Markets extend southward journey for third straight session

Indian benchmarks started the new week on a disappointing note, as sharp decline in the rupee, slide in crude oil prices and weakness among global peers led to sell off across the board by investors. Sentiments remained dismal as worries over global economic growth prospects prompted marketmen to take profits off the table after official data released earlier on Monday showed China's fixed-asset investment growth eased to 9.6 percent on-year in the January-May period, below market expectations, while the statistics bureau said downward pressures still exist in the economy. Sentiments were undermined by the industrial output, which contracted by 0.8 per cent in April, the first decline in three months, due to drastic fall in capital goods production and manufacturing activities. Disappointed over the latest Index of Industrial Production data, India Inc has said that industrial revival is going to be a major challenge going ahead but expressed hope that the growth will pick up on account of the recent measures taken by the government. Meanwhile, some traders remained on the sidelines and refrained from any buying activity ahead of key macroeconomic data i.e. consumer price index (CPI) to be released later in the day and inflation based on the wholesale price index (WPI) for May to be released on Tuesday.

Caution also prevailed ahead of the key central bank meetings this week in the United States, the UK, Switzerland and Japan. All are expected to hold monetary policy steady against a backdrop of caution heightened by the global impact from a possible Brexit. Further, the European stock markets got off to a gap down beginning and were trading with nasty cuts of around a percent, while the Asian counterparts too settled on a bleak note with huge losses on renewed worries about the global economy. Optimism has given way to fear in global financial markets since the middle of last week as polls indicated the U.K.’s June 23 referendum on EU membership is too close to call. Economists predict a vote for so-called Brexit will send the pound to the lowest level in more than three decades, while a victory for the ‘Remain’ camp would drive the currency toward the highest this year.

Earlier on Dalal Street, the benchmark got off to a gap down opening, in tandem with the somber sentiments prevailing in Asian markets amid jitters over the forthcoming referendum on whether the UK would remain in the European Union scheduled on June 23, 2016. The selling pressure accentuated in the early afternoon as investors took to across the board risk aversion immediately after a somber European market opening. The sharp cut dragged key indices to intraday lows of around 26,300 and 8,100 levels. However, these psychological levels proved as strong support levels for the key gauges as the benchmarks soon recovered from the lows, but could not succeed in minimizing the huge losses by the end of trading session. Finally the NSE’s 50-share broadly followed index Nifty, suffered a cut of over half a percent to settle around the crucial 8,100 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex- slipped over two hundred points and closed below the psychological 26,400 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of around half a percent. On the sectoral front, the rate sensitive sectors like Realty, Banking and Capital Goods witnessed brutal assaults as they got clobbered by 1.32%, 1.29% and 1.17% respectively. While counters like Power and Metal too suffered severe pounding. There appeared absolutely no gainer either on the BSE sectoral front. The market breadth remained pessimistic as there were 1108 shares on the gaining side against 1473 shares on the losing side while 163 shares remained unchanged.

Finally, the BSE Sensex ended lower by 238.98 points or 0.90% to 26396.77, while the CNX Nifty dropped 59.45 points or 0.73% to 8,110.60. 

The BSE Sensex touched a high and a low 26468.27 and 26262.27, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.50%, while Small cap index was lower by 0.45%.

The top losing sectoral indices on the BSE were Realty down by 1.32%, Bankex down by 1.29%, Capital Goods down by 1.17%, Power down by 1.17% and Metal down by 1.09%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were Lupin up by 1.12%, Dr. Reddys Lab up by 0.70%, Sun Pharma Inds. up by 0.60%, GAIL India up by 0.49% and Maruti Suzuki up by 0.43%. On the flip side, ICICI Bank down by 3.38%, Tata Steel down by 3.33%, Tata Motors down by 2.83%, BHEL down by 2.67% and Bharti Airtel down by 2.52% were the top losers.

