Benchmarks witness bloodbath; Nifty breaches 7,800 mark

Monday’s session turned out to be a awful for the Indian equity benchmarks which tumbled like a ‘house of cards’ and went on to breach various key technical levels in the over two percent freefall. The frontline gauges which appeared to be on a southbound journey, desperately kept searching for a bottom through the session, but to no avail as the journey only halted with the session’s close. Sentiments got undermined after the report that Indian manufacturing activity contracted in December for the first time in more than two years, hurt by softening domestic demand, adding pressure on the central bank to ease policy. Nikkei's Manufacturing Purchasing Managers' Index, compiled by Markit, fell to a 28-month low of 49.1 in December from November's 50.3.  Also, rupee's weakness against the dollar and a surge in crude oil prices dampened the market mood. Growing tension between Saudi Arabia and Iran allowed oil prices to soar in the first trading session of 2016, indicating the manner in which the unstable political situation in the Middle East could complicate the outlook for oil prices in 2016. Meanwhile, investors failed to draw any solace with Chief Economic Advisor Arvind Subramanian’s statement that India has emerged as the world's fastest growing economy notwithstanding global demand slowdown and four droughts. He also said that there has been improvement in quality of spending toward capital and agriculture, fiscal consolidation at central and state levels and improvement in indirect tax efficiency.

On the global front, sentiments remained somber across the Asian space after China factory activity contracted and its central bank guided the yuan lower, while oil prices jumped as much as 3 percent on rising tensions in the Middle East.  Leading the losses, mainland Chinese shares fell 7 percent to trigger the ‘circuit breaker’ on the very first day the trading suspension mechanism came into effect.  Among other markets in the region, Japan’s Nikkei, Hong Kong’s Hang Seng and Singapore’s Straits Times fell between 1-4%. European shares are also seen opening lower, with financial spreadbetters expecting Germany’s DAX to fall 1.5 percent, France’s CAC 40 0.7 percent and Britain’s FTSE 100 0.6 percent.

Back home, the benchmark got off to a weak start as the indices breached the psychological 7,900 and 26,000 levels in the early moments of trade since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The steep fall turned even acute after the negative opening of European markets in the noon trades, as weak Chinese economic data weighed on world stock markets. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session’s close after suffering gargantuan losses. Finally the NSE’s 50-share broadly followed index Nifty, suffered over one hundred and fifty points laceration to settle below the crucial 7,800 support level while Bombay Stock Exchange’s Sensitive Index Sensex got obliterated by over five hundred points and closed below the psychological 25,620 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of over a percent. On the BSE sectoral space, the banking pocket finished at the top laggard in the space, registering large cuts of over two and half percent as heavyweights like SBI, ICICI Bank and Axis Bank plummeted by 2.94%, 2.83% and 2.35% respectively. Auto and Capital Goods counters too remained among prominent losers in the space with over two percent cuts. Meanwhile, metal stocks also reeled under pressure following by a weak PMI data in China, while telecom stocks got hit post the order from the Telecom Regulatory Authority of India (Trai) that has written to operators to ensure compliance with call drop regulations, effective January 1, 2016. The market breadth remained awful as there were 1290 shares on the gaining side against 1597 shares on the losing side while 101 shares remained unchanged.

The market breadth remained in favor of declines, as there were 2911 shares on the gaining side against 1305 shares on the losing side, while 1369 shares remained unchanged.

Finally, the BSE Sensex declined by 537.55 points or 2.05% to 25623.35, while the CNX Nifty lost 171.90 points or 2.16% to 7,791.30.

The BSE Sensex touched a high and a low 1752.79 and 1710.77, respectively. The broader indices ended in red, with the BSE Mid cap index ending down by 1.20%, while Small cap index ending higher by 1.11%.

The top losing sectoral indices on the BSE were Bankex down by 2.59%, Auto down by 2.12%, Capital Goods down by 2.09%, Realty down by 2.03% and TECK down by 1.75%, while there were no gainers in the sectoral space.

The top gainers on the Sensex were Wipro up by 0.28%, Hindustan Unilever up by 0.07% and Asian Paints up by 0.06%. On the flip side, Tata Motors down by 6.10%, Bharti Airtel down by 4.10%, Adani Ports &Special down by 3.66%, BHEL down by 3.45% and HDFC down by 3.26% were the top losers.

Meanwhile, snapping 25 month sequence of growth, manufacturing activity in India has contracted in the month of December as Chennai floods triggered significant decline in output and new orders, adding pressure on the Central Bank in order to ease policy. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI), slipped to 49.1 in December from November's 50.3. The PMI has slipped below the crucial level of 50.0 for the first time since October 2013. A figure above 50 represents expansion while a reading below this level means contraction.

According to the survey, December's persistent rainfall in Chennai impacted heavily on the sector, with fall in new work leading the companies to scale back output at the sharpest pace since February 2009. Severe rainfall and flooding caused widespread destruction in late November and early December, limited the output to its lowest since the global financial crisis. On the price front, inflation rates of both input costs and output charges were at seven month highs.

In the month of December, Consumer goods bucked the sub-sector trend and was the only category to see improving business conditions as production and new orders rose. However, incoming new work and output fell in both the intermediate and investment goods market groups.

Talking about Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit has said “India’s manufacturing sector took a turn for the worse at the year end, with already-gloomy internal demand further hampered by floods in the South of the country.” The Nikkei India Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 300 industrial companies.

The CNX Nifty touched a high and low 7,937.55 and 7,781.10 respectively.  

The few gainers on Nifty were Tata Steel up by 0.62%, Asian Paints up by 0.20% and HCL Tech up by 0.13%. On the flip side, Tata Motors down by 6.41%, Idea Cellular down by 4.89%, Bank of Baroda down by 4.72%, Hindalco down by 4.59% and PNB down by 4% were the top losers.

European markets were trading in red; Germany’s DAX tumbled 371.98 points or 3.46% to 10,371.03, UK’s FTSE 100 declined 127.93 points or 2.05% to 6,114.39 and France’s CAC was down by 112.37 points or 2.42% to 4,524.69.

Asian equity markets ended in red on Monday after Chinese factory data disappointed investors and China's central bank set the reference rate for Yuan at a more than 4-1/2-year low. Reports showed that the Caixin/Markit purchasing managers' index (PMI) slipped to 48.2 in December from 48.6 the previous month, marking the 10th consecutive month of shrinking factory activity in the sector, fueling fresh concerns over the health of the world's second-largest economy. The geopolitical situation in the Middle East is also a point of concern for market watchers. Japanese shares tumbled to a 2-1/2 month low after weak China factory activity surveys and year-end losses on Wall Street discouraged investors on the first trading day of 2016.