Benchmarks witness bloodbath on global economic fears

Friday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 27,400 (Sensex) and 8,300 (Nifty) levels with a cut of around a percentage point as sentiments remained dampened on rising concerns of a slowdown in China, lingering uncertainty in Greece amid volatility in oil and currency. After a gap-down opening markets traded in tight band for most part of the day’s trade and found it difficult to rebound due to sustained selling by foreign funds and retail investors. Markets made a decent attempt to recover in last leg of trade supported by buying in pharma and FMCG counters but could only managed to wipe out a portion of losses suffered in the early trade, as traders remained concerned about the global growth lacking any major cues.

Depreciation in Indian rupee mainly weighed down sentiments. The rupee was trading at its weakest since September 2013 at 65.83 down by 30 paise since China devalued its yuan on August 11 along with weakness in the local equities. Investors failed to get any sense of relief with revenue secretary Shaktikanta Das’ statement who seeking to reassure foreign investors that it will not take any steps that “undermines the growth momentum”, participatory notes (P-Notes) “will not be banned overnight” and stakeholders will be consulted before a decision is taken, even as it was signaled that the know-your-customer (KYC) norms will be strengthened for such instruments.

On the global front, European markets have made weak start amid mixed economic data from the region. French manufacturing shrank for a second month in August and services growth weakened, while German manufacturing growth unexpectedly accelerated to the fastest pace in more than a year. Asian markets ended lower after a survey showed Chinese factories contracted at their fastest pace since the depth of the global financial crisis in 2009, sending investors scurrying to the safety of bonds and gold.

Back home, investors failed to draw any solace with Railways Minister Suresh Prabhu’s statement that the Indian economy can double in three years and has the potential of becoming a $20-trillion economy. The minister also asserted that only economic growth was not the agenda; rather the removal of poverty and corruption was also essential. Sentiments also remained weak on reports that foreign portfolio investors (FPIs) sold shares worth a net Rs 1007.26 crore on August 20, 2015, as per provisional data released by the stock exchanges.

Selling in banking stocks too dampened the sentiments after Finance Minister Arun Jaitley said that NPA levels are unacceptable, adding that it has been partly due to past inaction and changes in some sectors of economy. The metals counters too remained under pressure despite the government notifying the setting up of National Mineral Exploration Trust (NMET), which will look into the ways to encourage exploration of mines and minerals in the country. The trust will be headed by the minister of mines.

The NSE’s 50-share broadly followed index Nifty declined by over seventy points to end below the psychological 8,300 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over two hundred and forty points to finish below the psychological 27,400 mark. Broader markets too witnessed bloodbath and ended the session with a cut of around a percentage point. The market breadth remained in favour of decliners, as there were 1000 shares on the gaining side against 1,811 shares on the losing side while 94 shares remain unchanged.

Finally, the BSE Sensex plunged by 241.75 points or 0.88% to 27366.07, while the CNX Nifty declined by 72.80 points or 0.87% to 8299.95.

The BSE Sensex touched a high and a low 27442.82 and 27131.44, respectively. The BSE Mid cap index was dwon by 0.89%, while Small cap index was down by 0.60%.

The top gaining sectoral indices on the BSE were IT up by 0.37%, FMCG up by 0.11% and Healthcare up by 0.02%, while Realty down by 2.55%, Auto down by 2.07%, Capital Goods down by 1.76%, Bankex down by 1.28% and Infrastructure down by 1.01% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 1.24%, Infosys up by 1.09%, Hindustan Unilever up by 0.93%, Cipla up by 0.87% and Sun Pharma up by 0.28%. On the flip side, Vedanta down by 3.81%, Bajaj Auto down by 3.40%, Hero MotoCorp down by 2.81%, GAIL India down by 2.75% and Tata Motors down by 2.73% were the top losers.

Meanwhile, the government is not planning to raise excise duty on petrol and diesel to mop up gains accruing from oil prices that slumped to six-and- half year low, unless oil falls to $30 (per barrel) level. In the past year, taking advantage of the lower crude oil prices, the government had raised excise duty on petrol and diesel between November and January in four installments totalled Rs 7.75 per litre on petrol and Rs 6.50 a litre on diesel. But for the excise duty hikes, consumers would have benefited by reduction in retail rates to that extent.

The four excise duty hikes between November and January had led to about Rs 20,000 crore in additional revenue to the government, which helped to meet its fiscal deficit target. The drop in international oil prices will translate into cut in retail selling price of petrol and diesel at the month end if the government was not to take away gain before that.

Despite excise duty hikes, petrol prices have been cut by Rs 10.40% litre in several installments since July 2014. In the past tax on petrol and diesel was first hiked by Rs 1.5 per litre from November 12. Then again from December 2, the excise duty on petrol was raised by Rs 2.25 per litre and by Re 1 on diesel. This was followed by government hiking excise duty on petrol and diesel by Rs 2 per litre each from January 2 and a similar proportion from January 16.       

The CNX Nifty touched a high and low 8322.20 and 8225.05 respectively.

The top gainers on Nifty were Hindustan Unilever up by 1.66%, Hindalco up by 1.53%, Ambuja Cement up by 1.12%, Cipla up by 0.93% and Infosys up by 0.82%. On the flip side, Yes Bank down by 4.10%, , Bajaj Auto down by 3.80%, Vedanta down by 3.45%, Zee Entertainment down by 3.27% and GAIL down by 3.22% were the top losers.

European Markets were trading in the red; France’s CAC was down by 0.69%, Germany’s DAX was down by 0.51% and UK's FTSE was down by 0.77%.

The Asian markets closed in red on Friday as fears about the health of the global economy pounded equity markets. Worries of a deepening China economic slowdown intensified after a private survey showed the factory sector shrank at its fastest rate in almost 6-1/2-years in August, hammering global stocks and commodity prices. The gloomy figure sent investors fleeing for cover in gold and bonds, fearing China’s sagging economy would translate into slower global growth and muddy the outlook for the timing of the first US interest rate hike in nearly a decade. The preliminary Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) stood at 47.1 in August, down from July’s final 47.8. It was the worst reading since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis. Indonesia’s central bank has changed the auction mechanism of several monetary instruments and offered longer tenures as part of measures to support the shaky rupiah. The change is aimed at absorbing banks’ excess short-term liquidity to prevent its use to speculate against the rupiah. Japan’s trade balance fell to a seasonally adjusted -0.37T, from -0.28T in the preceding month whose figure was revised down from -0.25T.