Benchmarks extend southward journey for third straight session

Extending their southward journey for third straight session, Indian equity benchmarks ended the Wednesday’s session with a cut of around a percent, breaching their crucial 25,500 (Sensex) and 7,750 (Nifty) levels. Sentiments remained dampened on account of weak GDP data coupled with worries on China’s economic slowdown amid fears of an interest rate hike by the US fed has triggered a fresh round of selling across the global markets. Earlier, markets made a firm start as the government accepted the recommendation of the Shah Panel report stating that Minimum Alternate Tax (MAT) should not be imposed on overseas portfolio investors retrospectively.

However, traders booked profit at higher levels and markets lost the plot completely in the second half and there was hardly any serious attempt to move back in green. Concern in the market grew after India's weather office India Meteorological Department (IMD) said that for the country as a whole, cumulative rainfall during this year's monsoon season was 12% below the Long Period Average (LPA) until 1 September 2015. Weakness in Indian rupee too weighed down the sentiment. Sentiments also remained dampened on report that foreign portfolio investors (FPIs) remained net sellers in domestic equities worth Rs 675.32 crore on Tuesday, as per provisional data released by the stock exchanges.

On the global front, European counters were trading in green in early deals, with traders pointing to more intervention in China to calm jittery markets and upcoming central-bank policy meetings. However, Asian shares fell for a third straight day on Wednesday as weak manufacturing reports from China, the United States and Europe fuelled worries about slowing global growth, while the safe-haven Japanese yen firmed as investors unwound carry trades.

Back home, markets took the turn for worst in last leg of trade and slipped to their day’s low, with Nifty touching its lowest level since August 25. Selling in banking stocks too played spoil sport as Fitch Ratings said that RBI declaring only ICICI Bank and SBI as Domestic Systemically Important Banks (DSIBs) reflects in part some of the broader capital challenges in India. Fitch also said the government's capital support remains crucial for state-owned banks considering the shallow domestic additional tier I market and weak internal capital generation capability. On the flip side, shares of private oil exploration companies rallied, after the Cabinet approved auction of 69 small and marginal oil fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India to private and foreign firms.

The NSE’s 50-share broadly followed index Nifty declined by around seventy points to end below the psychological 7,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over two hundred and forty points to end below its crucial 25,500 mark. Broader markets struggled to get some traction during the trade and ended the session mixed. The market breadth remained in favor of decliners, as there were 1,221 shares on the gaining side against 1,394 shares on the losing side while 138 shares remain unchanged.

Finally, the BSE Sensex plunged by 242.88 points or 0.95% to 25453.56, while the CNX Nifty declined by 68.85 points or 0.88% to 7717.00.

The BSE Sensex touched a high and a low 25939.37 and 25395.09, respectively. The BSE Mid cap index was down by 0.82%, while Small cap index was up by 0.15%.

The top gaining sectoral indices on the BSE were IT up by 1.24%, TECK up by 0.97%, Realty up by 0.69% and FMCG up by 0.34%, while Power down by 2.43%, PSU down by 2.37%, Bankex down by 1.81%, Capital Goods down by 1.69% and Infrastructure down by 1.59% were the losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.45%, Tata Steel up by 1.60%, ITC up by 1.41%, Reliance Industries up by 1.09% and Infosys up by 0.98%. On the flip side, BHEL down by 5.10%, Mahindra & Mahindra down by 3.56%, SBI down by 3.55%, ONGC down by 3.55% and Coal India down by 3.07% were the top losers.

Meanwhile, Chief Economic Adviser (CEA) Arvind Subramanian has said that slowdown in China is a historic opportunity for India as Chinese production becomes less profitable. India is a net importer country accordingly Chinese slowdown is an opportunity to relaunch growth in India. Investment from Chinese company like Foxconn of Taiwan and Xiaomi suggest that companies based in China might now view India as a hedge against the slowdown.

Talking about the recently devalued Chinese Renminbi, Subramanian has stated that India has an unambiguous interest in supporting China's currency become the part of Special Drawing Rights (SDR) basket, or the supplementary foreign exchange reserves maintained by the International Monetary Fund, because essentially as the Chinese currency becomes more and more international, China will have to open up its economy which is good for the world, good for China. He also said that after which China will be less able to manipulate its currency, keep it low, which could be disadvantageous for China. So India has a strong stake in that the Chinese currency becomes internationalized.

Besides, he added that China should be able to get the geo-political benefits issuing from its currency becoming more international because the concrete economic result would be both an opening up and a tighter linking of the Chinese economy. Last month, in order to deal with current economic weaknesses, the Chinese central bank had lowered its daily reference rate by 1.9 percent, rocking currency markets globally and affecting the rupee.

The CNX Nifty touched a high and low 7862.55 and 7699.25 respectively.

The top gainers on Nifty were Tech Mahindra up by 5.19%, Idea Cellular up by 3.21%, TCS up by 2.47%, Ultratech Cement up by 2.15% and ACC up by 2.13%. On the flip side, BHEL down by 4.80%, ONGC down by 3.76%, SBI down by 3.66% , Cairn India down by 3.26% and Hindustan Unilever down by 3.25% were the top losers.

European Markets were trading in the green; France’s CAC was up by 0.34%, Germany’s DAX was up by 0.39% and UK's FTSE was up by 0.42%.

The Asian markets closed mostly in red on Wednesday with Chinese markets recovering some ground. Chinese markets will be closed on Thursday and Friday for a holiday to commemorate the end of World War Two. The yuan’s recent depreciation moves it closer towards its real market value, the head of the Asian Development Bank stated, dismissing fears that China may export deflation to its Asian neighbors by flooding goods made cheaper by a weak currency. ADB President Takehiko Nakao added that while China’s economy may no longer expand at a 10-percent pace seen in the past, it will continue to grow steadily as it shifts to a consumption-driven economy with a deeper service sector. Japanese Economics Minister Akira Amari stated that it is too early to say that Japan has completely escaped the risk of returning to deflation. The consumer price index was not the only way to judge whether the economy was out of deflation. Amari added that it was important for the economy to grow both in nominal and real terms and for the gross domestic product deflator to be positive. Japan’s Monetary Base rose to 33.3% compared to 32.8% in the preceding month. Indonesia’s president Joko Widodo promised quick massive deregulation to improve investor sentiment in Southeast Asia’s largest economy. Widodo added that there were 110 regulations already identified as being negative for investors.