Indian markets reel under global pressure; settle with loss of over half a percent

Wednesday’s session saw Indian benchmark indices complete a hat-trick of disappointing performances, reaching the finishing with cut of over half a percent.  Disappointing manufacturing surveys from China and the UK, combined with downgrades to growth and inflation forecasts from the European Commission soured investors' mood.  On the domestic front, sentiments were undermined after private sector activity in the country eased in April amid slower expansion in new business inflows in services sector, while order books at manufacturers also broadly stagnated. The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, dropped from 54.3 in March (37-month high) to 52.8 in April, pointing to a softer expansion in private sector activity across the country. Further, a softer expansion in activity suggests that companies are not fully convinced about the recovery. Besides, persistent selling by foreign funds, depreciation of rupee value against the dollar and extended losses in crude oil prices further dented sentiments. Indian rupee weakened 22 paise to 66.64 against the US dollar at the time of equity markets closing on increased demand for the American currency from importers and banks. Some losses were restricted with the Science and Technology Minister Harsh Vardhan’s statement that the Monsoon is expected to hit Kerala by May-end or early June, with various forecasting agencies predicting normal or above normal rainfall this year. Furthermore, the International Monetary Fund retained its growth forecast for India this year at 7.5 per cent, largely driven by private consumption even as weak exports and sluggish credit growth weigh on the economy. Meanwhile, sharp selling was witnessed in metal and mining stocks, as copper prices declined in global commodities markets. Telecom stocks declined after the telecom companies told the Supreme Court that the entire sector is under huge debt and they have to pay a big price for spectrum.

On the global front, Asian markets ended in red on Wednesday as worries about global growth and creeping deflation resurfaced, undermining commodities and boosting demand for safe-haven sovereign debt. Besides, a surprise interest-rate cut by Australia's central bank added to global economic jitters. The Reserve Bank of Australia on May 3, cut its benchmark interest rate by 25 basis points to record low of 1.75% in a bid to combat record-low inflation and a strong local currency. Further, Oil prices extended losses in Asia trade, with the US benchmark below $44 a barrel owing to a pick-up in the dollar and as Iran ramps up production, while traders await the release of inventories later in the day. Meanwhile, European stocks hovered near a three-week low in early trade.

Back home, the local benchmark indices started the session on feeble note as investors remained cautious, tracking a falling trend in global markets. The frontline indices thereafter traded in tight range below neutral line, due to lack of encouraging leads. The key gauges suffered a setback in afternoon trades as sudden bouts of selling emerged in the local markets immediately after a somber European market opening. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over half a percent to settle tad above the crucial 7,700 support level, while Bombay Stock Exchange’s Sensitive Index Sensex slipped by over hundred points and closed near the psychological 25,100 mark. Moreover, the broader markets too succumbed to the selling pressure and closed with losses of over a percent. On the BSE sectoral space, the rate sensitive - Metal and Realty pockets remained among top laggards in the space as they got lacerated by 3.49% and 2.29% respectively. While sectors like Auto, PSU and Consumer Durables too got pounded in the session. On the flipside, the defensives like information technology (IT) remained sole gainer and managed to go home with moderate gains of around quarter a percent. The market breadth remained pessimistic as there were 783 shares on the gaining side against 1783 shares on the losing side while 121 shares remained unchanged.Finally, the BSE Sensex declined by 127.97 points or 0.51% to 25101.73, while the CNX Nifty dropped 46.15 points or 0.60% to 7,700.85.

The BSE Sensex touched a high and a low 25245.70 and 25061.04, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.22%, while Small cap index was lower by 0.98%.

The only gaining sectoral index on the BSE was IT up by 0.23%, while Metal down by 3.49%, Realty down by 2.29%, Auto down by 2.05%, PSU down by 1.50% and Consumer Durables down by 1.33% were the losing indices on BSE.

The top gainers on the Sensex were HDFC up by 2.86%, NTPC up by 1.35%, HDFC Bank up by 0.89%, Infosys up by 0.75% and Sun Pharma Inds. up by 0.55%. On the flip side, Adani Ports &Special down by 11.98%, Tata Motors down by 6.76%, Tata Steel down by 5.60%, BHEL down by 3.78% and ICICI Bank down by 2.98% were the top losers.

Meanwhile, Indian Services PMI turned lower in the month of April after surging to its highest level since June 2014 in the previous month. The seasonally adjusted Nikkei Services Business Activity Index came in at 53.7 in April from 54.3 in March. Services firms’ sentiment also weakened slightly in April, with the degree of optimism being modest by historical standards.

PMI data for April showed that economic conditions across India continued to improve, softer increases in output were noted among goods producers and service providers alike, with services witnessing a slower expansion in new business inflows, while order books at manufacturers broadly stagnated. Services Business Activity Index pointed to a solid, although softer, expansion in activity. The latest increase in output was supported by growth in the Financial Intermediation, Post & Telecommunication and Transport & Storage sub-sectors.

New business at services firms rose for the tenth straight month in April. Despite easing since March, the rate of expansion was solid overall. Incoming new work in the private sector as a whole increased at a moderate and weaker rate, weighed on by stagnant order books among manufacturers. April data highlighted a general lack of pressure on the capacity of Indian service providers, as unfinished business declined. The latest fall was the third in as many months, but the weakest in this sequence and fractional overall.

Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, dropped from 54.3 in March to 52.8 in April, pointing to a softer expansion in private sector activity across the country.

Services employment was unchanged in April, companies kept workforce numbers unchanged and stagnent employment trends have now been registered through the past nine months. Input costs faced by Indian services companies increased in April. The rate of cost inflation reached a 13-month high. It was also noted that part of additional cost burdens were passed on to clients, as both manufacturers and service providers raised their selling prices again in April.

The CNX Nifty traded in a range of 7,749.00 and 7,697.25. There were 14 stocks advancing against 36 stocks decliners on the index.

The top gainers on Nifty were HDFC up by 2.67%, NTPC up by 1.79%, HCL Tech up by 1.22%, Aurobindo Pharma up by 1.09% and HDFC Bank up by 0.79%. On the flip side, Adani Ports &Special down by 11.78%, Tata Motors down by 7.12%, Tata Motors - DVR down by 6.68%, Hindalco down by 6.24% and Tata Steel down by 5.99% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 57.13 points or 0.92% to 6,128.46, Germany’s DAX shed 53.2 points or 0.54% to 9,873.57 and France’s CAC was down by 20.23 points or 0.46% to 4,351.75.

Asian equity markets ended mostly lower on Wednesday, with markets in Hong Kong, Singapore and Taiwan bearing the brunt of the selling, after US stocks fell sharply to hit a three-week low overnight in reaction to falling oil prices, weak Chinese and UK manufacturing data and downgrades to GDP and inflation forecasts from the European Commission. Chinese shares closed largely unchanged despite resource shares coming under selling pressure in the wake of a regulatory crackdown to curb speculation in commodities markets. Japanese markets were closed for the Greenery day public holiday.