Benchmarks crash like house of cards; Nifty breaches 7,650 mark

Indian stock markets went through a tumultuous session on Wednesday as the benchmark indices got bludgeoned by over a percent as crumbling oil prices and data pointing to cooling demand from China sapped investors’ appetite for risk assets. The benchmark indices succumbed to across the board selling pressure and tanked way below their important psychological bastions of 25,100 (Sensex) and 7,650 (Nifty). The markets kept treading southwards through the session in search of a bottom as lingering concerns over GST continued to pummel investors’ morale. Sentiments remained down-beat on fading hopes of passing GST Bill in this winter session after opposition raised their decibel protesting against Delhi High Court summons to Congress leaders Sonia Gandhi and Rahul Gandhi in the National Herald case which led to Parliament getting adjourned yet again.

Traders overlooked the government’s statement that the fall in foreign portfolio investments may not have any major macroeconomic impact as long as capital flows are adequate to finance current account deficit. Selling got extended after European counter, after a positive start, entered into red terrain in early deals as commodity extended their fall. Also, the British Chambers of Commerce (BCC) cut the UK growth forecast saying that a worsening global outlook will damp UK growth and persuade the Bank of England to keep its key rate at a record low until the third quarter. Asian markets ended mostly in red despite the oil advancing from a six-year low. Though, in China where slowing economic growth has been a source of anxiety in commodity and stock markets, consumer-price data on Wednesday signaled a nascent recovery in demand and helped the major index to make a mildly positive close.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include metal, healthcare and auto. Sentiments also remained dampened on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 518.46 crore yesterday, as per provisional data released by the stock exchanges. Depreciation in Indian rupee too weighed down sentiments. Rupee was trading at 66.86 per dollar at the time of equity markets closing compared with its previous close of 66.84 per dollar.

Stocks related to Pharma space remained under pressure as the Venezuela development continued impacting Glenmark Pharmaceuticals and Dr Reddy's, which have revenues worth $137 million and $50 million, respectively, from that country. The victory of the Opposition party in the National Assembly elections may result in many economic reforms in the country due to a change in the political landscape. Metals following their global counterparts extended their fall despite a report that to curb cheap steel imports from China, Japan and Korea, the government is likely to restrict inward shipments to one port, apart from introducing a floor price for imports.

The NSE’s 50-share broadly followed index Nifty declined by around ninety points to end below the psychological 7,650 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and seventy points to end below its crucial 25,100 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around two percent. The market breadth remained in favor of decliners, as there were 542 shares on the gaining side against 2215 shares on the losing side while 161 shares remain unchanged.

Finally, the BSE Sensex plunged by 274.28 points or 1.08% to 25036.05, while the CNX Nifty dropped by 89.20 points or 1.16% to 7612.50.  

The BSE Sensex touched a high and a low 25316.95 and 25012.22, respectively. The BSE Mid cap index was down by 1.76 %, while Small cap index was down by 2.24%.

The losing sectoral indices on the BSE were Metal down by 3.07%, Healthcare down by 2.02%, Auto down by 1.74%, Oil & Gas down by 1.72% and Capital Goods down by 1.29%, while there was no gainer on the sectoral index.

The top gainers on the Sensex were BHEL up by 2.61%, TCS up by 1.55%, ITC up by 0.71%, ONGC up by 0.49% and NTPC up by 0.12%. On the flip side, Vedanta down by 5.57%, Tata Steel down by 3.37%, Coal India down by 3.24%, Cipla down by 2.93% and Bajaj Auto down by 2.92% were the top losers.

Meanwhile, in order to link expenditure to the outcome more efficiently, the Narendra Modi government is now looking to do away with the practice of plan and non-plan expenditure classification in the budget and replacing it with capital and revenue spending.

Union finance Secretary Ratan Watal, at a meeting with his state counterparts said “In the backdrop of the abolition of Planning Commission and setting up of NITI Aayog, the classification of expenditure as plan and non-plan is in the way of losing its relevance.”

Watal further said that the classification will provide linking expenditure to outcome and better public expenditure management. Simplification of accounting heads and routing of heads of expenditure as revenue and capital could reflect the direction of public expenditure in a better way and said that the government has already started deliberations to move towards this.

He further said that the classification may continue for some time as there is a time left for the 12th Plan (2012-17), but perhaps capital and revenue expenditure is something which could also be looked at the state level. This will give the right direction in simplification of accounts and also how we focus on expenditure.

Earlier in 2011, the committee headed by C Rangarajan had proposed that the distinction between plan and non-plan expenditure be abolished for both the Centre and the states.

The CNX Nifty touched a high and low 7702.85 and 7606.90 respectively. 

The top gainers on Nifty were BHEL up by 2.64%, TCS up by 1.76%, ITC up by 0.87%, ONGC up by 0.79% and NTPC up by 0.42%. On the flip side, Vedanta down by 5.57%, BPCL down by 3.62%, Cipla Down by 3.23%, Coal India down by 3.18% and Tata Steel down by 3.17% were the top losers. 

European Markets were trading in red; France’s CAC was down by 0.72%, Germany’s DAX was down by 0.71% and UK’s FTSE was down by 0.28%.  

Asian equity markets ended mostly in red on Wednesday after oil prices took another tumble overnight and encouraging Japanese and Chinese data weakened the case for additional stimulus, at least in the near-term. Oil prices regained some lost ground in Asian deals on a weaker dollar, helping cap losses across the region. Chinese shares ended marginally higher after country's consumer price inflation rose at an annual rate of 1.5 percent in November, matching forecasts and easing concerns over domestic demand. Producer prices fell for the 45th straight month, but the annual 5.9 percent decline came in line with expectations. However, Japanese shares hit over one-month low after the dollar fell below the 123 yen line overnight. A surprise big jump in core machinery orders helped ease concerns about weakness in capital spending, but dimmed the chances of further policy easing in the near term. Core machinery orders jumped 10.7 percent in October from the previous month, widely beating estimates for a 1.5 percent decline. Hong Kong shares weakened, driven by sluggish global markets and investor caution ahead of an expected US rate hike next week.