Benchmarks end lower ahead of US FOMC meet

Tuesday turned out to be disappointing session for the Indian equity indices which got pounded by over half a percent, as investors booked profits ahead of the much-anticipated US Fed’s two-day policy meeting starting tomorrow, any rate hike in the US would not only strengthen the dollar but would lead to selling from foreign investors in emerging market stocks. Concern about the monsoon too dampened sentiments. The India Meteorological Department (IMD) reported that India is headed towards the driest monsoon season for the third time in three decades. Renewing concerns over poor harvest and spike in food inflation, the monsoon rainfall deficit so far has widened to 16 percent.

Better-than-expected inflation data too failed to impress D-Street. The consumer price index (CPI) declined to a nine-month low of 3.66 per cent in August from 3.69 per cent in July, but the rate of food price rise went up to 2.20 per cent from 2.15 per cent, that may lead RBI think again before going for its fourth rate cut in the year. Sentiments also remained down-beat on report that Foreign investors have already sold $995.5 million of Indian shares so far this month, according to data from National Securities Depository, after selling around $2.6 billion in August - the biggest monthly sales ever.

Global cues too remained sluggish with European counters trading in red in early deals, with investors waiting for the outcome of a crucial policy meeting of the US Federal Reserve on interest rates. Asian markets ended mostly in red on Tuesday led by the Chinese market, however, the Japanese market ended higher by around half a percent despite the Bank of Japan (BOJ) refraining from boosting stimulus even after the economy shrank last quarter.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee was at 66.39 per dollar at the time of equity markets closing as compared to 66.33 per dollar level on Monday. Selling in Metal counter too weighed down sentiment as China's investment and factory output in August missed forecasts, raising concerns over the growth of world’s second largest economy. Banking counter too witnessed selling after Reserve Bank of India (RBI) Deputy Governor R. Gandhi said there was an “urgent” need for banks to reduce their stressed assets, given the impact on liquidity and capital in the sector. He also said that the RBI had received a proposal to limit the number of banks in a lending consortium as a way to improve recovery of loans.

The NSE’s 50-share broadly followed index Nifty tumbled by over forty points to end below the psychological 7,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by one hundred and fifty points to finish below its psychological 25,750 mark. Broader markets too witnessed selling pressure and ended the session with a cut of over half a percent. The market breadth remained in favour of decliners, as there were 1,100 shares on the gaining side against 1,521 shares on the losing side while 103 shares remained unchanged.

Finally, the BSE Sensex declined by 150.77 points or 0.58 % to 25705.93, while the CNX Nifty lost 43.15 points or 0.55 % to 7829.10.

The BSE Sensex touched a high and a low 25909.83 and 25649.37, respectively. The BSE Mid cap index was down by 0.77%, while Small cap index was down by 0.55%.

The top gaining sectoral indices on the BSE were FMCG up by 0.80% and IT up by 0.03%, while Metal down by 2.34%, Capital Goods down by 2.11%, Auto down by 1.66%, Consumer Durables down by 1.55% and Bankex down by 0.97% were the losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.15%, Sun Pharma Inds. up by 1.11%, ITC up by 1.09%, NTPC up by 0.68% and Reliance Industries up by 0.52%. On the flip side, Tata Steel down by 5.08%, Vedanta down by 4.06%, Tata Motors down by 3.69%, Hindalco down by 3.05% and Larsen & Toubro down by 2.92% were the top losers.

Meanwhile, in order to protect the domestic steel industry from rising cheap imports, the government has imposed 20 per cent provisional safeguard duty of certain types of steel on the recommendations of the Directorate General of Safeguards (DGS). This duty comes into immediate effect and will be applicable for a period of 200 day. Safeguard duty is a WTO-compatible temporary measure that is brought in for a certain timeframe to avert any damage to a country's domestic industry from cheap imports.

