Global tremors continue to assault local markets; Nifty breaches 7400 mark

The carnage in Indian stock markets prolonged for yet another session, as the benchmarks continued to sway to the tune of depressing global developments and deposed another over a percentage point on Wednesday. The drop in oil prices to 12-year lows has sent shudders through world markets, helping wipe trillions of dollars off share valuations and even raising fears of recession. Besides, there were no positive surprises from the third quarter earnings on the domestic front, while in the overseas markets global oil majors have reported weak earnings. Depreciation in Indian rupee also weighed on the sentiments. The rupee again broke below the 68-mark by depreciating 28 paise to trade at 68.26 against the dollar in today’s trade due to increased demand for the American unit from importers and banks. The sentiments were also under pressure on reports that Foreign Institutional Investors sold shares worth Rs 113.98 crore, while the Domestic Institutional Investors sold shares worth Rs 323.23 crore on February 02, 22016. Moreover, investors failed to get any sense of relief from the report that activity in India's services sector increased at its fastest pace in over a year and a half in January as demand accelerated, allowing firms to build up a much bigger backlog of orders. The Nikkei/Markit Services Purchasing Managers' Index rose to 54.3 in January from 53.6 in December, the seventh straight month above the 50-level that distinguishes growth from contraction.

On the global front, Asian shares tumbled on Wednesday after another steep drop in the price of oil reinforced worries about the potential impact on the world economy of job cuts and reduced investment in the energy industry. Japan's Nikkei lost over three percent, wiping out almost all of its gains made after the Bank of Japan on Friday announced it would introduce negative interest rates. Furthermore, European stocks followed a weak Asian session as renewed volatility in the oil price highlighted worries about faltering global growth and its impact on corporate earnings.

Back home, Indian benchmarks started the session on a weak note mirroring losses in the global equities as oil prices continue to move south on growing supply glut. Thereafter, the indices traded in the small range for most part of the session, though some recovery emerged in early afternoon session on account of lower level buying, but the final hour selling washout that recover and took the indices for a ride to the lowest part of the session. This is the second session when the huge selling was witnessed in late hours, mainly on account of weakness from global markets. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over a percent to settle below the crucial 7,400 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over three hundred points and closed below the psychological 24,300 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of over a percent. On the BSE sectoral space, the high beta - Power and Capital Goods pockets remained among top laggards in the space as they got lacerated by 4.16% & 2.79% respectively, while sectors like rate sensitive Realty, Metal and PSU too got pounded heavily in the session. Furthermore, shares of oil exploration and production (E&P) firms edged lower after sharp decline in crude oil prices, while metal shares declined on falling commodity prices. Though there were no sectoral gainers in the space, individual names like Hindustan Unilever, TCS, Sun Pharma and Bajaj Auto settled in the green terrain on BSE. The market breadth remained awful as there were 578 shares on the gaining side against 2084 shares on the losing side while 98 shares remained unchanged.

Finally, the BSE Sensex slumped by 315.68 points or 1.29% to 24223.32, while the CNX Nifty lost 93.75 points or 1.26% to 7,361.80.

The BSE Sensex touched a high and a low 24409.26 and 24187.54, respectively. The broader indices ended in red, with the BSE Mid cap index ending down by 1.30%, while Small cap index ending lower by 2.25%.

The top losing sectoral indices on the BSE were Power down by 4.16%, Capital Goods down by 2.79%, Realty down by 2.63%, Metal down by 2.03% and PSU down by 1.96%, while there were no gainers on the sectoral front.

The top gainers on the Sensex were Hindustan Unilever up by 2.66%, TCS up by 0.65%, Sun Pharma Inds. up by 0.24% and Bajaj Auto up by 0.10%. On the flip side, BHEL down by 4.86%, NTPC down by 4.10%, Tata Steel down by 3.24%, ICICI Bank down by 3.09% and Tata Motors down by 2.79% were the top losers.

Meanwhile, in a pleasant surprise, India’s Services PMI expanded at its fastest speed in 19 months in January. The seasonally adjusted Nikkei Services Business Activity Index stood at 54.3 in January compared to 53.6 in December, driven by strengthening underlying demand and improved weather conditions. January also marked the seventh consecutive month of expansion in new business, above the 50 level that distinguishes growth from contraction with that sub-index rising to an 11-month high of 54.1 from 53.8. The demand accelerated, allowing firms to build up a much bigger backlog of orders.

Growth was noted in four of the six monitored categories, the exceptions being hotels & restaurants and transport and storage. As per the survey, the seasonally adjusted Nikkei India Composite PMI Output index, which maps both manufacturing and services sectors, climbed from 51.6 in December to an 11-month high of 53.3 in January.

The survey further noted that a strong upturn in new business is a positive note from January's survey, which underpins hopes for further growth of activity across the country's private sector in the near-term. Moreover, the upswing in demand may boost the labour market and help end the long run of subdued employment trends. During January, higher workloads encouraged service providers to hire additional staff in January, following stagnation in the prior month.

The New Year saw a boost to economic conditions across India’s private sector. The surge in service output growth is another set of positive news at the start of the year for the economy since manufacturing also rose in January as showed by the Nikkei India Manufacturing Purchasing Managers' Index which was a 4 month high of 51.1. Amid forecasts of further improvements in demand and favourable government policies, service providers in India expect output to continue to increase over the course of the next year.

The CNX Nifty touched a high and low 7,419.40 and 7,350.30 respectively.  

The few gainers on Nifty were Hindustan Unilever up by 2.87%, Yes Bank up by 1.66%, TCS up by 1.11%, Zee Entertainment up by 0.46% and Bank of Baroda up by 0.21%. On the flip side, Vedanta down by 4.93%, BHEL down by 4.78%, Tata Steel down by 3.87%, NTPC down by 3.02% and ICICI Bank down by 2.99% were the top losers.

European markets were trading in red; Germany’s DAX declined 106.88 points or 1.12% to 9,474.16, UK’s FTSE 100 decreased 48.58 points or 0.82% to 5,873.43 and France’s CAC was down by 31.65 points or 0.74% to 4,252.34.

Asian equity markets ended mostly in red on Wednesday after Wall Street stocks fell sharply overnight and oil extended declines for a third day on concerns about the pace of global economic recovery. Japanese shares ended lower as a stronger yen hit overall market sentiment amid weak earnings, including those of major Tokyo listing Nomura Holdings, which fell 10%. Hong Kong shares tumbled, led by energy firms as oil prices declined and insurance heavyweights, after Beijing imposed limits on purchases of insurance products in the city by mainlanders using bank cards. Chinese shares followed regional peers lower, despite positive service sector data and fresh measures announced by the government to spur new property investment. Reports showed that China's Caixin purchasing managers' index (PMI) for the services sector showing activity expanded at its fastest pace in six months in January. The index rose to 52.4 in January from a 17-month low reading of 50.2 in December.