Bears take the command of Dalal Street; Nifty breaches 7,800 mark

Tuesday's trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 7,800 (Nifty) and 25,700 (Sensex) levels, owing to heavy sell-off in global markets. Markets never got a breather after getting a sharp gap down opening and whenever there was any sign of stabilization, it was followed by more intensified selling, and finally the trading hours closing came to rescue to the plunging markets. Sentiments remained dampened since beginning on reports that the country’s growth rate declined to 7 percent in the April-June quarter, from 7.5 percent in the previous quarter, amid deceleration in farm, services and manufacturing sectors.

Traders also remained worried after the manufacturing sector grew at a slower pace in August as order flow turned sluggish. Sentiments also weighed down after index of eight core industries slowing 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. Some concern also came with the India Meteorological Department’s report that monsoon has been deficient by 11 percent so far with August recording 22 percent less than normal rainfall, raising the prospect of lower foodgrains production for the Kharif season than 2014 if the situation does not improve in September.

Selling got intensified after European markets made an awful start and were trading sharply lower in early deals, as investors considered further indications that the Chinese economy is slowing down. However, the German unemployment declined in August and jobless rate remained at 6.4 percent, the lowest level since German reunification. Asian markets too ended in red terrain after twin surveys showed China's manufacturing sector in the grip of its worst slump in several years, raising fresh fears about the health of its economy.

Back home, bulls never came into picture and bears were in absolute command of the markets from the start, mirroring the global rout. All across there was red on the street, with major bourses continuously losing their various support levels, while the bluechips dragged the benchmarks. Sentiments also remained dampened on report that foreign investors pulled out a record $2.55 billion from Indian markets in August, the highest-ever monthly outflow at least since 2002 as per regulatory data.

Selling in realty counter too dampened the sentiments after Moody’s said property developers will continue to face challenges due to weak cash flows, flat sales and stagnant prices. Oil marketing companies remained under pressure after fuel retailers cut petrol and diesel prices by Rs 2 and Rs 0.50 per litre, respectively.

The NSE’s 50-share broadly followed index Nifty declined by around one hundred and eighty points to end below the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over five hundred and eighty points to end below its crucial 25,700 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around two percentage points. The market breadth remained in favor of decliners, as there were 612 shares on the gaining side against 2,082 shares on the losing side while 89 shares remain unchanged.

Finally, the BSE Sensex plunged by 586.65 points or 2.23% to 25696.44, while the CNX Nifty declined by 185.45 points or 2.33% to 7785.85.

The BSE Sensex touched a high and a low 26141.07 and 25579.88, respectively. The BSE Mid cap index was down by 1.96%, while Small cap index was down by 2.17%.

The top losing sectoral indices on the BSE were Bankex down by 3.63%, Metal down by 3.24%, Realty down by 3.17%, Capital Goods down by 2.74%, PSU down by 2.66%, while they were no gainers on the sectoral index.

The top gainers on the Sensex were Sun Pharma up by 0.34%. On the flip side, Axis Bank down by 5.24%, Hindalco down by 5.18%, Tata Steel down by 3.93%, BHEL down by 3.91% and Vedanta down by 3.80% were the top losers.

Meanwhile, adding worries to the government and the policy makers, after the slow growth of the core sector, manufacturing sector too grew 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, indicating a slower pace of growth in the sector.

The data pointed to weaker rates of expansion for both output and new orders due to downward movement in the headline index were there was softer increases in output, new orders and stocks of purchases. New order growth also moderated in August, reflecting weaker improvements in both domestic and foreign demand.

Employment levels stagnated over the month and manufacturing employment was unchanged in August, with respondents indicating that hiring had been stymied by relatively weak growth and economic uncertainty. Nonetheless, companies were able to lower their levels of outstanding business in August.

The survey however pointed that manufacturing production across India rose further in August supported by sustained demand growth amid evidence of increased production requirements and efforts to replenish stocks, Indian manufacturers raised their buying levels in August. Purchasing activity grew at a sharp rate that was the quickest in 2015 so far. On the price front, input costs decreased for the first time in six months and, subsequently, firms lowered their selling prices.

Industry wise, the consumer goods category outperformed the capital and intermediate goods sub-sectors in terms of growth of output, new orders and buying levels. Reflecting lower prices paid for metals, plastics, chemicals and petroleum-based products, average costs faced by Indian manufacturers fell in August.

There was increase in both output and new orders, albeit a slower one, the output growth is likely to rebound in coming months, as indicated by buying levels coupled with a record drop in stocks of finished goods. Stocks of finished goods witnessed sharpest pace of drop in survey history.

The CNX Nifty touched a high and low 7929.10 and 7746.50 respectively.

The top gainers on Nifty were Bajaj Auto up by 0.86%, ACC up by 0.52%, Sun Pharma up by 0.45% and Ambuja Cement up by 0.14%. On the flip side, PNB down by 7.21%, 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.

European Markets were trading in the red; France’s CAC was down by 2.28%, Germany’s DAX was down by 2.40% and UK's FTSE was up by 2.26%.

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.