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

Indian benchmarks indices extended the sorrow of closing in the red territory for the fourth consecutive session on Wednesday, as worries over global economic growth prospects prompted marketmen to take profits off the table. Sentiments also remained dampened with a private report stating that consumer confidence in India declined in the second quarter this year with concerns over fuel prices and rising inflation, making the country lose the top position it occupied for the last two years as the most confident globally, adding some pessimism on the street. Besides, India's consumer goods market slowed in the June quarter from the year earlier, indicating that buyers are still being careful about discretionary spending as they wait for more concrete signs of an economic recovery, also weighing on the sentiments. Investors failed to drew any comfort with a private survey showing India’s services sector expanded at the fastest pace in the three months ended July, backed by a strong inflow of business amid strong underlying demand conditions. The Nikkei India Services Business Activity Index, which tracks changes in activity at service companies on a monthly basis, increased to 51.9 in July, up from 50.3 in June. Further, market participants were awaiting the outcome on the Goods and Services Tax (GST) constitutional amendment bill in Parliament, amidst strong indications that the most far-reaching taxation reform would be supported by Congress and all other major political parties.

Meanwhile, Steel counters gained traction on the report that India is expected to impose an anti-dumping duty of up to $557 per tonne on imports of certain steel products from six countries, including China, Japan and Korea. On the flip side, banking stocks came under pressure on the global rating agency S&P’s report that banks in India and China will continue to face pressures on their asset quality, profitability, and capitalization over the next 12-24 months. 

On the global front, Asian stock markets ended mostly lower on Wednesday as a disappointing Japanese stimulus package and oil trading below $40 a barrel renewed concern the global economic recovery is faltering.  Japanese shares hit a three-week low as a sell-off in government bonds and the internal debate conveyed by minutes of the Bank of Japan's June 15-16 policy meeting added to speculation the central bank could scale back on quantitative easing in the coming months. However, signs that Chinese authorities plan an interest-rate cut propped up the benchmark Shanghai Composite.  Meanwhile, European stocks edged lower in the early deals as investors trod cautiously amid a slew of earnings and the fall in oil price.

Back home, the local benchmark got off to a somber opening, extending the downtrend for the fourth straight session as pessimistic sentiments prevailed across Asian markets. The selling pressure accentuated in the mid morning trades as investors took to across the board risk aversion. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads.  Finally the NSE’s 50-share broadly followed index Nifty, took a cut of about a percent to settle below the crucial 8,550 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around three hundred points and closed below the psychological 27,700 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of over a percent. On the BSE sectoral space, the high beta - Realty and FMCG pockets remained among top laggards in the space as they got lacerated by over two percent while sectors like Capital Goods and Consumer Durables too got pounded heavily in the session.

The market breadth remained pessimistic, as there were 906 shares on the gaining side against 1825 shares on the losing side, while 141 shares remained unchanged.

Finally, the BSE Sensex ended lower by 284.20 points or 1.02% to 27697.51, while the CNX Nifty dropped 78.05 points or 0.91% to 8,544.85. 

The BSE Sensex touched a high and a low 28015.43 and 27647.14, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.50%, while Small cap index was lower by 1.14%.

The only gaining sectoral index on the BSE was Metal up by 0.07%, while Realty down by 2.15%, FMCG down by 2.04%, Capital Goods down by 1.74%, Consumer Durables down by 1.73% and Power down by 1.71% were the top losing indices on BSE.

The top gainers on the Sensex were Cipla up by 2.08%, Asian Paints up by 1.81%, Sun Pharma Inds. up by 1.16%, Coal India up by 0.88% and Infosys up by 0.06%. On the flip side, Tata Motors down by 2.98%, ITC down by 2.86%, Maruti Suzuki down by 2.32%, Power Grid Corpn. down by 1.93% and Larsen & Toubro down by 1.75% were the top losers.

Meanwhile, India’s service sector growth recovered to three-month high with faster increase in new business, underpinning stronger growth of output and boosting confidence. Services costs lowered first time in nine months indicated an overall decline in selling prices, while input cost also decreased. The seasonally adjusted Nikkei India Services Business Activity Index rose to 51.9 in July from 50.3 in June. The index posted above no-change mark of 50.0 for the thirteenth month running, highlighting ongoing growth of output in the sector.

The seasonally adjusted Nikkei India Composite PMI Output Index which measures both manufacturing and services, climbed to a three month high to 52.4 in July from 51.1 in June.  Manufacturing order books increased at the quickest pace since March. Besides, leading services output rise was a further expansion in incoming new business, one that was the most pronounced since April. According to survey, the upturn was supported by successful price negotiations with clients as well as improved marketing campaigns.

The survey showed that output charges fell at only a slight pace as the vast majority of survey respondents signalled no change in prices charged. By comparison, factory gate prices rose at a slight pace, which was nevertheless the quickest since April. Further, no different for job creation from June with almost all survey members reporting the same staff levels. It has now been over two-and-a-half years since the private sector has seen meaningful job creation.

July data highlighted a second successive monthly increase in unfinished business volumes at Indian service providers.  Amid reports of lower prices paid for fuel and some commodities, average input costs facing service providers fell in July. Conversely, purchasing costs at goods producers continued to rise, although the rate of inflation softened to a five-month low. Business sentiment among Indian service providers improved during July, with the degree of optimism reaching a four-month high.

The CNX Nifty traded in a range of 8,635.45 and 8,529.60. There were 12 stocks advancing against 39 decliners on the index.

The top gainers on Nifty were HCL Tech up by 3.12%, Bharti Infratel up by 2.14%, Asian Paints up by 1.93%, Cipla up by 1.93% and Bosch up by 1.29%. On the flip side, BHEL down by 3.75%, ITC down by 3.32%, Tata Motors - DVR down by 3.19%, Tata Motors down by 2.84% and Maruti Suzuki down by 2.33% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 14.09 points or 0.21% to 6,631.31 and France’s CAC was down by 13.25 points or 0.31% to 4,314.74, while Germany’s DAX was up by 2.33 points or 0.02% to 10,146.67.

Asian equity markets ended mostly lower on Wednesday, as a slew of factors such as a firmer yen, sliding oil prices, a deepening rout in Japanese government debt and concerns about the state of Europe's banks sapped investors' appetite for risk. Japanese shares hit a three-week low as a sell-off in government bonds and the internal debate conveyed by minutes of the Bank of Japan's June 15-16 policy meeting added to speculation the central bank could scale back on quantitative easing in the coming months. Chinese shares bucked the regional downtrend to end modestly higher after a private survey showed China's private sector expanded at the fastest pace since September 2014 in July despite moderation in services activity growth. Reports showed that the Caixin composite output index rose to 51.9 from 50.3 in June, driven by a marked expansion in the manufacturing sector. The services PMI fell to 51.7 from an 11-month high of 52.7 in June.