back of weak commodity prices coupled with weakness in the China shares.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below the psychological 8,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over hundred points to end below its crucial 27,500 mark. Broader markets too struggled to get any traction during the trade and ended the session marginally in red. The market breadth was evenly divided, as there were 1,363 shares on the gaining side against 1,388 shares on the losing side while 128 shares remain unchanged.

Finally, the BSE Sensex declined by 102.15 points or 0.37% to 27459.23, while the CNX Nifty lost 24.00 points or 0.29% to 8337.00.

The BSE Sensex touched a high and a low 27676.65 and 27416.39, respectively. The BSE Mid cap index was down by 0.18%, while Small cap index was down by 0.17%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.52%, Bankex up by 0.43% and  Power up by 0.43%, while Realty down by 2.72%, Metal down by 0.73%, Auto down by 0.69%, Oil & Gas down by 0.45% and TECK down by 0.42% were the losing indices on BSE.

The top gainers on the Sensex were BHEL up by 2.24%, NTPC up by 1.98%, HDFC Bank up by 1.10%, Hindalco up by 1.10% and Axis Bank up by 0.94%. On the flip side, Dr. Reddys Lab down by 2.85%, Hero MotoCorp down by 2.84%, HDFC down by 2.64%, ICICI Bank down by 2.11% and Tata Motors down by 1.89% were the top losers.

Meanwhile, in its bid to soothe the nerves of panic-stricken investors, Finance Minister Arun Jaitley has said they need not fear any “knee-jerk” reaction from the government on the SIT report, which had recommended tough measures to check investment flows through P-Notes. Jaitley said that 'It is too early to say what view the government would take. But it will certainly not take any such action in a knee-jerk reaction, particularly one which has any adverse impact on investment environment.' Jaitley also said government will wait for public comments on draft finance code before forming any view on monetary policy committee.

The Supreme Court-appointed SIT on black money last week recommended a host of measures, including suggesting the securities regulator SEBI to tighten norms related to participatory notes investments into India. The SIT said that Sebi does not have information about the ultimate beneficial owner of these transferable instruments, making it prone to be abused for round-tripping of tax-evaded funds back to India.

The SIT suspects that the P-note route is being used for the purpose of tax evasion and has 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, and take other steps required to curb black money and tax evasion through the stock market route.

Participatory Notes (P-Notes) are used by large number of foreign investors to invest in equity markets without disclosing their identity to the market regulator Sebi. Mostly, high net worth individuals, hedge funds and other foreign institutions tap this channel to invest in India through foreign institutional investors (FIIs). 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.

The CNX Nifty touched a high and low 8,397.40 and 8,321.75 respectively.

The top gainers on Nifty were PNB up by 5.44%, BHEL up by 2.50%, NTPC up by 2.31%, Kotak Mahindra Bank up by 2.29% and Yes Bank up by 1.61%. On the flip side, NMDC down by 4.74%, Hero MotoCorp down by 3.07%, Asian Paint down by 2.93%, HDFC down by 2.69% and Dr. Reddy down by 2.52% were the top losers.

European Markets were trading in the green; UK's FTSE was up by 0.90%, Germany’s DAX was up by 1.52% and France’s CAC was up by 1.36%.

Asian markets closed mostly in red on Tuesday, on heightened fears about the financial stability of the world’s second biggest economy. The wild volatility in China’s markets has stoked fears among global investors about the broader health of the Chinese economy, and sent Asian investors scurrying for safe-haven assets such as government bonds and the Japanese yen. China’s top economic planning agency stated that the economy still faces downward pressure and growth momentum is insufficient. For the first six months, China reported a growth rate of 7 percent, in line with Beijing’s full-year target. But a stock market plunge since June has fueled concerns about the health of the economy. China’s central bank stated that stable financial markets are expected to continue supporting steady gains in the real economy. Standard & Poor’s Ratings kept Malaysia’s long-term foreign currency sovereign credit rating at ‘A-‘, with a stable outlook, saying allegations of graft involving debt-laden state fund 1Malaysia Development Berhad (1MDB) will not impede policymaking. The agency also added that it does not see the decline in energy prices affecting Malaysia’s long-term fiscal consolidation. Japan’s Corporate Services Price Index (CSPI) fell to a seasonally adjusted annual rate of 0.4%, from 0.6% in the preceding month.