Indian equities declines for third straight session to snap the series on weak note

Thursday’s session saw Indian benchmark indices complete a hat-trick of disappointing performances and reaching the finishing line only after collapsing by around half a percent to their fresh 52 weeks low. Sentiments remained down-beat as International Monetary Fund warned that the world economy is highly vulnerable and called for new mechanisms to protect the most vulnerable countries. The global crisis raised concern that world growth had slowed and could be derailed by market turbulence, the oil price crash and geopolitical conflicts. On the domestic front, sentiments got undermined after the railway budget failed to announce big ticket capital expenditure projects, so as to meet the government's fiscal deficit targets.  Also, Railway Minister proposed increasing the capital outlay for the Railways, the world’s fourth-largest rail network, by 21 per cent to Rs. 1.21 lakh crore.  Depreciation in Indian rupee also weighed on investor sentiment. The rupee weakened by 18 paise to trade at 68.74 against the US dollar at the time of equity markets closing as compared to 68.56 in previous session. Market participants remained cautious with a private survey stating that optimism about the overall state of the economy came down in 2015, with households listing unemployment, corruption and rising inflation as major areas of concern. However, losses remained capped on the report that business sentiment among Indian companies rose for the second consecutive month in February, as companies increased production on the back of rising orders. The increase in sentiment was solely led by manufacturing firms where confidence was at a seven-month high.

On the global front, Asian equity markets made a mixed closing on Thursday, as a fragile recovery in volatile crude oil unraveled, reviving anxiety about the health of the global economy. Chinese shares skidded amid heightened worries about market liquidity, just as leaders of the world’s largest economies are preparing to meet in Shanghai. Meanwhile, European stocks climbed Thursday, with bank and commodity shares catching after a break from recent declines, moves that put regional benchmark in line for its first rise in three sessions.

Back home, benchmark got off to a soft start as the indices showed signs of consolidation in early trade, as investors remained cautious ahead of the Railway Budget. Sentiments remained subdued with report that foreign portfolio investors (FPIs) sold shares worth net Rs 731 crore on February 24, 2016. After trading in a tight range for most part of morning trade, the key gauges suffered a setback in afternoon trades as traders turned cautious ahead of the expiry of February derivative contracts. However, late short covering in some blue-chip stocks and supportive leads from European markets ensured that local bourses go home with relatively small losses.  Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of about half a percent to settle below the crucial 7,000 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over a hundred points and closed above the psychological 22,900 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around a percent. On the BSE sectoral space, the high beta sectors like - Power and Realty pockets remained among top laggards in the space as they got lacerated by 2.19% and 1.95% respectively. While sectors like Capital Goods, Banking and Auto too got pounded heavily in the session. On the flipside, Metal pocket managed to go home with moderate gains of around half a percent. The market breadth remained pessimistic as there were 913 shares on the gaining side against 1553 shares on the losing side while 157 shares remained unchanged.

Finally, the BSE Sensex plunged by 112.93 points or 0.49% to 22976.00, while the CNX Nifty dropped 48.10 points or 0.69% to 6,970.60. 

The BSE Sensex touched a high and a low 23142.96 and 22948.10, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.14%, while Small cap index lost 0.91%.

The only gaining sectoral index on the BSE was Metal up by 0.41%, while Power down by 2.19%, Realty down by 1.95%, Capital Goods down by 1.91%, Bankex down by 1.67% and Auto down by 1.39% were the losing indices on BSE.

The top gainers on the Sensex were ONGC up by 2.88%, Sun Pharma up by 2.38%, HDFC up by 1.85%, Coal India up by 1.32% and Hindustan Unilever up by 0.97%. On the flip side, SBI down by 3.06%, GAIL India down by 2.96%, Tata Motors down by 2.90%, Larsen & Toubro down by 2.37% and ICICI Bank down by 1.98% were the top losers.

Meanwhile, India got a setback with the World Trade Organisation (WTO) hearing a matter in which the US had filed a complaint before the global trade body alleging discrimination against American firms, has ruled against India saying that the government's power purchase agreements with solar firms were 'inconsistent' with international norms. The WTO’s Dispute Settlement Panel has ruled that “the DCR measures are inconsistent” with relevant provisions of TRIMs (Trade Related Investment Measures) Agreement and with the articles of the erstwhile GATT (General Agreement of Trade and Tariffs). The panel also found that the DCR measures accorded “less favourable treatment” to the American companies and were 'not justified' under the general exceptions in GATT rules.

Though, India can challenge this ruling before the appellate body of the WTO, but the findings of the panel said that DCR measures are not distinguishable in any relevant respect from the domestic content requirements previously examined under this provision by the Appellate Body in Canada Renewable Energy / Feed-In Tariff Programme and the electricity purchased by the government is not in a 'competitive relationship' with the solar cells and modules subject to discrimination under the DCR measures.

The panel asked India to 'bring its measures into conformity with its obligations under the TRIMs Agreement and the GATT 1994', the panel said that 'in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment'.

The dispute relates to the domestic content requirements imposed by India for the National Solar Mission, including in the Guidelines and Request for Selection documents, the model power purchase agreement, and the individually executed power purchase agreements between Indian government agencies and solar power developers. On January 11, 2010, India had launched its national solar policy, named Jawaharlal Nehru National Solar Mission. The country has an ambitious target of generating 20,000 Mega Watts of solar power by 2022.

The CNX Nifty touched a high and low 7,034.20 and 6,961.40 respectively. 

The top gainers on Nifty were ONGC up by 3.63%, Sun Pharma up by 2.63%, Coal India up by 2.12%, Idea Cellular up by 2.10% and HDFC up by 1.95%. On the flip side, Power Grid down by 5.01%, Bank of Baroda down by 2.80%, Yes Bank down by 2.80%, SBI down by 2.75% and ACC down by 2.69% were the top losers.

European markets were trading in green; France’s CAC surged 68.22 points or 1.64% to 4,223.56, Germany’s DAX increased 84.51 points or 0.92% to 9,252.31 and UK’s FTSE 100 was up by 112.32 points or 1.91% to 5,979.50.

Asian equity markets made a mixed closing on Thursday, as oil prices ended a brief overnight rally and Chinese shares slumped on fears of tighter liquidity and the cooling economy ahead of the G20 meeting in Shanghai on Friday and Saturday. Japanese shares ended higher, helped by an overnight bounce in oil prices and a weaker yen. Chinese shares ended lower, its worst loss in a month, despite China's central bank intensifying its liquidity operations and the chairman of Industrial and Commercial Bank of China saying there was no basis for continued depreciation of the yuan.