Indian equities declines for second straight session; Nifty slips below 7600 mark

After remaining volatile throughout the session, Indian equity benchmarks ended the session on a weak note on Tuesday, as investors turned jittery ahead of the expiry of monthly derivative contracts later this week and a speech from Federal Reserve Chair Janet Yellen later in the day. Yellen's speech comes after a chorus of hawkish comments from other Fed officials unsettled global markets last week, casting doubt about a revival of foreign investments into emerging markets. On the domestic front, sentiments got undermined by the Finance Minister Arun Jaitley’s statement that India needs to further ease its business processes to boost foreign and domestic investments, as he admitted that the country has been impacted by global trade shrinkages. Further, market participants turned cautious with the report that Indian business sentiment fell for the first time in three months in March as companies faced lower demand amid rising input prices adding to expectations of an interest rate cut by the Reserve Bank.  The MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, fell to 62.7 in March from 63.5 in February. However, investors got some comfort with Prime Minister Narendra Modi’s statement that India will live up to the global expectation of being a bright spot for growth with requisite policy as also administrative reforms on a sustained basis.

Some support also came with the report that foreign institutional investors' (FII) inflow in the Indian market so far this month is the highest single-month investment since May 2013. According to the data from NSDL and SEBI, FIIs have put in Rs 18,437 crore ($2.74 billion) thus far in the Indian market during the current month (till March 23, 2016). Meanwhile, market players are anxiously awaiting the announcement of first bi-monthly monetary policy of the Reserve Bank of India (RBI) for FY16-17 amid clamours for a 25 bps rate cut.

On the global front, Asian markets ended mixed, as investors awaited the US Federal Reserve chair Janet Yellen's speech on the US economy in New York later in the day, which might potentially shed some light on the outlook for interest rates. Further, European equities climbed higher in early trading, with the market catching up after a long weekend, while mining stocks tracked stronger metals prices.

Back home, Indian bourses got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. After getting weak start, Indian benchmarks showed some strength, but the sentiments turned pessimistic in late morning trades and indices started drifting lower, lacking any significant upside cues. Thereafter, the key indices remained choppy but saw a sudden spurt in buying post the sanguine European market opening. The indices in no time climbed to intraday highs and traded around the psychological 25,000 (Sensex) and 7,650 (Nifty) levels. But the optimism faded in final hours of trade and profit booking in few sectors weighed down the local bourses by the end of a session. Finally, the NSE’s 50-share broadly followed index Nifty, slipped by around quarter a percent to settle below the crucial 7,600 support level, while Bombay Stock Exchange’s Sensitive Index Sensex deposed around sixty-five points and closed just above the psychological 24,900 mark. Moreover, the broader markets too failed to show any fervor and closed with losses of around quarter a percent.

On the BSE sectoral space, Capital Goods index remained the top laggard in the space and settled with around a percent laceration, followed by the Power, IT and FMCG pockets, which went home with around half percent cuts. On the flipside, Auto, Metal and Banking pockets managed to go home with moderate gains of over quarter a percent. The market breadth remained pessimistic as there were 947 shares on the gaining side against 1699 shares on the losing side, while 163 shares remained unchanged.

Finally, the BSE Sensex declined by 65.94  points or 0.26% to 24900.46, while the CNX Nifty dropped 18.10 points or 0.24% to 7,597.00. 

The BSE Sensex touched a high and a low 25079.35 and 24835.56, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.21%, while Small cap index lost 0.27%

The top gaining sectoral indices on the BSE were Auto up by 0.89%, Metal up by 0.40%, Bankex up by 0.39%, Realty up by 0.20% and Oil & Gas up by 0.13%, while Capital Goods down by 0.99%, Power down by 0.83%, IT down by 0.41%, FMCG down by 0.39% and PSU down by 0.17% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.63%, Maruti Suzuki up by 2.55%, Axis Bank up by 1.55%, Reliance Industries up by 1.46% and Tata Steel up by 1.28%. On the flip side, Lupin down by 6.27%, Cipla down by 3.83%, Dr. Reddys Lab down by 2.98%, GAIL India down by 2.88% and Sun Pharma down by 2.10% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan who is known for his criticism of unconventional’ monetary policies of central banks, has said that there should be guidelines for responsible monetary policy behaviour globally, as aggressive actions by one nation can lead to significant adverse cross- border spillovers on others. Rajan said that we can pretend all is well with the global monetary non-system and hope that nothing goes spectacularly wrong, or we can start building a system fit for the integrated world of the twenty-first century.

RBI governor in a working paper titled ‘Rules of Monetary Policy’ with Prachi Mishra, advisor, RBI, has suggested that aggressive monetary policy actions by one country can lead to significant adverse cross-border spillovers on others, especially as countries contend with the zero lower bound. If countries do not internalize these spillovers, they may undertake policies that are collectively suboptimal. Perhaps instead, countries could agree to guidelines for responsible behaviour that would improve collective outcomes.

He further suggested that policies that generally have positive or domestic effects could be rated green, policies that should be used temporarily and with care could be rated orange, and policies that should be avoided at all times could be rated red. Rajan has also stated in the paper that the temptation to shift costs can create inefficiencies when countries set their policies unilaterally.

However, noting that economic analysis of the issues is at an early stage, Rajan said it is unlikely 'we will get strong policy prescriptions soon, let alone international agreement on them, especially given that a number of country authorities like central banks have explicit domestic mandates'. Following the global financial crisis of 2008, many central banks in developed countries, had followed ‘unconventional monetary policies’ by keeping their policy rates close to zero for long periods to boost economic activity.

The CNX Nifty touched a high and low 7,652.90 and 7,582.25 respectively. 

The top gainers on Nifty were Maruti Suzuki up by 2.36%, Tata Motors up by 2.30%, Idea Cellular up by 1.95%, Tata Steel up by 1.70% and IndusInd Bank up by 1.66%. On the flip side, Lupin down by 6.03%, Cipla down by 4.11%, Dr. Reddys Lab down by 3.22%, GAIL India down by 2.35% and BHEL down by 2.17% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose 4.48 points or 0.07% to 6,110.96, Germany’s DAX increased 17.46 points or 0.18% to 9,868.81 and France’s CAC was up by 22.22 points or 0.51% to 4,351.90.

Asian markets made a mixed closing on Tuesday and while many of the indices managed to recover their early losses, the Chinese market ended with cut of over a percent. There was initially concern over the decline in crude prices that weighed on the sentiments, while the dollar rebounded from its first slide in seven days. Also, the traders waited to hear from Federal Reserve Chair Janet Yellen on US interest rate outlook. Japan’s market declined around a quarter percent even though the yen extended its decline for the eighth day, as more than 1,500 members traded ex-dividend on Tuesday. Australian shares hit one-month lows as trading resumed after the Easter break. However, Seoul shares finished modestly higher, aided by foreign investor flow into equities. Hong Kong market coming after the Easter break moved higher, as trade deficit narrowed during January to February period from last year as the pace of decline in imports outpaced the fall in exports.