Benchmarks end lower as trade deficit widens; Sensex slips below 27,900 mark

Monday turned out to be a disappointing session for the Indian equity indices which got pounded by around half a percent as investors opted to book profits in index heavyweights after sharp gains in the previous session. After a cautious but positive opening, the domestic bourses entered into red terrain to trade choppy throughout the day and ended the session below their crucial support levels of 27,900 (Sensex) and 8,500 (Nifty). Sentiments remained dampened after India's merchandise exports contracted for the eighth month running in July, registering a 10.3 per cent drop over last year. The trade deficit widened to $12.8 billion in July from $10.8 billion in June. Investors also remained disappointed as key goods and services tax bill was not passed in the monsoon session of parliament, which ended last week.

Traders’ sentiments also weighed down by the report from the weather department that India's monsoon rainfall deficit has widened to 10% as a strengthening El Nino weather pattern trimmed rainfall. The rainfall is likely to remain subdued even this week over most parts of the country, raising concerns over output from summer-sown crops such as cotton, oilseeds, paddy and pulses. However, benchmarks managed to trim some of their losses in second half of trade as some support came with Prime Minister Narendra Modi promising to continue the war on prices to bring rates further down as a measure to boost economy and provide relief to the common man. Some support also came on report that foreign institutional investors were net buyers to the tune of Rs 404 crore on Friday, as per provisional stock exchange data.

On the global front, Euripoean counter have made a positive opening and were trading in green as concern eased that China’s currency devaluation would hurt the region’s exporters. Meanwhile, the European Commission confirmed a deal to lend cash-strapped Athens up to 86 billion euros over three years. However, Asian markets ended mostly in red terrain on Monday. Though the Chinese Shanghai Composite bounced back to end in green, other markets in the region remained concerned on speculation that Chinese authorities may dial back support measures implemented to stem the equity markets.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee was at 65.28 per dollar at the time of equity markets closing as compared to 65.00 per dollar level on Friday. Shares of upstream oil exploration and production (E&P) firms edged lower as global crude oil prices fell. Stocks related to public sector oil marketing companies (OMCs) declined after announcing reduction in petrol and diesel prices. On the flip side, state-run banks rallied on the government’s broad reform plan to shake up the country’s dominant but often inefficient government-backed lenders.

The NSE’s 50-share broadly followed index Nifty tumbled by over forty points to end below the psychological 8,500 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around one hundred and ninety points to finish below its psychological 27,900 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of around quarter of a percent. The market breadth remained in favor of decliners, as there were 1,440 shares on the gaining side against 1,425 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex declined by 189.04 points or 0.67% to 27878.27, while the CNX Nifty lost 41.25 points or 0.48% to 8477.30.

The BSE Sensex touched a high and a low 28095.97 and 27739.13, respectively. The BSE Mid cap index was up by 0.30%, while Small cap index was up by 0.21%.

The top gaining sectoral indices on the BSE were Metal up by 1.30%, PSU up by 1.11%, Consumer Durables up by 1.09% and Bankex up by 0.51%, while Realty down by 1.28%, Capital Goods down by 0.99%, Oil & Gas down by 0.97%, Auto down by 0.64% and Infrastructure down by 0.56% were the losing indices on BSE.

 The top gainers on the Sensex were Tata Steel up by 3.99%, SBI up by 3.95%, GAIL India up by 1.88%, Sun Pharma Inds. up by 0.83% and Coal India up by 0.68%. On the flip side, Cipla down by 4.95%, Hindalco down by 2.63%, ONGC down by 2.37%, Hero MotoCorp down by 2.23% and Dr. Reddys Lab down by 1.83% were the top losers.

 Meanwhile, domestic prices of natural gas may fall below $4.2 per unit from October 1 as international prices to which they are benchmarked have come down. This move could lead to lower piped cooking gas and CNG prices. Power plants which use gas a fuel and fertilizer units, which use it as an input would also benefit. Further, the cut will impact the revenue of producers like ONGC and Reliance Industries. This price cut will be the second reduction in rates since April 1.

Last year in October, government announced a new pricing formula which led to rates rising by about 33% to $5.61 per million British thermal unit (mmBtu) for a period up to March 31, 2015 from the long-standing price of $4.2, by using prevailing price in gas surplus nations like the US, Russia and Canada. As per the system the domestic natural gas price is to be revised every six months by using weighted average or rates prevalent in gas-surplus economies of US/Mexico, Canada and Russia.

From April 2015, the rates, on net calorific value (NCV) basis, dropped to $5.05 per mmBtu for six month period. According to the average price at the international hubs the rate is likely to be $4.16 or $4.17 per mmBtu on NCV basis from October 1. On gross calorific value (GCV) basis, the rate will be about $ 3.8 per mmBtu as compared to $4.66 currently.

Domestic gas price is calculated by using weighted average price at Henry Hub of US, National Balancing Point of UK, rates in Alberta (Canada) and Russia with a lag of one quarter. Earlier the rates for April 1 to September 30 period were based on average price at the international hubs during January to December 2014. Further, October 1, 2015 to March 31, 2016 rate will be based on average of prices during July 1, 2014 to June 30, 2015.

The CNX Nifty touched a high and low 8530.60 and 8428.05 respectively.

The top gainers on Nifty were Bank of Baroda up by 14.99%, Tata Steel up by 4.17%, SBI up by 3.99%, PNB up by 3.58% and GAIL India up by 2.33%. On the flip side, Cipla down by 5.06%, Zee Entertainment down by 2.79%, Hindalco down by 2.63%, Hero MotoCorp down by 2.38% and ONGC down by 2.37% were the top losers.

European Markets were trading in the green; France’s CAC was up by 0.54%, Germany’s DAX was up by 0.46% and UK's FTSE was up by 0.01%.

The Asian markets closed mostly in red on Monday, while Jakarta Stock Exchange was closed on account of ‘Independence Day’ holiday. Beijing is stepping up curbs on property market speculation after prices surged in one area of the capital, raising concerns some bigger cities may also tighten home purchase rules. China’s year-long slump in the housing market has dragged on the economy but there are fears bubbles are forming in some big cities even as prices in smaller cities languish. South Korean President Park Geun-hye stated that the domestic economy was returning to a modest recovery path after the shocks of the deadly Middle East Respiratory Syndrome ( MERS), but expressed concerns about China’s devaluation of the yuan. Japan’s economy shrank at an annualized pace of 1.6 percent in the April-June period, contracting for the first time in three quarters on weak exports and consumer spending. The preliminary reading for gross domestic product compared with the median estimate of a 1.9 percent contraction. It followed a revised 4.5 percent expansion in the first quarter.