Post Session: Quick Review

Indian markets suffered sharp set-back on Friday, tracking a retreat in Asian stocks amid disappointment in the European Central Bank’s (ECB’s) stimulus decision, the ECB President Mario Draghi delivered a smaller stimulus package than many had expected. Also there was probability that the US Federal Reserve will raise interest rates this month. Back home, the rupee depreciated for the third straight session to hit a two-year low of 66.90 against the US dollar, in contrast to other Asian currencies, which too weighed on the sentiments. Traders overlooked Railway Minister Suresh Prabhu’s statement that Indian economy will grow at 7.5 percent in the current fiscal year and the country's growth will accelerate in the coming years despite slowing world economy. He said "We will accelerate it to much higher level in next few years".

The global cues remained somber and after the sell-off in the US markets overnight, the Asian markets too showed a similar fate, with some of the indices losing around two percent for the day on disillusionment with the ECB’s decision. The European markets too made a soft start, extending their over 3 percent drop on Thursday. Draghi announced that his quantitative easing program would be extended by six months until at least March 2017 at the current rate of 60 billion euros a month. Meanwhile, IMF said it would start considering a fresh loan to Greece when European authorities embark next month on the first formal review of their latest bailout program for the nation.

Back home, markets after a gap-down start remained under pressure throughout the day, though there was some recovery attempt in the second half that took the markets to their intraday highs but they were sold out quickly and markets snapped the session near the lows of the day and the benchmarks lost their crucial psychological levels of 25700 (Sensex) and 7800 (Nifty). Traders did not paid any heed to Finance Minister Arun Jaitley’s statement that the government will meet fiscal deficit target and maintain quality.  Though there was all gloom in the markets but some pockets like logistic showed some upmove, on report that the government and Opposition were finding some common ground on crucial elements of the much-awaited goods & services tax (GST). The government is likely to concede the Congress demand to do away with the 1% tax on interstate sales, which was proposed to compensate manufacturing states. Sical Logistics and Allgargo Logistics gained over a percent, while Gati surged by over 3 percent. Among the sectoral indices, none were able to end in green on BSE, while power was the top sectoral loser, it was closely followed by realty, FMCG, auto, Finance and Bankex. The BSE Telecom showed some upmove in early deals led by RCom  ahead of  its meeting to discuss its tower business sale, but it too slipped into red by last.

The BSE Sensex ended at 25632.81, down by 253.81 points or 0.98% after trading in a range of 25623.71 and 25810.06. There were just 3 stocks in green against 26 stocks in red on the index, while one stock remained unchanged. (Provisional)

The broader indices too made a red closing; the BSE Mid cap index was down by 1.02%, while Small cap index ended lower by 0.63%. (Provisional)

The top losing sectoral indices on the BSE were Power down by 1.76%, Realty down by 1.45%, FMCG down by 1.18%, Auto down by 1.12%, Bankex down by 1.08%. (Provisional)

The top gainers on the Sensex were Sun Pharma Inds. up by 3.96%, Bharti Airtel up by 0.53%, Tata Steel up by 0.08% and Coal India up by 0.00%. On the flip side, Mahindra & Mahindra down by 2.49%, HDFC down by 2.29%, ITC down by 2.19%, NTPC down by 2.13% and ICICI Bank down by 1.50% were the top losers. (Provisional)

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 ended at 7787.70, down by 76.45 points or 0.97% after trading in a range of 7775.70 and 7821.40. There were just 6 stocks on gainers side against 44 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Sun Pharma Inds. up by 3.87%, Cairn India up by 2.12%, Bharti Airtel up by 0.67%, Ultratech Cement up by 0.16% and Hero MotoCorp up by 0.08%. On the flip side, Zee Entertainment down by 3.42%, Tata Power down by 2.44%, Power Grid Corpn. down by 2.43%, Mahindra & Mahindra down by 2.26% and ITC down by 2.23% were the top losers. (Provisional)

European markets were trading lower, Germany’s DAX was down by 34.94 points or 0.32% to 10,754.30, France’s CAC lost 22.18 points or 0.47% to 4,708.03 and UK’s FTSE 100 was lower by15.7 points or 0.25% to 6,259.30.

Asian equity markets ended in red on Friday, following a global sell-off overnight as investors digested comments from the Federal Reserve and the European Central Bank (ECB). Federal chair Janet Yellen said Thursday that recent economic data back the central bank's expectations of an improved job market. The US non-farm payrolls number for November is due later today. Yellen added the bank will proceed with caution in raising interest rates from near zero and that Fed funds rates would remain accommodative after the initial increase. Elsewhere, ECB president Mario Draghi announced monetary policy measures that fell short of market expectations. The central bank cut deposit rate by 10 basis points to negative 0.3 percent and said its asset purchase program will also be extended until at least March 2017 and broadened in scope. Japanese shares fell after the European Central Bank dashed expectations for greater stimulus, triggering a broader sell-off after the dollar weakened against the yen. Chinese shares too closed down as investors remained cautious over Chinese economy.