Sell-off in last hour of trade drag markets lower; Nifty breaches 8,000 mark

Monday turned out to be a disappointing session for the Indian equity indices which got pounded by around half a percent, breaching their crucial 8,000 (Nifty) and 26,300 (Sensex) levels as investors remained on sidelines ahead of quarterly gross domestic product (GDP) data scheduled to be released post market hours today. In the extremely volatile session of trade key gauges, after a sluggish start, staged smart recovery in noon deals to regain their green terrain as investors got some encouragement with Reserve Bank of India’s (RBI) Governor Raghuram Rajan hinting of an imminent rate cut, after he said that inflation has come down to the comfort zone quicker than expected and he is keeping a watch on data to see how much room is there for further easing of the monetary policy.

However, market participants booked profit at higher levels in last hour of trade ahead of April-June gross domestic product data which is likely to come at 7.4 per cent, just below 7.5 per cent in January-March. Sentiments also remained dampened on report that the country’s services sector witnessed around 14 per cent decline in foreign direct investment (FDI) at $636 million (Rs 4,036 crore) in the first quarter of the current fiscal. Some cautiousness was also due to the progress of the monsoon as a strengthening El Nino weather pattern is likely to trim rainfalls in August-September, raising fears of the first drought in six years.

Selling got intensified after European counters made an awful start with CAC and DAX were trading with a cut of over half a percent in early deals hit by sliding Chinese stocks and prospects of a near-term US rate increase. Asian markets ended mixed after top Federal Reserve officials kept the door open for an interest rate hike in September and investors braced for China economic data this week.

Back home, traders were also concerned about Prime Minister Narendra Modi’s announcement that the government will not re-promulgate the controversial ordinance on land acquisition. Weakness in Indian rupee too weighed down sentiments. The rupee was trading lower at 66.42 per dollar at the time of equity markets closing against previous close of 66.14 per dollar on sustained month-end dollar demand from importers. Sentiments also weighed down on report that foreign institutional investors (FIIs) have pulled out a record Rs 17,000 crore from the Indian equity market in August amid concerns over a China-led global economic slowdown.

The NSE’s 50-share broadly followed index Nifty declined by over thirty points to end below the psychological 8,000 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around one hundred and ten points to end below its crucial 26,300 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around quarter a percent. The market breadth remained in favor of decliners, as there were 1,169 shares on the gaining side against 1,490 shares on the losing side while 114 shares remain unchanged.

Finally, the BSE Sensex plunged by 109.29 points or 0.41% to 26283.09, while the CNX Nifty declined by 30.65 points or 0.38% to 7971.30.

The BSE Sensex touched a high and a low 26504.73 and 26215.16, respectively. The BSE Mid cap index was down by 0.23%, while Small cap index down by 0.20%.

The few gaining sectoral indices on the BSE were Healthcare up by 1.79%, Metal up by 0.60%, Oil & Gas up by 0.27% and PSU up by 0.06%, while Power down by 1.54%, Realty down by 1.34%, INFRA down by 1.31%, Capital Goods down by 1.08% and Auto down by 0.77% were the top losing indices on BSE.

The top gainers on the Sensex were Lupin up by 3.55%, Cipla up by 3.30%, Dr. Reddys Lab up by 3.15%, Coal India up by 2.50% and Vedanta up by 2.34%. On the flip side, BHEL down by 3.45%, Bharti Airtel down by 2.14%, Hindalco down by 2.08%, ICICI Bank down by 1.92% and Reliance Industries down by 1.65% were the top losers.

Meanwhile, the new black money law by the Narendra Modi government has spooked the Swiss banks. Due to the fear of being accused of 'abetting' the hoarding of untaxed assets, Swiss and other European banks are urging their Indian clients to disclose their accounts to the tax authorities back home. The banks having headquarters in Switzerland and London have asked the Indian customers including those having turned NRIs, to avail the ongoing 'one-time compliance' window provided by the Indian tax authorities for disclosure of undeclared foreign assets. Besides, these banks are also asking their clients to give fresh undertakings to state that they are in compliance with all the laws in their home countries. In order to confirm the clean status of money, Swiss banks have also started asking for auditor certificates from high net worth individuals and corporate clients.

Under the new law, a three-month compliance window has been given for disclosure of all undeclared foreign assets till next month, for which they would need to pay 30% tax and 30% penalty. However, after this window anyone with undisclosed foreign assets would have to pay 30% tax and 90% penalty and further would also be labile for jail term of up to 10 years. The law also provides for 'punishment for abetment' where the abettor would be punishable with careful imprisonment for a term which shall not be less than 6 months but may extend to 7 years along with fine. This provision would be applicable to those who abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to tax payable under this Act which is false and which either knows to be false or to commit an offence.

In order to curb the black money menace, Supreme Court had formed special investigation team who is investigating various cases, while the government would soon be coming out with a stringent that provides for hefty penalties as well as imprisonment for stashing away unaccounted money. Meanwhile, Switzerland is also moving towards automatic exchange of tax information with various jurisdictions, including India.

The CNX Nifty touched a high and low 8043.60 and 7947.95 respectively.

The top gainers on Nifty were Cipla up by 3.66%, Lupin up by 3.45%, Dr. Reddys Lab up by 2.81%, GAIL up by 2.75% and BPCL up by 2.67%. On the flip side, BHEL down by 3.64%, Power Grid down by 3.51%, Bharti Airtel down by 2.33%, Ultratech Cement down by 2.18% and ACC down by 2.16% were the top losers.

European Markets were trading in the red; France’s CAC was down 0.52% and Germany’s DAX was down by 0.53%.

The Asian markets closed mostly in green on Monday, while they ended their worst monthly performance in more than three years in August, as shares struggled to recover from a global selloff sparked by worries about China. Malaysia stock exchange was closed on account of ‘National Day’ holiday. China’s central bank is highly likely to ease monetary policy again by the end of this year, as it seeks to support a rapidly cooling economy and calm financial markets. The People’s Bank of China cut interest rates and lowered the amount of reserves banks must hold for the second time in two months, acting amid pressure from a global stock market rout and massive outflows from its markets. The outstanding amount of China’s dollar-denominated Qualified Foreign Institutional Investor (QFII) programme inched up to $76.7 billion as of August 28, from $76.6 billion at the end of July. The QFII scheme was created by China to allow foreigners to invest in Chinese capital markets. Japanese industrial production fell to a seasonally adjusted -0.6%, from 1.1% in the preceding month while Japanese Housing Starts fell to a seasonally adjusted 7.4%, from 16.3% in the preceding quarter. South Korean Industrial Production fell to a seasonally adjusted annual rate of -3.3%, from 1.4% in the preceding month whose figure was revised up from 1.2%.