Post Session: Quick Review

Just after a day of relief, nervousness once again gripped the Dalal Street on Friday, with markets crashing in very early deals on across the board selling, tailing the overnight weakness in the US markets that was followed by the Asian indices. Traders were concerned about the August US nonfarm-payrolls report due Friday that may add fuel to the debate over whether the US economy is strong enough for the Federal Reserve’s first interest-rate increase since 2006. A strong jobs number could rekindle speculation of an early rate hike, which could hurt risk assets, particularly in emerging economies. Domestic markets fell more than 2 per cent to the lowest in nearly 14 months and posted their worst week since November 2011.

The global cues remained bleak, though the US markets made a mixed closing; the Asian markets remained in somber mood despite the absence of Chinese volatility, amid concern that China will pare back support for its stock market on Monday. Japanese market slipped to seven-month lows, with the Nikkei posting its biggest weekly fall in almost a year. The European markets too made a weak start, extending their weekly slump, even though German factory orders, adjusted for seasonal swings and inflation, dropped 1.4 percent after June’s reading was revised down to 1.8 percent.

Back home, markets never looked posing any resistance and it was a free run for the bears on the street. Initially it looked that selling got arrested but it turned out be a mirage and the selling intensified rather with traders pressing the panic button kept on relentless selling till the closing of the trade. Traders were also concerned about the sustained capital outflows of the foreign investors’, FPIs withdrew a net Rs 17,428 crore from the domestic stock market in August, the biggest since Jan 2008. Though, all the sectoral indices plunged, the rate sensitives were the worst affected despite the Minister of State for Finance Jayant Sinha’s statement that the Reserve Bank of India will factor in domestic as well as global deflationary trends while deciding policy rates. He has also said that Indian economy could grow close to 8 per cent this fiscal. Former Reserve Bank of India governor C Rangarajan too weighed in on the side of rate cut saying there is room for moderation in interest rates and India is in a better shape to face any global turbulence. Power sector too was one of the laggard of the day, despite Prime Minister Narendra Modi stating that every household should have round-the-clock power supply by 2022.

The BSE Sensex ended at 25206.21, down by 558.57 points or 2.17% after trading in a range of 25119.06 and 25775.38. There were just 2 stocks advancing against 28 stocks declining on the index. (Provisional)

The broader indices too suffered sharp cuts; the BSE Mid cap index was down by 1.88%, while Small cap index slumped by 2.46%. (Provisional)

The top losing sectoral indices on the BSE were Realty down by 3.56%, INFRA down by 3.24%, Power down by 2.90%, Bankex down by 2.69%, Auto down by 2.41%.(Provisional)

The two gainers on the Sensex were Bharti Airtel up by 0.73% and Coal India up by 0.68%. On the flip side, Tata Steel down by 4.75%, Vedanta down by 4.74%, GAIL India down by 4.70%, Hindalco down by 4.27% and Dr. Reddys Lab down by 3.74% were the top losers. (Provisional)

Meanwhile, the government has received over Rs 1 lakh crore investment proposals for manufacturing in the electronics sector. Communications and IT minister Ravi Shankar Prasad said that “We are promoting electronic cluster in a big way since last 14 months and have received investment proposals of Rs.1.07 lakh crore till now”

Prasad further said that the government is promoting electronic clusters which will provide full eco-system to make certain products and states are competing with each other for setting them up. For the electronic clusters government provides assistance of up to 50 per cent of the project cost for new EMC which is subject to a ceiling of Rs 50 crore for 100 acres of land. For larger areas, pro-rata ceiling applies. As of July this year, government has approved two greenfield EMCs and accorded in-principle approval to 16 and three Common Facility Centres in brownfield clusters under the scheme.

The government also plans to give lot of incentives to the investors under Modified Special Incentive Package Scheme. The Modified Special Incentive Package Scheme provides subsidy for investments in capital expenditure which is 20 per cent for investments in special economic zones (SEZs) and 25 per cent in non-SEZs. It also provides for reimbursement of countervailing duty or excise for capital equipment for the non-SEZ units.  Besides, for setting up electronic chip manufacturing unit, government is allowing 200 per cent deduction on expenditure on research.

The minister further said that the government's 'Make in India programme' for the domestic market as also for exports is the essence of Digital India initiative, and appealed to stakeholders to make India hub for all kind of manufacturing. The minister noting that electronics manufacturing space has huge potential for employment generation has said that seven institutes of IT and electronics will be set up so that there is good human resource to supplement need of workforce in electronic manufacturing.

The CNX Nifty ended at 7655.95, down by 167.05 points or 2.14% after trading in a range of 7626.85 and 7804.90. There were just 4 stocks in green against 46 stocks in red on the index. (Provisional)

The gainers on Nifty were BPCL up by 1.47%, Coal India up by 1.07%, Bharti Airtel up by 1.01% and Lupin up by 0.03%. On the flip side, Vedanta down by 4.94%, GAIL India down by 4.94%, Tata Power down by 4.84%, Tata Steel down by 4.72% and Hindalco down by 4.47% were the top losers. (Provisional)

European markets were trading with sharp cuts, Germany’s DAX declined by 180.05 points or 1.75% to 10,137.79, UK’s FTSE 100 lost 98.16 points or 1.58% to 6,095.94 and France’s CAC was lower by 81.11 points or 1.74% to 4,572.68.

The Asian markets closed in red on Friday while Shanghai Stock Exchange was shut on account of ‘Victory Day’ holiday. Japan’s government offices have requested 102.4099 trillion yen ($852.14 billion) for an annual budget for the next fiscal year from April 2016, the biggest amount ever. The spending requests got a boost from areas such as social security in a fast ageing society and pro-growth policy steps. The requests, to be announced, highlight a challenge for Prime Minister Shinzo Abe’s aim of achieving both economic growth and fiscal consolidation. Indonesian central bank survey indicates that the country’s consumers are more optimistic about the economy, despite fears of higher inflation. Bank Indonesia’s August Consumer Confidence Index, based on a sample of some 4,600 households in 18 cities nationwide, rose by 2.7 points to 112.6 in August from a month earlier. Japan’s Average Cash Earnings rose to a seasonally adjusted 0.6%, from -2.5% in the preceding quarter whose figure was revised down from -2.4%. Malaysian Trade Balance fell to 2.38B, from 7.98B in the preceding month.