Markets continue to trade lower in tight band

Pressurized by feeble global cues, key barometer gauges continued to trade lower in range bound trade in noon deals, breaching their crucial 27,800 (Sensex) and 8,450 (Nifty) levels. Sentiment was hit as China allowed the yuan to fall sharply for a second straight day, forcing investors to seek refuge in safe-haven government debt. Marketmen remained on sidelines ahead of the June Index of Industrial Production (IIP) and July Consumer Price Index (CPI) numbers, which will be unveiled later today. Depreciation in Indian rupee too weighed down the sentiments. The rupee fell near 65 dollar mark on Tuesday amid appreciation of the American currency post the devaluation of Chinese yuan.

On the global front, European counters have made a dismal start and CAC, DAX and FTSE all were trading with a cut of around a percent in early deals. All the Asian markets were trading in red at this point of time as China’s currency tumbled for a second day and raised concern that financial-market volatility in the world’s second-largest economy will curb global growth. Back home, on the sectoral front, software, technology and consumer durables witnessed the maximum gain in trade, while realty, oil and gas and metal remained the top losers on the BSE sectoral space. The broader indices too were reeling under pressure, while the market breadth on the BSE was negative; there were 851 shares on the gaining side against 1,681 shares on the losing side while 109 shares remain unchanged.

The BSE Sensex is currently trading at 27759.40, down by 106.69 points or 0.38% after trading in a range of 27628.78 and 27883.33. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.09%, while Small cap index down by 0.61%.

The few gaining sectoral indices on the BSE were IT up by 2.27%, TECK up by 1.58%, Consumer Durables up by 1.44% and Healthcare was up by 1.21%, while Realty down by 2.95%, Oil & Gas down by 2.55%, Metal down by 2.34%, PSU down by 2.10% and Auto down by 1.44% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 4.04%, Tata Steel up by 3.38%, Infosys up by 3.00%, TCS up by 2.36% and Wipro up by 1.83%. On the flip side, Hindalco down by 5.13%, Vedanta down by 3.96%, Coal India down by 3.94%, Tata Motors down by 2.91% and Bharti Airtel down by 2.47% were the top losers.

Meanwhile, China’s central bank decision to devaluate Yuan by 2 percent to boost their economy, will hit Indian exports and further trade deficit may also widen which is currently close to $50 billion as imports from China may increase particularly as China is having excessive capacity in diverse sectors of manufacturing. This devaluation is bound to raise the competitiveness of outbound shipments from the neighbouring country and will not just hurt India’s export to China but also to other countries with increasing competiveness of Chinese exports, said Ajay Sahai, Director general and CEO of the Federation of Indian Export Organizations (FIEO). The biggest losers are Indian tyre manufacturers who have already been hit by the rising demand for cheaper Chinese tyres in Indian markets.

Indian exporters are worried that this move from China will hit India’s exports at a time when they are already under pressure due to slow global demand where exports have contracted for seven straight months until June 2015. Chinese demand for Indian goods is likely to contract further due to the decline in the overall demand in the world’s second largest economy. Imports from China have jumped by one-fifth to $60 billion in 2014-15, compared with previous year, while exports have plunged to $12 billion, resulting in a huge trade gap between the two countries. There are worries that the yuan devaluation will tilt the balance further in China’s favour.

SC Ralhan, President, Federation of Indian Export Organisations (FIEO) said that this may also lead to a currency war as could be seen by huge depreciation in numerous currencies such as Euro, Japanese Yen, Brazalian Real and Turkish Lira. The devaluation of the Chinese yuan will boost the competitiveness of Chinese exports, however a further decline in the currency may make it difficult for India to maintain its pace of monthly exports at $22 billion.

Around 36 Indian companies have subsidiaries or representative offices for doing business in China. These include Reliance, Tata, Infosys, Satyam, Lupin, Ranbaxy, Aurobindo, SBI, Essel Packaging, Jindal Strips.

The CNX Nifty is currently trading at 8418.25, down by 44.10 points or 0.52% after trading in a range of 8382.35 and 8446.95. There were 12 stocks advancing against 37 stocks declining on the index while 1 stock remained unchanged.

The top gainers on Nifty were Sun Pharma up by 3.97%, Tata Steel up by 3.53%, Infosys up by 2.66%, TCS up by 2.32% and HCL Tech up by 2.31%. On the flip side, BPCL down by 5.83%, Hindalco down by 5.18%, Coal India down by 3.86%, Vedanta down by 3.80% and NMDC down by 2.96% were the top losers.

Asian markets were trading in red; Hang Seng declined 550.69 points or 2.25% to 23,947.52Nikkei 225 dropped 327.98 points or 1.58% to 20,392.77, Jakarta Composite tumbled 123.08 points or 2.66% to 4,499.51, Taiwan Weighted decreased 110.76 points or 1.32% to 8,283.38, Straits Times shed 83.74 points or 2.66% to 3,069.32, Shanghai Composite slipped 33.86 points or 0.86% to 3,894.05, FTSE Bursa Malaysia KLCI dipped 23.83 points or 1.46% to 1,612.88 and KOSPI Index was down by 11.18 points or 0.56% to 1,975.47.

European Markets were trading in the red; Germany’s DAX lost 1.32%, France’s CAC declined 1.24% and UK’s FTSE was down by 0.91%.