Markets make gap-down opening after ECB's decision

With a gap-down opening Indian equity markets have extended their last session losses and are now trading in tight range with a cut of over half a percent, with both Sensex and Nifty trading below psychologically crucial 25,750 and 7,850 levels respectively, in absence of positive triggers and sustained selling activities by market-participants. Weakness in the global markets too weighed on the sentiments after the European Central Bank unveiled a smaller-than-expected expansion of its monetary stimulus program. Further, the sentiments were also under pressure on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 611.43 crore yesterday, as per provisional data released by the stock exchanges. Moreover, depreciation in Indian rupee against dollar too weighed down the markets. The rupee dropped by 24 paise to 66.90 against the US dollar in early trade today at the Interbank Foreign Exchange, ahead of the RBI’s planned infusion of liquidity into the system via term repo and open market operations (OMO) routes during the day.  However down side remained capped with the statement of Railway Minister Suresh Prabhu that Indian economy will grow at 7.5 per cent in the current fiscal year and the country's growth will accelerate in the coming years despite slowing world economy.

In the scrip specific development, Tree House Education & Accessories was locked in upper circuit of 10%, while Zee Learn too rallied 10% on the BSE, after board of these companies gave in-principle approval for exploring consolidation options.

On the global front, the US stocks ended lower as the European Central Bank's announcements failed to impress investors, while Janet Yellen’s comments suggested the Federal Reserve was on track to raise rates this month. Asian markets were trading in red after Wall Street closed in the red as investors digested comments from the Fed and the European Central Bank (ECB).

Back home, all the sectoral indices, barring Metal, were trading in red led by IT, FMCG, TECK and Bankex. The market breadth on BSE was negative in the ratio of 751: 1011while 92 scrips remained unchanged.

The BSE Sensex is currently trading at 25712.45, down by 174.17 points or 0.67% after trading in a range of 25644.35 and 25810.06. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.36%, while Small cap index was lower by 0.30%.

The lone gaining sectoral index on the BSE was Metal up by 0.48%, while IT down by 0.95%, FMCG down by 0.83%, TECK down by 0.79%, Bankex down by 0.77% and Consumer Durables down by 0.65% were the losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 0.87%, Tata Steel up by 0.69%, Coal India up by 0.64%, Hindalco up by 0.57% and Tata Motors up by 0.47%. On the flip side, Mahindra & Mahindra down by 1.39%, ITC down by 1.19%, Wipro down by 1.13%, HDFC down by 1.08% and Infosys down by 1.03% were the top losers.

Meanwhile, Crisil, the homegrown global analytical agency has said that India is unlikely to attain the ambitious target of doubling exports of goods and services to $900 billion by fiscal 2020 from $470 billion in FY15, mainly due to declining competitiveness of India Inc, infrastructure bottlenecks and labour market rigidity. It said that while, the current global cyclical slowdown and the new Trans Pacific Partnership are casting a long shadow, the bigger challenge is structural.

The agency further elaborated that Merchandise exports, which are almost two-thirds of India’s total exports, have been declining in the last eleven months. Cumulatively, they have fallen 17.6 per cent in dollar terms in the first seven months of this fiscal, after seeing a 1.5 per cent decline in FY15. Even real exports of goods and services (adjusted for price changes) shrank by 6.5 per cent in the first quarter of fiscal 2016. Trade openness or the proportion of trade to GDP, has shrunk drastically from a high of 55.6 per cent in FY13 to 47.1 per cent in FY15 and further to 42.6 per cent in the first quarter of the current fiscal.

Crisil pointed out that the Indian export destinations are not doing well, prices of many export items have fallen, and the rupee, too has appreciated in real terms against a basket of 36 currencies. Adding that the decline in exports is more than that warranted by these factors. For instance, while world real GDP growth improved from 3.2 per cent in 2009-2011 to 3.4 per cent in 2012-2014, India’s real growth of exports came down from 11.1 per cent to 4.1 per cent,' he said. 'This suggests the decline isn’t merely cyclical -- there are structural elements at play as well.

It also said that falling competitiveness is another structural factor restricting export growth. For key export items such as gems & jewellery and textiles, India’s ‘revealed comparative advantage’ has come down over the years. It also pointed that there is the threat from regional trading agreements of which India is not a part, such as the Trans Pacific Partnership (TPP), forged between 12 countries including the US. TPP countries account for 25% of India’s exports. Because of not being a part of TPP, India risks losing out a significant chunk of its export market to rivals.

The CNX Nifty is currently trading at 7805.20, down by 58.95 points or 0.75% after trading in a range of 7787.70 and 7819.25. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Cairn India up by 2.05%, Hindalco up by 0.57%, Tata Steel up by 0.48% and Sun Pharma Inds. up by 0.41% and Vedanta up by 0.38%. On the flip side, Zee Entertainment down by 2.00%, Adani Ports &Special down by 1.47%, Bank Of Baroda down by 1.43%, Infosys down by 1.36% and Wipro down by 1.32% were the top losers.

Asian markets were trading in red, Nikkei 225 decreased 433.84 points or 2.18% to 19,506.06, Hang Seng decreased 245.99 points or 1.1% to 22,171.02, Taiwan Weighted decreased 57.9 points or 0.68% to 8,398.16, Shanghai Composite decreased 42.7 points or 1.19% to 3,542.13, Jakarta Composite decreased 22 points or 0.48% to 4,515.38, KOSPI Index decreased 18.2 points or 0.91% to 1,975.87 and FTSE Bursa Malaysia KLCI decreased 5.34 points or 0.32% to 1,668.58.