Benchmarks end a disappointing day with over half a percent cut

Indian stock indices showed a disappointing performance on Thursday’s trading session after a resilient show in previous trade. Sentiments remained under pressure with the Moody's Investors Service’s report indicating the growth in debt levels over the decade-mainly driven by private debts, making emerging market economies vulnerable to external shocks. According to Moody's report, the average external debt to gross domestic product ratio for Asia as a whole has increased from 31 per cent in 2008 to 47 per cent in 2015. The largest surge was reported in external borrowings in China, India, Indonesia, Taiwan and Malaysia.  Further, market participants turned jittery with the Finance Minister Arun Jaitley’s statement that India has underlined the need for a judicious mix of fiscal, monetary and structural policies by major economies to deal with the heightened uncertainty on account of Brexit. Weak trend in European stocks coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. Indian rupee was at 67.22 per dollar at the time of equity markets closing as compared to 67.18 per dollar level on Wednesday on sustained demand for the American currency from importers. However, investors got some comfort with the private report indicating Inflation in India to fall to 4.5 per cent by next March, giving the Reserve Bank of India (RBI) space to cut key policy rates by 50 basis points in the current fiscal.

Some support also came after international credit rating agency Standard & Poor's (S&P) striking a buoyant note, penciling in an 8 percent growth for India in the next two years. According to S&P, the view is predicated on the steady, ongoing structural reform push, including GST passage, a good monsoon season this year, and a wise choice to head the Reserve Bank.  Meanwhile, Energy shares witnessed a buying interest, tracking overnight gains in the crude oil, while pharma shares extended gains on the back of USFDA approval to manufacture and market generic versions of a blockbuster cholesterol drug, Crestor, in the American market. On the flip side, Metal stocks edged lower on report that the government under pressure from exporting countries and Indian small scale industries is planning to prune the list of steel products covered by the Minimum Import Price.

On the global front, Asian markets ended mostly higher on Thursday as expectations for a stimulus package lifted Japanese shares and better-than-anticipated corporate earnings in the U.S. eased concerns over global growth. Japan’s Prime Minister Shinzo Abe is eyeing a package of at least 20 trillion yen to kick start the economy from years of slumber and light a fire under torpid inflation, about double the size initially expected. Further, Chinese shares ended with modest gains as investors looked for bargains after three days of losses in the wake of mixed signals on the economic front.  However, Europe edged lower in early trade as investors paused following a recent rally and waited for the European Central Bank’s first policy meeting since the U.K. voted to leave the European Union last month. Investors don’t expect the European Central Bank to boost its stimulus measures on Thursday, but many believe signal of such a move is on the cards at the bank’s September meeting.

Back home, after getting a fragile start, Indian benchmark indices traded near neutral line through the morning trade, but sentiments turned pessimistic in noon post weak opening of European markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads.  The selling pressure accentuated in the late afternoon trades as investors took to across the board risk aversion. 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 half percent cut and managed to settle above the crucial 8,500 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over two hundred points and managed a close just above the psychological 27,700 mark. The broader markets traded with some resilience and finished with moderate losses, thereby outperforming their larger peers by quite a margin. On the BSE sectoral space, barring the FMCG and Oil & Gas counters, all the gauges closed in the negative territory with indices like Power, Banking and Capital Goods suffering nasty lacerations of 2.10%, 1.70% and 1.01% respectively. Though there were no other sectoral gainers, there were some individual gainers like ACC, Ultratech Cement and Coal India which gained some traction in the session.  The market breadth remained awful as there were 1089 shares on the gaining side against 1596 shares on the losing side, while 184 shares remained unchanged.

Finally, the BSE Sensex ended lower by 205.37 points or 0.74% to 27710.52, while the CNX Nifty dropped 55.75 points or 0.65% to 8,510.10. 

The BSE Sensex touched a high and a low 27988.76 and 27687.54, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.19%, while Small cap index was down by 0.14%.

The gaining sectoral indices on the BSE were FMCG up by 0.16% and Oil & Gas up by 0.06%, while Power down by 2.10%, Bankex down by 1.70%, Capital Goods down by 1.01%, Realty down by 0.78%, Auto down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.21%, Adani Ports &Special up by 1.13%, Asian Paints up by 1.06%, Bharti Airtel up by 0.84% and Wipro up by 0.72%. On the flip side, Axis Bank down by 3.62%, Power Grid down by 3.13%, SBI down by 2.30%, Dr. Reddys Lab down by 2.15% and ICICI Bank down by 2.13% were the top losers.

Meanwhile, putting an end to the long pending issue of relaxing FDI policy in print media, the government has finally decided not to raise foreign direct investment (FDI) limit on newspapers and periodicals to 49 percent from the current 26 percent. The Department of Industrial Policy and Promotion (DIPP) who was looking at the proposal after being asked by the Department of Economic Affairs (DEA), ruled against such an increase of FDI cap in print media sector and reportedly said that a 'considered view' was taken against increasing the FDI cap in print media sector

The move to raise FDI limit was aimed at attracting more foreign funds and the issue of relaxing the FDI cap in print media came up for discussions last November as well as during the recent liberalisation of the norms in June and both times it was decided not to tweak the caps. At present, the FDI policy permits 26% FDI in the publishing of newspapers and periodicals dealing with news and current affairs through government approval route.

Recently, the government had announced a series of changes in its FDI policy, opening sectors like pharmaceuticals industry, civil aviation, animal husbandry, and e-commerce related to food products manufactured in India and broadcast technology such as DTH, cable and mobile television to 100% FDI. During 2015-16, FDI into the country increased by 29 percent to $40 billion from $30.93 billion in the previous fiscal.

The CNX Nifty traded in a range of 8,585.25 and 8,503.45. There were 16 stocks advancing against 35 decliners on the index.

The top gainers on Nifty were ACC up by 4.42%, Ultratech Cement up by 2.39%, Ambuja Cement up by 1.85%, Indusind Bank up by 1.51% and Asian Paints up by 1.22%. On the flip side, Axis Bank down by 3.82%, Bank of Baroda down by 3.62%, Power Grid down by 3.42%, Kotak Mahindra Bank down by 2.77% and SBI down by 2.75% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 31.25 points or 0.46% to 6,697.74, Germany’s DAX shed 31.17 points or 0.31% to 10,110.84 and France’s CAC was down by 24.51 points or 0.56% to 4,355.25.

Asian equity markets ended mixed on Thursday. Hong Kong shares closed above 22,000 for the first time this year, joining a regional rally that led many Asian bourses higher. Japanese shares rose to close near their highest level in more than a month, as the yen weakened to the lower 107 yen zone amid reports that the government is arranging to compile a 20 trillion yen ($186 billion) stimulus package, about double its previous plan. Meanwhile, Chinese shares eked out modest gains as investors looked for bargains after three days of losses in the wake of mixed signals on the economic front.