Benchmarks edge lower ahead of F&O expiry

Indian frontline equity indices were pounded a day ahead of December series futures and options expiry, leading the key indices to undo all the good work done in last trading session and slip below the important psychological 7,900 (Nifty) and 26,000 (Sensex) levels. Sentiments remained down-beat with a report indicating the recovery in Indian economic activity remains tentative and narrowly focused in sectors such as roads, railways, power transmission and passenger vehicles. Also, investors remained cautious with World Bank chief economist Kaushik Basu’s statement that the Indian economy is expected to grow at 7 to 7.5 per cent in 2016. Until October, the World Bank retained India’s growth forecast at 7.5 per cent for 2015-16 and expected it to be 7.8 per cent in 2016-17 and 7.9 per cent in 2017-18. Depreciation in Indian rupee also weighed on the sentiment. The rupee was trading lower by 4 paise to 66.43 against the dollar at the time of equity markets closing at the Interbank Foreign Exchange market, on increased month-end demand for the US currency from importers. However, losses remained capped with report that foreign direct investment into India has grown by 35 per cent in the last 17 months even as across the world it has fallen by 16 per cent. FDI has come mainly into manufacturing, consumer goods, logistics and food processing sectors.

On the global front, Asian shares ended mixed on Wednesday after Japan and China's benchmark share indices ended with marginal gains of around 0.3 percent. Among other major markets in the region, Straits Times and Hang Seng were down 0.2%-0.5% each. Further, European shares were trading lower with mining and energy shares among the losers because of weak commodity and crude oil prices.

Back home, the benchmark got off to an optimistic opening, shrugging the somber sentiments prevailing in Asian markets. However, the indices dropped into the red terrain, lacking any significant upside cues. Thereafter, the indices kept oscillating in a narrow range for most part of the day. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. This selling dragged key indices to intraday lows of around 25,940 and 7,890 levels post which some short covering helped the indices to settle off the day’s lows. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of over quarter a percent to settle below the crucial 7,900 support level, while Bombay Stock Exchange’s sensitive Index Sensex slipped by over a hundred points and closed below the psychological 26,000 mark. However, broader markets showed some resilience by outclassing their larger peers by a big margin as investors carried forward their value hunting in beaten down shares from the midcap and small cap space. On the BSE sectoral space, the high beta - IT and TECK pockets remained among top laggards in the space as they got lacerated by 1.21% and 0.77% respectively. While sectors like Oil & Gas and Bank too got pounded heavily in the session. On the flipside, Metal and Power pockets managed to go home with moderate gains of around quarter a percent. Meanwhile, Liquor companies like United Breweries, United Spirits, Tilaknagar Industries continued their decline for second day in a row after the Supreme Court of India upheld the Kerala liquor ban policy. On the other hand, companies related to insurance business edged higher, as the Insurance Regulatory and Development Authority of India (Irdai) has said that the existing micro insurance products will continue to be on offer till March 31, 2016.The market breadth remained in favour of decliners, as there were 1385 shares on the gaining side against 1283 shares on the losing side, while 285 shares remained unchanged.

Finally, the BSE Sensex declined 119.45 points or 0.46% to 25960.03, while the CNX Nifty ended down by 32.70 points or 0.41% to 7,896.25.

The BSE Sensex traded in a range of 26130.20 and 25939.25. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices made a positive close; the BSE Mid cap index ended up by 0.21%, while Small cap index ended up by 0.07%.

The top gaining sectoral indices on the BSE were Metal up by 0.28%, Power up by 0.27%, FMCG up by 0.12% and Consumer Durables up by 0.02%, while IT down by 1.21%, TECK down by 0.77%, Oil & Gas down by 0.56%, Bankex down by 0.43% and PSU down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.18%, Tata Motors up by 0.68%, Dr. Reddys Lab up by 0.62%, NTPC up by 0.52% and BHEL up by 0.50%. On the flip side, Infosys down by 1.60%, TCS down by 1.37%, SBI down by 1.18%, Maruti Suzuki down by 1.08% and Reliance Industries down by 1.01% were the top losers.

Meanwhile, ahead of the World Bank review of the growth projections of countries on January 7 or 8, World Bank chief economist Kaushik Basu has said that the Indian economy is expected to grow at 7 to 7.5 percent in 2016. Though the numbers are lower than early expected, but Kaushik Basu said that “Roughly it is in a ballpark of the kind of figure. We (World Bank) have given over 7 percent or somewhere between 7 and 7.5 percent which no matter whether the top-end of it or bottom end of it. India will still be the leader among major economies. Not only in 2015 but we expect India to lead that chart in 2016 as well”.

Every six months the World Bank takes stock of the whole global situation and puts out forecast. Until October, the World Bank retained India's growth forecast at 7.5 percent for 2015-16 and expected it to be 7.8 percent in 2016-17 and 7.9 percent in 2017-18.

Talking on impact of the rate hike by the US Fed on investment scenario in the country, Basu said that there could be some outflow of investments but the impact is minimal. Regarding exports, Basu said India needs to focus more on manufacturing-based exports as wages are rising, situation in China is on the rising path. He said that 'I think India has great potential in exports and in particular in the manufacturing sector. In manufacturing historically India has done well. The opportunity in the manufacturing sector is very high especially since wages are rising in China. But it is true that that over last 12 months if you look at the trend in exports we have not done well. He also said the ease of doing business is improving when compared to last year and the trend may contribute for higher exports in the long run.

Earlier, the World Bank chief economist Kaushik Basu had indicated that the bank may revise its GDP growth projection for India after it goes for a stock-taking in a few months. He had said that decision-making and reforms can have an impact in terms of growth rate and the fact that a couple of important decisions did not go through could have an impact.

The CNX Nifty traded in a range of 7,944.75 and 7,889.85. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.92%, Tata Steel up by 1.33%, Indusind Bank up by 1.16%, Tata Power up by 1.12% and Tech Mahindra up by 0.97%. On the flip side, PNB down by 2%, HCL Tech down by 1.83%, BPCL down by 1.51%, Infosys down by 1.51% and TCS down by 1.39% were the top losers.

European markets were trading in red; Germany’s DAX decreased 56.9 points or 0.52% to 10,803.24, UK’s FTSE 100 declined 39.16 points or 0.62% to 6,275.41 and France’s CAC was down by 16.46 points or 0.35% to 4,684.90.

Asian equity markets ended mixed on Wednesday. Trading volumes were light across the region, despite an overnight rally in Brent crude oil prices driving up US stocks. Japanese stocks ended up on last trading day of 2015, as the dollar steadied at mid-120 yen range on optimism over the world's largest economy. Japanese markets are closed for a public holiday on 31 December. China stocks reversed initial losses to end slightly higher, helped by a late rally in banking shares. However, activity was thin as traders awaited manufacturing activity surveys for December, which are expected to show the economy remains sluggish. Hong Kong stocks fell in thin trading, undermined by selling in energy and financial shares, amid lingering worries about China's economy.