Post Session: Quick Review

Indian markets after the Diwali day glitters were back into gloom on Friday, with major indices losing considerable ground further. Markets made a gap-down start tailing the weakness in the US markets and the Asian peers, traders remained concerned with weak macro data from the domestic front, India's factory output growth declined to 3.6 percent in September from 6.4 percent in the month before, while the annual retail inflation for October moved up significantly to 5 percent from 4.41 percent in the month before. The selling which was visible since opening intensified towards the mid of the session and dragged the Nifty below crucial 7750 mark. Traders largely overlooked the International Monetary Fund’s statement that it broadly supports the series of economic reforms undertaken by India, which is moving in the right direction, after the government relaxed foreign investment rules in 15 sectors such as civil aviation, banking, defence, retail and news broadcasting and eased the process for approval of Foreign Direct Investment.

On the global front, after the sharp slump in the US markets overnight, the Asian markets followed the trend and most of the regional indices suffered deep cuts. Chinese shares dropped on slowing credit growth. The country’s broadest measure of new credit tumbled to a 15-month low, as rate cuts failed to ignite borrowing. European markets too made a soft start, while the euro slid for the first time in three days on expectations for faster stimulus, as the European Central Bank chief Mario Draghi has hinted at adding stimulus.

Back home, the markets once looked recovering in latter part of the trade paring some of their losses, but the selling intensified in the last leg, dragging the major indices almost back to where they started the day. Resource stocks like Cairn India and Vedanta slumped amid a selloff in global commodity prices and led the markets lower. Commodity prices have been hurt by worries over global growth and supply glut. However, the metal pack on the BSE was one of the two which posted gains, supported by surge in Jindal Steels, JSW Steel and Coal India. In non sectoral gauges, sugar remained in limelight and surged in a range of 7-15 percent after Shree Renuka Sugars management said that the previous two quarters were hit by lower sugar prices, but things appear to be on the mend and the company expects margins to improve in the next two quarters. On the same time capital goods, auto, IT, tech and realty suffered sharp profit taking.

There were lots of scrip specific actions following the semi-annual reshuffle of indices by MSCI that kept the markets buzzing, Ashok Leyland, Cadila Healthcare, Maruti India and Tata Motors, ended lower despite their inclusion in the MSCI India index, while Sun TV, Ricoh India, Force Motors, KEC International, Escorts Mahindra Holidays and Shasun Pharma all surged following their inclusion in the MSCI India Smallcap index. A total of 24 stocks have been included and 12 stocks dropped from the MSCI India Smallcap index.

The BSE Sensex ended at 25596.84, down by 270.11 points or 1.04% after trading in a range of 25540.73 and 25724.09. There were 8 stocks in green against 22 stocks in red on the index. (Provisional)

The broader indices too ended in red; the BSE Mid cap index was down by 1.34%, while Small cap index declined by 0.75%. (Provisional)

The two gaining sectoral indices on the BSE were Metal up by 0.54%, Consumer Durables up by 0.35%, while Capital Goods down by 2.04%, Auto down by 1.72%, TECK down by 1.54%, IT down by 1.54%, FMCG down by 1.52% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Coal India up by 2.69%, Bharti Airtel up by 1.03%, Axis Bank up by 0.71%, Dr. Reddys Lab up by 0.51% and Tata Steel up by 0.43%. On the flip side, Vedanta down by 4.34%, Cipla down by 4.04%, Bajaj Auto down by 3.18%, Hindalco down by 3.18% and ONGC down by 3.17% were the top losers. (Provisional)

Meanwhile, after the government on November 10 opened up 15 sectors including real estate, defence, civil aviation and news broadcasting in a bid to push up reforms, Fitch Ratings has lauded the sweeping reforms and said that liberalisation of foreign direct investment (FDI) rules in 15 sectors is a significant structural macroeconomic reform that will support investment and real GDP growth over the long term.

The rating agency further said that “We forecast Indian real GDP growth to come in at 7.5 per cent this year and accelerate to 8.0 per cent in 2016 and 2017,” and added that implementation of these reforms and boosting investment is an important credit factor for India, both to bolster growth and to reduce external vulnerabilities.

Fitch also hailed the government's package to revive discoms, announced on November 5, which it said underscores the reform momentum. It added that the heavily indebted discoms of states that opt for the package will see 75 percent of their outstanding debt transferred to the states while the remaining 25 percent will be issued as state-guaranteed disco bonds. As per the rating agency, this could lead to higher general government debt of up to 2 percent of GDP, but this is not sufficiently significant to have an effect on India's ratings, especially with the potential positive longer-term effects of the reforms. The reforms, it said, create an incentive structure for state governments to reduce losses at discoms by requiring the state governments to assume a certain share of losses at these entities.

Fitch said the FDI and discom announcements highlight how the government can make reform progress using its regulatory and executive powers. Earlier, the government announced key changes to FDI regime, include raising the limit for FDI approvals from the Foreign Investment Promotion Board (FIPB) to Rs 5,000 crore from Rs 3,000 crore, increasing foreign-investor limits in several sectors including private banks, defence and non-news entertainment media as well as allowing property developers to sell completed projects to foreign investors without lock-in periods.

The CNX Nifty ended at 7761.30, down by 63.70 points or 0.81% after trading in a range of 7730.90 and 7775.10. There were 13 stocks on gainers side against 37 stocks on the losers side on the index. (Provisional)

The top gainers on Nifty were Coal India up by 2.97%, PNB up by 2.27%, Kotak Mahindra Bank up by 2.20%, BPCL up by 1.95% and Grasim Industries up by 0.84%. On the flip side, Cairn India down by 5.53%, Vedanta down by 4.12%, Cipla down by 3.97%, Zee Entertainment down by 3.57% and Hindalco down by 3.55% were the top losers. (Provisional)

European markets were trading in red, UK’s FTSE 100 declined by 35.23 points or 0.57% to 6,143.45, France’s CAC was lower by 19.7 points or 0.41% to 4,836.95 and Germany’s DAX lost18.12 points or 0.17% to 10,764.51.

The Asian markets closed mostly lower on Friday, as the weak cues overnight from Wall Street and the fall in commodity prices to multi-year lows increased risk aversion. Indonesia’s President Joko Widodo’s administration had called off the plan to reveal its seventh economic stimulus package, as the president’s tight schedule meant that discussions with key ministers had to be delayed. The seventh stimulus package was to be on increasing the purchasing power of consumers and accelerating infrastructure development in rural areas and villages. Japan’s industrial production rose to a seasonally adjusted 1.1%, from 1.0% in the preceding month while Japanese tertiary industry activity index fell to a seasonally adjusted -0.4%, from 0.2% in the preceding month whose figure was revised up from 0.1%. Singaporean Retail Sales fell to a seasonally adjusted 4.6%, from 6.6% in the preceding month whose figure was revised up from 6.1%. Hong Kong GDP rose to a seasonally adjusted annual rate of 0.9%, from 0.4% in the preceding quarter.

Malaysia posted its slowest economic growth and smallest current account surplus in over two years, with third quarter data offering little relief for a country whose currency has lost 20 percent of its value this year. The ringgit is Asia’s worst performer, having been hit hard by weak global prices for Malaysia’s gas and commodity exports, subdued demand from China, and a scandal at an indebted state fund that has raised questions over Prime Minister Najib Razak’s leadership and weakened investor sentiment. Malaysian GDP fell to a seasonally adjusted 4.7%, from 4.9% in the preceding month.