Meanwhile, dragged down by poor manufacturing and capital sectors, India's latest Index of Industrial Production numbers, which monitor industrial production in the country, stated that the country's industrial output shrank 0.8% in April as against 3 per cent growth in the same month last year. This is the first time in three months that the factory output has contracted, prompting industry to demand policy interventions from the government. Disappointing data may add to the clamour for rate cut by the Reserve Bank of India.

As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, IIP with base 2004-05 for the month of April 2016 stood at 176.4, which is 0.8 percent lower as compared to the level in the month of April 2015. The cumulative growth for the period April-March 2015-16 over the corresponding period of the previous year stands at 2.4 percent.

On the sectoral basis, the growth of manufacturing index which occupies 75.52 percent weightage in the overall index contracted by 3.1 per cent in April this year compared to a growth of 3.9 per cent in same month last year. Mining sector, showed some improvement recording a growth of 1.4 per cent as against a contraction of 0.6 per cent a year ago. On the positive side, power generation recorded a growth of 14.6 per cent as against a marginally decline of 0.5 per cent a year ago.The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of April 2016 stand at 123.6, 182.6 and 203.0 respectively. The cumulative growth in these three sectors during April-March 2015-16 over the corresponding period of 2014-15 has been 2.2 percent, 2.0 percent and 5.7 percent respectively. In terms of industries, nine out of the twenty two industry groups in the manufacturing sector have shown negative growth during the month of April 2016 as compared to the corresponding month of the previous year.

As per Use-based classification, the growth rates in April 2016 over April 2015 are 4.8 percent in Basic goods, (-) 24.9 percent in Capital goods and 3.7 percent in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 11.8 percent and (-) 9.7 percent respectively, with the overall growth in Consumer goods being (-) 1.2 percent.

This is the first set of production data after the statistics office said the economy grew 7.6 percent in FY16. The Reserve Bank of India expects the country to clock 7.6 percent gross value added growth in the current fiscal, slightly higher than 7.3% in the last one.

The CNX Nifty traded in a range of 8,125.25 and 8,063.90. There were 23 stocks advancing against 28 stocks decliners on the index.

The top gainers on Nifty were BPCL up by 2.45%, Lupin up by 1.17%, Dr. Reddy's Laboratories up by 1.12%, Aurobindo Pharma up by 1.07% and Bharti Infratel up by 0.93%. On the flip side, Idea Cellular down by 3.57%, Tata Motors - DVR down by 3.53%, Tata Steel down by 3.51%, ICICI Bank down by 3.35% and Tata Motors down by 2.71% were the top losers.

European markets were trading in red; Germany’s DAX declined 151.59 points or 1.54% to 9,683.03, France’s CAC decreased 73.33 points or 1.7% to 4,233.39 and UK’s FTSE 100 was down by 34.19 points or 0.56% to 6,081.57.

Asian equity markets ended lower on Monday as falling oil prices, disappointing Chinese data and weak cues from offshore markets dampened investor sentiment ahead of the Fed and BOJ meetings and the upcoming Brexit referendum later this month. Speculation is rising over whether Britain will choose to remain in the 28-nation European Union in a June 23 referendum. A poll in London's last week showed that 55 percent of British citizens want to leave the European Union. Meanwhile, the Bank of Japan's rate decision is due on Thursday and it is likely that the central bank will ease its policy mainly by increasing its ETF purchases, against the backdrop of a broadly weak dollar and falling expectations for Fed rate hikes. China and Hong Kong shares ended lower, as mixed data from China overshadowed recent optimism that MSCI could add mainland Chinese stocks to its benchmark Emerging Markets Index. Industrial output in China grew 6.0 percent in May from a year earlier, the National Bureau of Statistics said - matching expectations and unchanged from the previous month. Retail sales grew by a slightly less than expected 10 percent in the month and growth in fixed-asset investment slipped below 10 percent for the first time since 2000 in January-May, painting a mixed picture of the world's second-largest economy. Japanese shares hit five-week lows to extend losses for a third straight day, as Brexit woes lifted the yen to a fresh one-month high against the dollar and a three-year high against the euro.