Local indices crack after a long uptrend; settle with loss of over a percent

The Indian equity markets lost over a percent on Monday, posting their biggest single-day fall in five weeks, as investors booked profit after an upward revision in US fourth quarter GDP numbers signaled strength in the world’s biggest economy, bolstering the case for the Federal Reserve to tighten interest rates further in the coming months. Sentiments weakened further with the Centre imposing President’s rule in Congress-ruled Uttarakhand, which could impact the functioning of the second half of the budget session and hinder passage of any crucial Bill. Besides, depreciation in Indian rupee against dollar and rise in crude oil prices also dampened investor sentiment. Indian rupee weakened by 8 paise to quote at 66.72 against the dollar in noon deals on month-end demand for the American currency from importers and banks. Investors also remained cautious with the private report indicating Indian economy to grow at 7.2 per cent in 2016-17, a tad lower than Central Statistics Office's advance estimates of 7.6 per cent in the current fiscal due to weak investments and external headwinds. According to the report, Indian economy continues to face multiple challenges, and this is being reflected in high frequency data such as industrial production and trade. Meanwhile, market participants were patiently waiting for the Reserve Bank of India (RBI) monetary policy review due on April 5 amid hopes of a 25 basis points cut in interest rates. Also, volatility is likely to be witnessed this week on account of March series futures and options contracts expiry.

On the global front, Asian markets ended mostly in red on Monday as investors turned jittery ahead of US economic data and speeches by Federal Reserve officials this week that could signal more interest rate increases than expected. However, losses remained capped with an upward revision in US gross domestic product data that stoked expectations for a steady recovery in the world’s largest economy. European markets were closed for the Easter holiday. Meanwhile, Oil prices rose after a three-day break, adding to gains in recent weeks as optimism holds that a production freeze among major producers may be implemented, but volumes were thin as a number of markets remain on holiday for Easter.

Back home, the benchmark got off to a flat opening with a positive bias following supportive leads from Asian markets. Sentiments remained optimistic in thin trades triggered by a slew of encouraging economic reports from the US. However, the indices dropped into the red terrain, lacking any significant upside cues. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets. Though the bourses recovered from the lows of the day but could not succeed in minimizing the huge losses by the end of trading session. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of over a percent to settle below the crucial 7,650 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by three hundred and fifty points and closed below the psychological 25,000 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around one and half a percent. On the BSE sectoral space, the high beta - realty and Metal pockets remained among top laggards in the space as they got lacerated by around four percent while other sectors like Consumer Durables, Capital Goods and Banking too got pounded heavily in the session. The market breadth remained pessimistic as there were 741 shares on the gaining side against 1943 shares on the losing side while 168 shares remained unchanged.

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 371.16  points or 1.46% to 24966.40, while the CNX Nifty dropped 101.40 points or 1.31% to 7,615.10. 

The BSE Sensex touched a high and a low 25432.94 and 24895.49, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.36%, while Small cap index lost 1.65%The top losing sectoral indices on the BSE were Realty down by 4.35%, Metal down by 3.92%, Consumer Durables down by 3.48%, Capital Goods down by 2.08% and Bankex down by 1.92%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were NTPC up by 1.06%, GAIL India up by 0.42% and Bajaj Auto up by 0.04%. On the flip side, Tata Steel down by 5.23%, SBI down by 4.24%, Sun Pharma Inds. down by 4.20%, ICICI Bank down by 3.86% and Tata Motors down by 3.63% were the top losers.

Meanwhile, in order to meet the revised disinvestment target of Rs 25,300 crore, the government is targeting to raise around Rs 5,000 crore over the last few days of the current fiscal year with unlisted public sector companies such as Hindustan Aeronautics and Ireda agreeing to buy back the Centre's shares by dipping into the surplus cash at their disposal.

As the buyback of shares in listed entities will take longer the government is looking at unlisted companies to help it meet the target this year. The move is expected to be especially helpful for companies such as HAL, which are currently unlisted and may go for a listing later.

In a buyback, companies with surplus cash use their reserves, repurchase the shares and transfer the money to the shareholders, which in this case will be the government. While will help the government raise resources; it will also help the PSUs improve the earning per share as the number of shares will come down.

For the current financial year, the government had budgeted for record disinvestment of Rs 69,500 crore, but had to lower its ambitious target in the wake of poor market conditions and its inability to push through strategic sale. But even that target is looking tough, prompting the government to rush ahead with other options to raise resources, including buyback and special dividend. As a result last week, HAL board cleared the buyback plan, while Ireda has been asked to opt for the same route or pay special dividend.

The CNX Nifty touched a high and low 7,749.40 and 7,587.70 respectively. 

The top gainers on Nifty were Power Grid up by 1.78%, Kotak Mahindra Bank up by 1.71%, Bosch up by 1.47%, NTPC up by 1.10% and BPCL up by 0.92%. On the flip side, Vedanta down by 9.40%, Hindalco down by 8.43%, Tata Steel down by 5.44%, Sun Pharma down by 4.18% and SBI down by 4.02% were the top losers.

Asian equity markets ended mostly lower on Monday as heightened expectations of another US rate hike in April tempered the initial optimism over higher oil prices and better-than-expected US GDP data for the October-December period. The world's largest economy grew at an annual rate of 1.4 percent in the last three months of 2015, compared to the second estimate of 1 percent. Trading volumes remained thin as Hong Kong remained closed for the Easter Monday holiday. Chinese shares surrendered early gains to end slightly lower, as losses in realty shares on reports of increased regulatory scrutiny of financing risk in the property market overshadowed initial optimism over the economy triggered by encouraging industrial profit data released over the weekend. But Japanese shares bucked the trend to finish higher as renewed weakness in the yen lifted shares of export-oriented companies.