Benchmarks end a disappointing day with over a quarter percent cut; broader markets outclass

Indian stock indices showed a disappointing performance in Friday’s trading session after a resilient show in previous one. Sentiments remained impacted with the Credit rating agency, ICRA stating that the Reserve Bank of India (RBI) is unlikely to cut policy rates in its upcoming monetary policy review on August 9, 2016. It said the central bank is expected to keep rates unchanged for now as the Consumer Price Index (CPI) inflation at around 5.8 per cent in June is close to upper end of the RBI’s target of 4 per cent (+/- 2 per cent). Discouraging leads from the Asian markets too proved as a big dampener for the domestic bourses as sentiments were weighed down by the Bank of Japan’s policy decision. However, losses remained capped with the report that foreign direct investment (FDI) into the country grew by 7 per cent to $10.55 billion during the first quarter of the current financial year. The sectors, which attracted maximum FDI during the period, included computer hardware and software, services, telecommunications, power, pharmaceuticals and trading business. Investors got some comfort with efforts to hammer out a consensus on the Goods and Services Tax bill gathering momentum. Finance Minister Arun Jaitley and Chief Economic Adviser Arvind Subramanyam held several rounds of talks with leaders from opposition parties. Congress the main opposition described the exercise as 'constructive and positive' and the bill is likely to be tabled in the Rajya Sabha next week. Meanwhile, water levels in 91 major reservoirs in India rose 9 percent in the past week, as heavy rains lashed their catchment areas, but remained lower compared with those at this time last year and the 10-year average.  These dams together held 59.366 billion cubic metres of water on Thursday, compared with 68.454 billion cubic metres at this time last year and the 10-year average of 63.128 billion cubic metres.

On the global front, Asian markets ended mostly lower on Friday after the Bank of Japan's monetary easing programme disappointed investors and the oil price downturn, with US crude futures falling further towards the $40 mark in Asian trade. The BOJ modestly increased purchases of exchange-traded funds, but maintained its base money target at 80 trillion yen ($775 billion) and the pace of purchases of other assets, including Japanese government bonds. In China, shares fell even on buzz the banking regulator's proposals to limit investment in equities through wealth-management products will have limited effect on money flowing into the stock market. However, European shares advanced in early trade, following some encouraging company updates, with EDF surging after its board approved the company's Hinkley Point nuclear project and Kering gaining after its fashion brand Gucci recorded strong sales.

Back home, the local indices got off to a sedate opening tracking the dismal leads prevailing in Asian markets, as the Bank of Japan acted narrowly on easing policy, avoiding pulling harder on levers on negative interest rates and asset purchases. The selling pressure accentuated in the mid morning trades as investors took to across the board risk aversion. The key gauges made some attempts to claw back into the green zone in early afternoon trades but profit booking at higher levels dragged the key indices to the lowest point in the session. However, late short covering in blue-chip stocks and supportive leads from European markets ensured that local bourses go home with relatively small losses. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over quarter percent to settle below the crucial 8,650 support level while Bombay Stock Exchange’s Sensitive Index Sensex slipped by over hundred and fifty points and closed tad above the psychological 28,050 mark. However, broader markets showed some resilience by outclassing their larger peers by a big margin as investors carried forward their value hunting in beaten down shares from the midcap and small cap space. On the BSE sectoral space, Consumer Durables and Capital Goods pockets remained among top laggards in the space as they got lacerated by 0.92% and 0.73% respectively. While sectors like Banking, Metal and Realty too got pounded heavily in the session. On the flipside, Auto, Oil & Gas and Power pockets managed to go home with moderate gains.

The market breadth remained pessimistic as there were 1224 shares on the gaining side against 1457 shares on the losing side, while 214 shares remained unchanged.

Finally, the BSE Sensex ended lower by 156.76 points or 0.56% to 28051.86, while the CNX Nifty dropped 27.80 points or 0.32% to 8,638.50. 

The BSE Sensex touched a high and a low 28233.47 and 28037.87, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.70%, while Small cap index was up by 0.23%.

The top gaining sectoral indices on the BSE were Auto up by 0.79%, Oil & Gas up by 0.51% andPower up by 0.17%, while Consumer Durables down by 0.92%, Capital Goods down by 0.73%, Bankex down by 0.63%, Metal down by 0.63% and Realty down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports &Special up by 2.95%, Lupin up by 2.15%, Bajaj Auto up by 1.89%, Cipla up by 1.83% and Hindustan Unilever up by 1.47%. On the flip side, ICICI Bank down by 3.40%, Bharti Airtel down by 2.70%, HDFC down by 1.92%, Wipro down by 1.32% and Larsen & Toubro down by 1.20% were the top losers.

Meanwhile, Railway has to perform its dual role of commercial organization and vehicle for fulfillment of social obligations. Railway Minister Suresh Prabhu has emphasized that and said that if we run it as a commercial enterprise, we cannot fulfill social obligations and if we fulfill the social obligations, we cannot run it as a commercial enterprise. But we have to fulfill our social obligations while running this as a commercial enterprise.

Suresh Prabhu said that constant efforts should be on to find ways to increase passenger and freight traffic and also the share of non-fare revenue as railways is facing challenges. Minister said that “If we do not think about competition, we cannot improve. At the micro level, we should see how the competition is faring. We therefore, have to properly make our pricing policy for both passenger and freight traffic. And at the same time we have to keep long term interest of the railways in mind”.

Emphasizing on station redevelopment through PPP route, he said it is a priority for us because Railways cannot work only with our own resources. Joint ventures with states are very much necessary Hence PPP route should be explored wherever possible to benefit the states and to fund the joint venture projects. He said railways needs to strike a balance between Japanese and Chinese railway financial models as China invests heavily for the development of their railways. Extra Budgetary resources are necessary for the development of railways.

The CNX Nifty traded in a range of 8,670.35 and 8,631.15. There were 24 stocks advancing against 27 decliners on the index.

The top gainers on Nifty were Eicher Motors up by 6.64%, Adani Ports &Special up by 3.29%, Zee Entertainment up by 2.92%, Lupin up by 2.23% and Tata Power up by 1.84%. On the flip side, ICICI Bank down by 3.57%, Bharti Airtel down by 2.81%, BHEL down by 2.44%, HDFC down by 1.94% and Bank of Baroda down by 1.78% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 21.97 points or 0.33% to 6,699.09 and France’s CAC was down by 2.45 points or 0.06% to 4,418.13, while Germany’s DAX was up by 42.69 points or 0.42% to 10,317.62.

Asian equity markets ended mostly lower on Friday on the back of Bank of Japan’s disappointment and the oil price downturn, with US crude futures falling further towards the $40 mark in Asian trade on concerns over a supply glut and waning demand from key international markets. The safe-haven Japanese yen soared after the Bank of Japan's fresh stimulus measures disappointed markets. Bank of Japan raised the target for exchange-traded fund purchases and doubled its dollar lending program, but kept its interest rate and the pace of monetary base expansion unchanged. The central bank also downgraded its projections for inflation and growth for fiscal 2016. Chinese shares closed lower on worries that regulatory changes are coming to restrict investments by small banks in the rapidly growing $3.5 trillion wealth management product industry. However, Japanese shares themselves rose in volatile trade, with banks and insurers pacing gainers, after the central bank refrained from expanding negative interest rates and ensured smooth funding in foreign currencies.