Post Session: Quick Review

Slew of weak economic data coupled with selling in the global equity markets led to sharp slump in the Indian markets on Tuesday. Benchmarks not only slipped below their crucial support levels but closed almost near their lows of the day at lowest level in last 11 months. Markets remained under pressure from the very beginning reacting to weak economic data of the index of eight core industries slowing6 to three months low at 1.1 per cent in July compared to 3 per cent in the previous month, implying that July IIP will come lower than the June figures, as the eight core industries comprise a weightage of nearly 38 per cent in the IIP. Traders were also concerned about GDP growth slowing to 7 percent in the April-June quarter, from 7.5 percent in the previous quarter, amid deceleration in farm, services and manufacturing sectors. The numbers were not only slower than the preceding three-month period but were below expectations.

Feeble global cues played the major spoil sport and after the weak closing of the US markets the Asian markets followed the trend with a gauge of Chinese manufacturing falling to a three-year low as monetary easing failed to spur traditional growth drivers. The Japanese market too suffered sharp plunge after data showed that capital spending rose 5.6 percent on the year in the second quarter, missing the expectation. The European markets too made a weak start as investors considered further indications that the Chinese economy is slowing down. Even though, the German unemployment declined in August and jobless rate remained at 6.4 percent, the lowest level since German reunification.

Selling intensified in the second half of the trade led by the financials after Moody's Investor Services opined that though India is relatively insulated from the Chinese slowdown as it is not a commodity exporter or a big exporter. Although, in only, the sense that China affects lies in case of the Indian economy is in the financial market impact of a China slowdown. Sentiments were also weighed down by the report of manufacturing sector growing at a slower pace in August as order flow turned sluggish and forced the companies to cut prices. The Nikkei India Manufacturing PMI -- a composite monthly indicator of manufacturing performance -- stood at 52.3 in August, down from a six-month high figure of 52.7 in July. The final moments witnessed some short covering and there was mild rebound in the markets but it was too little-too less and markets suffered cut of over two percent for the day. Apart from the slowing growth momentum, traders were concerned about the inflation worries and rise in international crude oil prices, after OPEC’s statement that it was willing to talk to other producers to achieve reasonable oil prices led to sharp rise in crude prices overnight. Back on street, the broader markets too suffered losses in similar magnitude to the benchmarks, while none of the sectoral indices could manage a green close. The IT and tech gauges that were bucking the trends till noon, too fell in line and lost over a percent by close. Though, all the indices ended in red but the Banking, metal and realty were the major drag of the trade today.  

The BSE Sensex ended at 25690.75, down by 592.34 points or 2.25% after trading in a range of 25579.88 and 26141.07. There were just 2 stocks in green against 28 stocks in red on the index. (Provisional)

The broader indices too suffered sharp cuts; the BSE Mid cap index lost 2.12%, while Small cap index was down by 2.13%. (Provisional)

The top losing sectoral indices on the BSE were Bankex down by 3.66%, Metal down by 3.23%, Realty down by 3.07%, Auto down by 2.82% and Consumer Durables down by 2.81%. (Provisional)

The two gainers on the Sensex were Sun Pharma Inds. up by 0.35% and Bajaj Auto up by 0.10%. On the flip side, Hindalco down by 5.50%, Axis Bank down by 5.10%, Mahindra & Mahindra down by 4.19%, Vedanta down by 4.06% and Tata Steel down by 3.98% were the top losers. (Provisional)

Meanwhile, slowing to three-month low, the Index of Eight Core Industries-coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity which comprises nearly 38% of the weight of items included in the Index of Industrial Production (IIP), slowed to 1.1% in July this year, against 3.1% in the same period of previous year. The combined Index of Eight Core Industries stood at 168.0 in July, 2015, which was 1.1% higher compared to the index of July, 2014. Its cumulative growth during April to July, 2015-16 was 2.1%.

