Markets extend last session losses with a gap down opening; Nifty breaches 7400 mark

With a gap down opening Indian equity markets have extended their previous session losses and are now trading with cut of around one percent in early deals, tracking weak global markets after U.S. crude oil prices fell over 5 percent on Tuesday on industry data showing a 3.8 million inventory build and amid fading hopes of a deal to curb one of the worst supply gluts in history. The sentiments were further weighed down by Indian rupee depreciating 22 paise to 68.20 against the US dollar in early trade today, as a sharp plunge in crude prices overseas increased investors' risk aversion to riskier assets. Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 113.98 crore on February 2, 2016, as per provisional data released by the stock exchanges. At present, Sensex and Nifty were trading below the crucial 24,300 and 7,400 levels respectively.  Apart from blue chips, broader indices were weak with both mid cap and small cap indices trading down by 1.51% each respectively.

In the scrip specific development, Crompton Greaves dropped over 24% on the National Stock Exchange (NSE), after the company reported consolidated net loss of Rs 107 crore for the quarter ended December 31, 2015 (Q3FY16) against profit of Rs 274 crore in the same quarter last fiscal.

On the global front, the US markets ended lower on Tuesday as renewed declines in oil prices weighed amid mixed reaction to some key earnings reports. Asian markets were trading in red, extending losses from the previous session, following the overnight sell off on Wall Street amid a further slump in crude oil prices. Weak corporate earnings also dented investor sentiment.

Back home, all the sectoral indices on the BSE were trading in red led by Power, Capital Goods, Realty, Bankex and PSU. The market breadth on BSE was negative in the ratio of 305: 1332 while 38 scrips remained unchanged.

The BSE Sensex is currently trading at 24279.95, down by 259.05 points or 1.06% after trading in a range of 24263.65 and 24393.77. There were just 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.51%, while Small cap index lost 1.51%.

The top losing sectoral indices on the BSE were Power down by 3.12%, Capital Goods down by 2.56%, Realty down by 2.09%, Bankex down by 1.72% and PSU down by 1.66%, while there were no losers.

The top gainers on the Sensex were Sun Pharma Inds. up by 1.58%, Hindustan Unilever up by 1.46% and Bajaj Auto up by 0.48%. On the flip side, BHEL down by 3.15%, ONGC down by 2.86%, Tata Motors down by 2.40%, GAIL India down by 2.32% and Wipro down by 2.26% were the top losers.

Meanwhile, Reserve Bank of India (RBI), much on expected line maintained a status quo in its Sixth Bi-monthly Monetary Policy Statement, saying it would want to wait for more inflation data and the Union Budget before taking action. It said that the Indian economy was prodding along well, but it would take into consideration steps taken in the Budget that would boost growth while keeping inflation in check.

In its assessment  the central bank said that since the fifth bi-monthly statement of December 2015, global growth has slowed, with the ongoing weakening of activity in major emerging market economies (EMEs) outweighing the recovery in some advanced economies (AEs). Regarding domestic economy, it said that economic activity lost momentum in Q3 of 2015-16, pulled down by slackening agricultural and industrial growth. It added that in the first two months of Q3 of 2015-16, industrial activity slowed in relation to the preceding quarter. This mainly reflects weak investment demand with some deceleration of capital goods production. Stalled projects continue to remain high, and there is a decline in new investment intentions, perhaps on the back of low capacity utilization.

Regarding inflation, the assessment said that retail inflation measured by the consumer price index (CPI) rose for the fifth month in December across all constituent categories. While the upturn in December essentially reflected unfavourable base effects, the ongoing seasonal decline in prices of fruits and vegetables could temper headline inflation in the near-term. CPI inflation excluding food and fuel rose for the fourth successive month. The RBI governor later stated that  we have not factored in the Seventh Pay Commission in our inflation targeting. We have to see how it is implemented. Broadly speaking, the risks to inflation are balanced as of now.  There are also factors that can pull inflation down - like a good monsoon. It is not fair to read that RBI has become more hawkish over time. We expect the inflation rate to be 5 per cent by March 2017.

RBI further in its assessment said that liquidity conditions tightened in the second half of December with advance tax outflows. Tightness spilled over into January 2016 on the back of a seasonal pick-up in demand for currency, restrained spending by the government and a pick-up in bank credit growth, in relation to deposit mobilisation. RBI governor said that marginal cost of funding will actually help in transmission of rates. It will be an improvement over the (earlier) base rate (calculation for interest rates).

It also said that for 2016-17, growth is expected to strengthen gradually, notwithstanding significant headwinds. Expectations of a normal monsoon after two consecutive years of rainfall deficiency and kept its growth projections for Indian economy unchanged at 7.4 percent for the current fiscal, a tad higher than 7.3 percent forecast by the World Bank. Based on an assessment of the balance of risks, GVA growth for 2016-17 is projected at 7.6 percent. Now the first bi-monthly monetary policy statement for 2016-17 will be announced after the Budget on Tuesday, April 5, 2016.

The CNX Nifty is currently trading at 7386.55, down by 69.00 points or 0.93% after trading in a range of 7370.00 and 7392.50. There were 5 stocks advancing against 45 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.13%, Hindustan Unilever up by 1.71%, Sun Pharma Inds. up by 1.41%, Grasim Industries up by 0.59%, Bajaj Auto up by 0.55%. On the flip side, Cairn India down by 3.64%, BHEL down by 2.89%, Idea Cellular down by 2.59%, Tata Power down by 2.47% and ONGC down by 2.33% were the top losers.

Asian markets were trading in red, Nikkei 225 decreased 634.59 points or 3.58% to 17,116.09, Hang Seng decreased 564.27 points or 2.9% to 18,882.57, Taiwan Weighted decreased 65.82 points or 0.81% to 8,065.42, Jakarta Composite decreased 34.28 points or 0.75% to 4,553.16, Shanghai Composite decreased 32.07 points or 1.17% to 2,717.50, KOSPI Index decreased 20.35 points or 1.07% to 1,886.25 and FTSE Bursa Malaysia KLCI decreased 14.25 points or 0.86% to 1,638.93.