Benchmarks end a disappointing day with over quarter percent cut

Indian benchmarks extended their southbound journey for yet another session on Friday, as investors remained wary on hopes of an interest rate hike by the US Federal Reserve in the month of June. On the domestic front, sentiments remained dampened with the market regulator Sebi taking its fight against black money and money laundering to another level and announcing steps to stop suspected illegal money flowing into the country by making issuers of securities known as offshore derivative instruments register their customers. Depreciation in rupee value against the US dollar too weighed down sentiments. Indian rupee was trading at 67.46 at the time of equity markets closing as against yesterday’s closing level of 67.36 at the Inter-bank Foreign Exchange (forex) market on the back of dollar demand from importers and banks. However, losses remained capped with strength in Asian & European equities and uptick in crude oil prices. Some support came with Moody's Investors Service, forecasting Indian economy to grow 7.5 percent in the current and next year and statement that the expansion is primarily driven by rising consumption and sustained improvement in private investment was needed to maintain the momentum. The ratings agency also said India has benefited from lower commodity prices as it is a net importer of commodities and a low exposure to trade has also helped.

On the global front, Asian markets ended mostly higher on Friday as investors restored calm a day after worries about the Fed's rate hike signals prompted sell-offs. William Dudley, one of the influential members of the US Fed, believes the current sound economic fundamentals warrant a rate hike by the US Fed in June or July. He has repeatedly warned the market to not take the Fed lightly or its rate hike talks.  Shares in Japan and South Korea led the charge higher, helping trim a fourth straight weekly decline in the regional equity index, the longest run of losses since September. Chinese shares eked out modest gains after China said it would allocate 27.64 billion yuan ($4.23 billion) from the central budget to cut steel and coal capacity. Meanwhile, European stocks rebounded on Friday as oil prices picked up and weak German data suggested the Eurozone's central bank may dig even deeper to spur growth.

Back home, after getting cautious start, Indian benchmark indices traded in the tight range near neutral line, altering between positive and negative territory, for most part of the session, but sharp selling in final hour of trade dragged the indices to lowest point of the session. However, a mild short covering in dying moments of trade ensured that the key indices shut shops off the intraday lows. Finally the NSE’s 50-share broadly followed index Nifty, suffered over quarter percent cut to settle below the crucial 7,750 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around hundred points and managed a close just above the psychological 25,300 mark. On the BSE sectoral space, barring the FMCG counters, all the gauges closed in the negative territory with indices like Realty, Capital Goods and Oil & Gas suffering nasty lacerations of 1.42%, 0.75% and 0.56% respectively. Though there were no other sectoral gainers, there were some individual gainers like ITC, Adani Ports & SEZ and ONGC which gained some traction in the session. The market breadth remained awful as there were 901 shares on the gaining side against 1665 shares on the losing side, while 181 shares remained unchanged.

Finally, the BSE Sensex ended lower by 97.82 points or 0.39% to 25301.90, while the CNX Nifty dropped 33.70 points or 0.43% to 7,749.70. 

The BSE Sensex touched a high and a low 25506.06 and 25251.90, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.49%, while Small cap index declined by 0.83%.

The only gaining sectoral index on the BSE was FMCG up by 0.19%, while Realty down by 1.42%, Capital Goods down by 0.75%, Oil & Gas down by 0.56%, IT down by 0.52%, Bankex down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports &Special up by 3.49%, ITC up by 1.55%, ONGC up by 1.40%, NTPC up by 1.00% and Bajaj Auto up by 0.83%. On the flip side, Lupin down by 9.10%, ICICI Bank down by 2.44%, Reliance Industries down by 1.73%, Mahindra & Mahindra down by 1.17% and Cipla down by 1.04% were the top losers.

Meanwhile, global rating agency Moody’s Investors Service has projected that Indian economy will grow 7.5 percent in the current as well as next year in real terms from 7.3 percent in 2015, on the back of private consumption growth. Moody's in its latest Global Macro Outlook 2016-17 has said that India’s overall economic growth is supported by robust consumer spending, which makes up 55% of aggregate demand in the economy and added that private spending will be supported by the implementation of the public sector salary increases, mandated by the 7th Pay Commission, and a rise in rural incomes, provided the forecast of a good monsoon is realized.

Moody's in its report has further said that the India, being a net importer of commodities, has benefited from falling prices and growth will be driven by rising consumption. But, for the growth momentum to be sustained, a continuous improvement in domestic private investment would be required. It added that sustained improvement in private investment was needed to maintain the momentum.  The report said that the monsoon this year will be crucial for inflation projections and interest rates and added that “Prevailing low headline inflation is expected to remain so, given the current forecast of a good monsoon season, and should allow the Reserve Bank of India to sustain its current accommodative stance”.

Referring to the pressure points, Moody’s had said that India has a strong GDP growth, but private investment remains weak. Modest exposure to trade in goods and a net-commodity importing status has shield the economy from external headwinds to some extent. It also pointed that investment spending fell in the last quarter of 2015, as did industrial output and capital utilisation rates remain low.

It also said that looking forward the impact of weaker commodity prices is likely to fade over time with the stabilization of commodity prices. It added that combined with the fact that external demand is likely to remain lackluster, a sustained improvement in domestic private investment would be required for the growth momentum to be sustained. For other markets, the report said that weak growth in emerging markets, driven by low commodity prices and waning export demand, will continue to act as a drag on the global economy this year.

The CNX Nifty traded in a range of 7,812.40 and 7,735.75. There were 22 stocks in green against 29 decliners on the index.

The top gainers on Nifty were ITC up by 4.05%, Adani Ports &Special up by 3.7%, Tata Power up by 1.97%, Idea Cellular up by 1.58% and ONGC up by 1.4%. On the flip side, Lupin down by 9.03%, Ambuja Cement down by 2.50%, ICICI Bank down by 2.44%, BPCL down by 2.33% and UltraTech Cement down by 1.87% were the top losers.

European markets were trading in green; France’s CAC increased 48.77 points or 1.14% to 4,331.31, UK’s FTSE 100 surged 82.22 points or 1.36% to 6,135.57 and Germany’s DAX was up by 89.74 points or 0.92% to 9,885.63.

Asian equity markets ended mostly higher on Friday, as oil prices rebounded ahead of US rig count data and the dollar held gains against the yen on the eve of a G7 meeting, with issues such as money laundering, tax evasion and currency volatility high on the agenda. Chinese shares eked out modest gains after China said it would allocate 27.64 billion yuan ($4.23 billion) from the central budget to cut steel and coal capacity. Japanese shares reversed early losses to end higher as a weaker yen boosted exporters' shares.