The decline in the core sector growth for the month of July was mainly on account of contraction in the output of crude oil, natural gas and steel, making a case for a further rate cut by the Reserve Bank.  Steel production, which occupies weight of 6.68%, recorded a fall of 2.6% in July, 2015 over July 2014 confirming fears that cheap imports from China were hurting domestic production. The cumulative growth during April to July, 2015-16 increased by 1.4% over the corresponding period of previous year. Natural gas production with the overall weight of 1.71% continued to contract, falling 4.4% in July from a year ago. Its cumulative index during April to July, 2015-16 declined by 4.2% over the corresponding period of previous year. Crude Oil production having weight of 5.22% declined by 0.4% in July, 2015 over July, 2014. Its cumulative index during April to July, 2015-16 declined by 0.7% over the corresponding period of previous year.

Meanwhile, Coal production having weight of 4.38%, the growth finally moderated, rising only 0.3% in July 2015 over July, 2014. Its cumulative index during April to June, 2015-16 increased by 5.7% over corresponding period of previous year. Electricity generation having weight of 10.32% growth slowed to 3.5% in July from 11.8% a year ago and registered 2.0% cumulative growth in power during April to July, 2015-16 over the corresponding period of previous year.

The other segments which showed improvement in the month of July were, Fertilizer production having weight of 1.25% was the strongest performing sector, posting 8.6% growth in July, but even that comes on a low base of 4.2% contraction in July 2014. Its cumulative index during April to July, 2015-16 increased by 4.1% over the corresponding period of previous year. Cement production having weight of 2.41%, increased by 1.3%  suggesting that construction and infrastructure building activity were yet to pick up pace. Its cumulative index during April to July, 2015-16 increased by 1.0% over the corresponding period of previous year. Petroleum Refinery production having weight of 5.94% inched up to 2.9%. Its cumulative index during April to June, 2015-16 increased by 3.9% over the corresponding period of previous year.

The slowdown in the core sector is expected to raise the clamour for further rate cut by RBI, which has already lowered the key lending rate thrice this year. The next monetary policy review is on September 29. (Provisional)

The CNX Nifty ended at 7781.40, down by 189.90 points or 2.38% after trading in a range of 7746.50 and 7929.10. There were just 4 stocks on the gainers side against 45 stocks on losers side, while one stock remained unchanged on the index. (Provisional)

The gainers on Nifty were Bajaj Auto up by 0.95%, ACC up by 0.52%, Sun Pharma Inds. up by 0.45% and Ambuja Cement up by 0.14%. On the flip side, PNB down by 7.28%, Bank Of Baroda down by 6.55%, Kotak Mahindra Bank down by 5.86%, Hindalco down by 5.43% and Axis Bank down by 5.27% were the top losers.  (Provisional)

European markets were trading in red, Germany’s DAX was down by 270.91 points or 2.64% to 9,988.55, UK’s FTSE 100 declined by 148.43 points or 2.38% to 6,099.51 and France’s CAC was lower by 110.07 points or 2.37% to 4,542.88.

The Asian markets closed in red on Tuesday after surveys of China’s mammoth manufacturing sector showed a further loss of momentum in the world’s second-biggest economy. China’s giant manufacturing sector contracted and exports from South Korea tumbled by the most in six years in August, rattling Asian markets and reinforcing expectations that policymakers will need to ease policy further. Manufacturers across Asia struggled last month, denting hopes of a pick-up in the second half of the year as the region tries to fire its traditional growth engine of exports. The Chinese government’s measure of manufacturing showed activity contracted at the fastest pace in three years, while a survey by Markit, which focuses more on smaller, private firms, showed the factory sector’s weakest performance in 6-1/2 years. Even China’s services sector, which has been one of the few bright spots in the sputtering economy, showed alarming signs of cooling, expanding at its slowest rate in more than a year. Other surveys by Markit showed manufacturing struggling across Asia: an 11th successive contraction in Indonesia, a sixth contraction in South Korea and the weakest reading in nearly three years in Taiwan. Activity in India also slowed from July, although it was still expanding. In a signal of slowing global demand, exports from South Korea dropped by nearly 15 percent in August from a year earlier, with shipments to China, the United States and Europe all weaker. Indonesian Inflation fell to a seasonally adjusted 7.18%, from 7.26% in the preceding month.