Finance Minister Arun Jaitley said that the duty will be applied on specified categories of steel from all countries, adding that the power of imposing provisional duty was invoked in view of sudden surge in imports and subsequent injury to domestic producers. The duty will provide temporary relief to domestic industry by making imports costlier. Safeguard duty will be the latest imports of specific steel products from China, Japan and Korea for 200 days.

Earlier, DGS had recommended imposition of safeguard duty on hot-rolled flat steel products for 200 days to protect interests of the domestic industry. Such products account for almost 80 per cent of India’s steel imports. The major steel producers, like JSW Steel, Essar Steel and SAIL, representing 50 percent of the domestic production, have complained of surge in imports of steel products like hot-rolled steel and other variants from China, Korea, Japan and Russia and they had moved DGS, for imposition of the levy on imports of hot-rolled flat products of non-alloy and other alloy steel in coils of a width of 600 mm or more for four years.

In 2014-15, steel imports jumped 71% to 9.32 mt from 5.42 mt. China, Japan and Korea accounted for 76% of total imports which almost doubled to 7 mt from 3.8 mt. Imports of Chinese steel grew by 232%, Japan by 18% and Korea by 46%, according to steel ministry data. During April-June 2015, steel imports from China and Korea went up by 49 per cent and 105 per cent from Japan.Total imports (including semifinished steel) during Q1 FY16 surged by 57 per cent to 2.7 mt, this time on a higher base.

This year, basic customs duties on steel were raised twice in June and in August by 2.5% each time. In June, India imposed anti-dumping duty of up to $316 per tonne on imports of certain steel products from three countries, including China, to protect domestic producers from below-cost inbound shipments.

 The CNX Nifty touched a high and low 7880.00 and 7799.75 respectively.

The top gainers on Nifty were Tech Mahindra up by 2.87%, Hindustan Unilever up by 1.24%, Sun Pharma up by 1.13%, ITC up by 1.08% and Cairn India up by 1.04%. On the flip side, Tata Steel down by 5.46%, Vedanta down by 4.74%, Tata Motors down by 3.59%, L&T down by 3.30% and Ambuja Cement down by 2.96% were the top losers.

European Markets were trading in the red; France’s CAC was down by 0.78%, Germany’s DAX was down by 0.32% and UK's FTSE was up by 0.68%. 

The Asian markets closed mostly in red on Tuesday, as investors await the outcome of a US Federal Reserve meeting. The Bank of Japan held fire on expanding its unprecedented monetary easing scheme but raised concern that the economy was being dragged by a slowdown key emerging markets, while it was forecast to unveil further measures before too long. BoJ kept its 80 trillion yen ($665 billion) annual asset-buying scheme unchanged, saying in a statement the economy has continued to recover moderately, although exports and production are affected by the slowdown in emerging economies. The decision came despite data showing Japan’s economy shrank 0.3% in the three months to June. The country’s near-zero inflation rate is also far below the BoJ’s 2% target. Indonesia’s trade surplus shrunk to $430 million in August from its revised target of $1.38 billion in July, when shipments to and from Indonesia began to improve. Indonesian exports increased by 11 percent to $12.7 million in August from $11.5 billion July, while imports increased by 22 percent to $12.3 billion per month. However, Indonesia’s cumulative imports fell by 17 percent and exports fell by 12 percent in comparison to the year before, extending the surplus streak for the ninth consecutive month.

China’s new residential property inventory dropped from the previous year for the first time in 54 months in August. Property inventory in 35 cities dropped 1.4 percent year on year and 0.8 percent from July, the sixth consecutive month-on-month decrease. Official data showed sales value of commercial housing in the first eight months went up 15.3 percent year on year. The growth rate was 1.9 percentage points higher than the first seven months, indicating nascent signs of recovery in some cities. China’s property market took a downturn in 2014 due to weak demand and a surplus of unsold homes. The cooling has continued into 2015, with both sale and prices falling and investment slowing. Singaporean Unemployment Rate remained unchanged at 2.0% compared with the preceding quarter.