Markets make gap down opening amid global growth concerns

After witnessing a sharp rise in previous session, the Indian equity markets made gap down opening and are now trading with cut of over one and half percent, on fresh selling triggered by a weakening trend on other Asian bourses, after crude oil fell to its lowest since September 2003 on oversupply glut worries. The session was also harrowing for broader indices, which were trading with losses of over 2.00%. The sentiments were under pressure on report that the International Monetary Fund (IMF) cut its global growth forecasts for the third time in less than a year. The IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets. The sentiments were further weighed down by Indian rupee depreciating 29 paise to 67.94 against the US dollar in early trade on Wednesday, tracking mixed cues from Asian currencies. Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 857.70 crore on January 19, 2016, as per provisional data released by the stock exchanges. On the sectoral front, all the sectoral indices on the BSE were trading in red led by Realty, Power, Capital Goods, Bankex and Oil & Gas.

In the scrip specific development, BASF dipped 7% on the NSE, after the specialty chemicals company reported a net loss of Rs 106 crore for the third quarter ended December 2015 (Q3FY16) as against loss of Rs 40 crore in the same quarter last year.

On the global front, US markets ended mix on Tuesday, as gains in the Utilities, Telecoms and Consumer Goods sectors led shares higher, while losses in the Oil & Gas, Basic Materials and Healthcare sectors led shares lower. Asian markets were trading lower on Wednesday, reversing some of the gains in the previous session, with worries about global economic growth and the further fall in crude oil prices weighing on investor sentiment.

Back home, the NSE Nifty and BSE Sensex were trading near the psychological 7,300 and 24,000 levels respectively. The market breadth on BSE was negative in the ratio of 192: 1502 while 51scrips remained unchanged.

The BSE Sensex is currently trading at 24054.23, down by 425.61 points or 1.74% after trading in a range of 24053.69 and 24325.77. There were just 2 stocks advancing against 28 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 2.16%, while Small cap index declined by 2.12%.

The losing sectoral indices on the BSE were Realty down by 3.10%, Power down by 2.99%, Capital Goods down by 2.84%, Bankex down by 2.72% and Oil & Gas down by 2.69%, while there were no gainers.

The only gainers on the Sensex were Sun Pharma Inds. up by 0.43% and Infosys up by 0.11%. On the flip side, Tata Steel down by 3.91%, Reliance Industries down by 3.83%, Adani Ports &Special down by 3.55%, SBI down by 3.47% and ONGC down by 3.39% were the top losers.

Meanwhile, a day after the Reserve Bank of India (RBI) governor Raghuram Rajan and two of his deputies met with banks and other financial institutions to discuss stressed loans in the banking system,  Minister of State for finance Jayant Sinha has stated that the finance ministry and the Reserve Bank of India are working in tandem on a comprehensive solution to the stressed assets held by banks through asset-quality reviews followed by specific solutions.

Sinha further acknowledging that bad loans posed a major economic risk for India, said that the stressed assets fund being set up under National Infrastructure Investment Fund (NIIF) is expected to play a key role in the process, making available equity to troubled companies.

The minister said that we have been spending a lot of time on public sector banks, outlining key pillars of intervention that will address the bigger universe of stressed assets and not just bad loans. Now we have to work out the right way to provision for them,' said Sinha, adding that the solution would avoid targeting banks. 'After extensive discussion with experts, RBI and banks, our conclusion was that a badbank approach was not necessarily the best,' he said, elaborating on the three-pronged solution. 'One is to get NIIF started with a stressed-assets fund, which is what we are going to do.' The second pertains to companies getting extensions on payments and loan haircuts while the third calls for taking over assets and induction of new management to effect a turnaround when this is possible.

Sinha said many of the stressed assets stem from industry wide issues, such as the ones that afflict power distribution, steel and textiles. 'There the intervention has to be at multiple levels. At the account level, it has to be with the banks, and it has to be at the industry level.' The global experience has been that the faster such problems are dealt with the better. 

 The CNX Nifty is currently trading at 7308.20, down by 126.90 points or 1.71% after trading in a range of 7298.70 and 7470.90. There were 1 stocks advancing against 48 stocks declining on the index.

The only gainer on Nifty was Sun Pharma Inds. up by 0.87%. On the flip side, Vedanta down by 5.92%, Cairn India down by 5.84%, PNB down by 3.95%, Tata Steel down by 3.84% and Reliance Industries down by 3.70% were the top losers.

Asian markets were trading in red, Hang Seng decreased 676.84 points or 3.45% to 18,958.97, Nikkei 225 decreased 460.78 points or 2.7% to 16,587.59, Taiwan Weighted decreased 125.59 points or 1.6% to 7,729.29, KOSPI Index decreased 47.04 points or 2.49% to 1,842.60, Shanghai Composite decreased 41.08 points or 1.37% to 2,966.66, FTSE Bursa Malaysia KLCI decreased 7.99 points or 0.49% to 1,621.23 and Jakarta Composite decreased 5.19 points or 0.12% to 4,486.55.