Benchmarks end a disappointing day with over a percent cut

Indian markets showed a disappointing trade on Tuesday and major bourses got pounded by over a percentage point, as funds and retail investors engaged in reducing positions amid sluggish global cues. Investors failed to draw any sense of relief with the report that retail inflation declined to a three-month low of 5.18 per cent in February after rising for five months in a row as food prices including vegetables, pulses and fruits became less costly. A sharp decline in the consumer inflation and still negative wholesale inflation in February raised expectations of a rate cut by the Reserve Bank of India (RBI) amid disappointing industrial growth and the government staying the course on fiscal consolidation. However, the central bank may push forward its rate cut on account of recent unseasonal rain and hailstorms flattened hundreds of acres of winter crop across Haryana, Punjab and Uttar Pradesh. Sentiments remained down-beat with a leading global brokerage firm revising its growth forecast for India for 2016 to 7.5 per cent from 7.9 per cent previously. According to it, though the domestic macro environment has been improving steadily in the last two years, the pace of recovery has been slower than anticipated, held back by external factors. Depreciation in Indian rupee too dampened sentiments. The rupee was at 67.33 per dollar at the time of equity markets closing as compared to 67.11 per dollar level on Monday. Meanwhile, shares of pharmaceutical companies came under pressure after the government notified a ban on about 300 fixed dose combination drugs, while the gold and jewellary stocks declined as Finance Minister Arun Jaitley refused to roll back a 1 per cent excise duty proposed in the Budget on non-silver ornaments.

On the global front, most of the Asian markets closed in the red on Tuesday due to weaker oil and commodities prices. Sentiments came under pressure after the Bank of Japan held policy steady as expected and offered a bleaker view of the country's economy in the face of lingering anxiety over slowing global growth. Stocks across the Asia region were fell ahead of the US Federal Reserve interest-rate decision due Wednesday. Meanwhile, European equities were trading lower on Tuesday with basic resources turning the worst performing sector.

Back home, the benchmark got off to a weak start as the indices breached the psychological 7,500 and 24,700 levels in the early moments of trade, since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. The selling pressure accentuated in the afternoon as investors took to across the board risk aversion immediately after a somber European market opening. The indices barely managed to show signs of stabilizing in the second half of the session as the downward drift halted only with the session’s close after suffering some serious losses. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of over a percent to settle above the crucial 7,450 support level, while Bombay Stock Exchange’s sensitive Index Sensex slipped by over two hundred and fifty points and closed below the psychological 24,600 mark. Moreover, the broader markets too failed to show any fervor and closed with losses of over half a percent. On the BSE sectoral space, FMCG index remained the top laggard in the space and settled with over one and half a percent laceration followed by the Teck and Auto pockets, which went home with over half percent cuts. On the flipside, Banking, PSU and Oil & Gas pockets managed to go home with moderate gains of over quarter a percent.

The market breadth remained pessimistic as there were 1011 shares on the gaining side against 1633 shares on the losing side, while 157 shares remained unchanged.

Finally, the BSE Sensex plunged by 253.11 points or 1.02% to 24551.17, while the CNX Nifty dropped 78.15 points or 1.04% to 7,460.60. 

The BSE Sensex touched a high and a low 24840.77 and 24517.28, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.79%, while Small cap index lost 0.62%

The top gaining sectoral indices on the BSE were Bankex up by 0.36%, PSU up by 0.33%, Oil & Gas up by 0.29%, Metal up by 0.19% and Consumer Durables up by 0.02%, while FMCG down by 1.54%, TECK down by 0.93%, IT down by 0.85%, Auto down by 0.70% and Capital Goods down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.84%, Tata Steel up by 1.18%, Bharti Airtel up by 0.81%, Axis Bank up by 0.77% and BHEL up by 0.52%. On the flip side, Lupin down by 7.59%, HDFC down by 3.63%, Dr. Reddys Lab down by 2.96%, Cipla down by 2.48% and Sun Pharma down by 2.33% were the top losers.

Meanwhile, after rising for five months in a row and surging to its 16 months high in January, India's consumer price index (CPI) or retail inflation eased to 5.18% in February, as compared to 5.69% in January and 5.37% in February last year. The decline in inflation was helped by fall in food prices, after edging up for six straight months. The food price inflation at the consumer level was up 5.3 per cent for February, compared with a 6.85% rise in January and 5.37% in February last year. The food index, that constitutes over 45 per cent of CPI rose at 6.88 per cent in February 2015.

As per the data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation the CPI (Rural, Urban, Combined) on Base 2012=100 in February stood at 5.97%, 4.30% and 5.18% respectively compared to 5.79%, 4.95% and 5.37% respectively in the year ago period. Similarly Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined stood at 5.96%, 4.23% and 5.30% as against 6.43%, 7.52% and 6.88% in the same month last year. The General Indices (Provisional) for the month of February 2016 for Rural, Urban and Combined were 127.8, 123.8 and 125.9 respectively.  The CFPI for Rural, Urban and Combined for the same month were 129.8, 128.2 and 129.2 respectively.

Component wise, inflation for food and beverages declined to 5.52% in February 2016 from 6.66% in January 2016, Fruit prices dipped 0.7 percent, while prices of pulses rose about 38 percent. Inflation for housing increased to 5.33%, for Clothing and Footwear was 5.52%, Fuel and Light was 4.59%, while for miscellaneous items it was up 4.38% in February 2016, for Pan, tobacco and intoxicants it was 8.39%. Among the states, the retail inflation was as low as 2.70% in Uttarakhand and 3.01% in Jammu and Kashmir, while it was as high as 8.04%  in Odisha and 8.03% in Andhra Pradesh.

While, the Finance Ministry has said that decline in February 2016 inflation numbers (WPI and CPI inflation) is on expected line, with both wholesale and retail inflation levels under check, industry has raised its pitch for the central bank to cut rates and loosen its monetary, ahead of the policy update on April 5.

The CNX Nifty touched a high and low 7,545.20 and 7,452.80 respectively. 

The top gainers on Nifty were SBI up by 1.95%, Bank of Baroda up by 1.60%, Tata Steel up by 1.26%, PNB up by 1.22% and Yes Bank up by 1.12%. On the flip side, Lupin down by 7.83%, HDFC down by 4.09%, Zee Entertainment down by 3.55%, Dr. Reddys Lab down by 3.10% and ITC down by 2.63% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 40.54 points or 0.66% to 6,134.03, Germany’s DAX shed 37.67 points or 0.38% to 9,952.59 and France’s CAC was down by 32.18 points or 0.71% to 4,474.41.

Asian equity markets ended mostly in red on Tuesday as oil prices fell again on oversupply concerns and the Bank of Japan preferred to stand pat on rates after its surprise January decision to adopt negative interest rates. Lackluster cues from Wall Street, a weaker yuan and profit taking after recent sharp gains also kept investors on edge ahead of a two-day Federal Reserve monetary policy meeting that gets underway tonight. Japanese stocks ended lower after the central bank decided to leave its main policies unchanged, resulting in a stronger yen that pushed exporter shares lower. However, China stocks recouped early losses to end modestly higher on Tuesday, led by gains in finance, consumer and real estate shares.