Benchmarks resume southward journey; Nifty slips below 7,800 mark

Penultimate session of F&O series expiry turned out to be a daunting one for stock markets in India, with benchmarks ending below their crucial 7,800 (Nifty) and 25,800 (Sensex) levels. Key domestic markets, resuming their southward trend, clobbered out of shape with frontline gauges shaving off over a percentage point on Wednesday as traders booked profit mainly in last leg of trade. Earlier, after a gap-down opening markets witnessed significant recovery as traders got some support with the global rating agency Moody’s latest report that it will upgrade India's rating if the government is able to push through reforms, inflation stabilises, regulatory environment improves and infrastructure investment rises. Traders got some sense of relief with Reserve Bank of India Governor Raghuram Rajan’s statement that there is confidence that we are actually quite healthy, last time we did not have the confidence that is the big difference this time.

However, the sentiments were spooked largely in last leg of trade where frontline gauges once again entered into red terrain as investors feared fresh rate cuts in China may not be enough to stabilise its slowing economy or halt a stocks collapse that is wreaking havoc in global markets. Depreciation in Indian rupee too dampened the sentiments. The rupee depreciated by 4 paise to 66.14 against the US dollar at the Interbank Foreign Exchange at the time of equity market closing due to fresh dollar demand from importers. Moreover, the traders will be keenly watching whether the government succeeds in convening a special session of Parliament to pass the crucial GST bill.

Global cues too remained sluggish with European counters making an awful start as the jittery mood returned and sent investors back into safe-haven German and US government bonds. Asian markets, after a good start made a mixed close, with Chinese markets extending its plunge despite cutting interest rates in a bid to tame worries over the economy.

Back home, the sentiments were also under pressure on reports that foreign portfolio investors (FPIs) sold shares worth a net Rs 2080.01 crore on August 25, 2015, as per provisional data released by the stock exchanges. The IT sector, that showed smart recovery on rupee weakness and remained resilience for most part of the day, gave up and ended in red. On the flip side, the metal counter made recovery on reports that India will auction about 20 major iron ore mines this year in its first such sale ever. Additionally, the aviation stocks though showed a mixed trend after Federation of Indian Airlines (FIA), which represents domestic Indian airlines, urged the Government to drop the proposal to scrap the 5/20 rule as it will unsettle the level playing field in the Indian aviation sector and may favour new entrants, established and controlled by foreign airlines.

The NSE’s 50-share broadly followed index Nifty dropped by around ninety points to end below the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around three hundred and twenty points to end below its crucial 25,800 mark. Broader markets too struggled to get traction during the trade and ended mixed. The market breadth remained evenly divided, as there were 1,321 shares on the gaining side against 1,345 shares on the losing side while 99 shares remain unchanged.

Finally, the BSE Sensex plunged by 317.72 points or 1.22 % to 25714.66, while the CNX Nifty declined by 88.85 points or 1.13 % to 7791.85.

The BSE Sensex touched a high and a low 26156.61 and 7777.10, respectively. The BSE Mid cap index was down by 0.79%, while Small cap index was up by 0.16%.

The top gaining sectoral indices on the BSE were Power up by 1.64%, Metal up by 0.23% and Infrastructure up by 0.12%, while Bankex down by 1.68%, Healthcare down by 1.14%, TECK down by 1.04%, Oil & Gas down by 0.98% and FMCG down by 0.96% were the losing indices on BSE.

The top gainers on the Sensex were BHEL up by 3.45%, Tata Motors up by 2.31%, Bajaj Auto up by 1.79%, Wipro up by 1.46% and Coal India up by 1.22%. On the flip side, HDFC down by 3.77%, Hero MotoCorp down by 3.45%, Mahindra & Mahindra down by 3.07%, SBI down by 3.00% and Bharti Airtel down by 2.57% were the top losers.

Meanwhile, Commerce & Industry Ministry additional secretary J K Dadoo has said that due to fall in fuel prices overseas, the exports of petroleum products have been dipped. Low prices of crude, metal and commodity, dip in manufacturing and slowdown in western markets are some of the factors attributing to the fall. Also there has been increase in demand for petroleum-based products in the domestic markets because of the deregulation of diesel prices. Dadoo further said that trading with the European Union has been impacted due to economic woes of the 27-nation bloc.

Reliance, which accounts for over quarter of the country’s exports reported over 40% plunge in exports in Q1 of the current fiscal. Essar Oil too reported decline in petroleum products exports during the same quarter as oil prices across the globe were falling, due to fall in demand in the world's largest oil consumer China and increased shale gas production in the US, which is the second largest oil market globally.

Hit by global slowdown and dip in crude oil prices that impacted the value of petroleum products, exports were down 10.3% in July 2015 to $23.13 billion compared to that of $25.79 billion in same month last fiscal. The last time when the exports had registered a positive growth was in November 2014, where shipments expanded 7.27%.

The CNX Nifty touched a high and low 7930.05 and 7777.10 respectively.

The top gainers on Nifty were BHEL up by 4.29%, Tata Power up by 3.25%, Cairn India up by 2.46%, Power grid up by 1.98% and Bajaj Auto up by 1.92%. On the flip side, Tech Mahindra down by 4.07%, Hero MotoCorp down by 3.83%, Ambuja Cement down by 3.78%, HDFC down by 3.19% and Bank Of Baroda down by 3.09% were the top losers.

European Markets were trading in the red; France’s CAC was down by 1.43%, Germany’s DAX was down by 1.04% and UK's FTSE was down by 1.37%.

The Asian markets closed mostly in green on Wednesday, while China’s stock market has fallen again, for the fifth day running, as the market rout continues despite its central bank’s efforts to calm the crisis by cutting interest rates on Tuesday. The People’s Bank of China cut its benchmark interest rate and lowered the amount of cash banks are required to hold, as Beijing steps up efforts to support a stock market rout and a deepening economic slowdown. The People’s Bank of China cut the one-year lending rate to 4.6% from 4.85% effective Wednesday. China’s central bank also reduced its reserve requirement ratio by 0.5%, with that requirement effective on September 6. China’s central bank injected 140 billion yuan ($21.8 billion) into the interbank money market via short-term liquidity operations (SLOs). The loans, which mature in six days, have an average interest rate of 2.3%. The PBOC launched SLOs in 2013 to supplement its other monetary policy tools. The facility is mainly used to provide one- to three-day direct lines of credit to commercial banks, though loans with other maturities are occasionally used. The Bank of Korea board member stated that the biggest risk facing South Korea’s economy in the second half of the year is the US Federal Reserve’s pending interest rate hike. The government and the central bank is also preparing responses for future risks, including volatility from economic troubles in China and uncertainties coming out of other emerging market economies. Japan’s corporate services price index rose to a seasonally adjusted annual rate of 0.6%, from 0.4% in the preceding month. Singaporean Industrial Production fell to an annual rate of -6.1%, from -4.0% in the preceding month whose figure was revised up from -4.4%.