Benchmarks end a disappointing day with over quarter percent cut

Indian benchmark indices staged a disappointing performance in Tuesday's volatile session of trade, erasing almost all the gains accumulated in the previous session. Marketmen, remained on sidelines after the Reserve Bank of India (RBI) at its policy meet kept key policy rates unchanged and retained FY17 GDP growth forecast at 7.6 percent. Inflation at a two-year high prevented Rajan from cutting interest rates at his final policy review.  Going forward, RBI indicated that the full implementation of the recommendations of the 7th central pay commission (CPC) on allowances will affect the magnitude of the direct effect of house rents on the retail inflation. RBI also noted that prices of pulses and cereals are rising and services inflation remains somewhat sticky. However, the central bank kept a positive outlook on the economy saying abundant monsoon will help in the recovery. Indian monsoon has been more than plenty this year, leading to better sowing averages. Promises of a better harvest also mean that food inflation could come down in the coming months, creating some space for his successor to cut rates later in the year. Further, dispelling fears of price rise due to the rollout of Goods and Services Tax, Raghuram Rajan said its impact could be assessed only after the GST rate is decided and inflation could be short-lived as seen in many other countries.  He further added that it will be challenging to roll out GST from April 1, 2017, but the new indirect tax regime will eventually boost business sentiment and investments.

Meanwhile, local sentiments were also hurt by the private report that indicated consumer sentiment waned in July this year due to decreasing optimism towards personal finances, business environment, employment and the real estate market.  The MNI India Consumer Sentiment Indicator decreased 2.6 per cent on month-on-month basis to 111.6 in July, offsetting last month's pickup, which had left confidence running at a nine-month high of 114.7. Besides, weakness in Indian rupee against the dollar too dampened sentiment. The rupee weakened by four paise to trade at 66.87 against the US dollar at the time of equity markets closing due to fresh buying of the American currency by banks and importers.

On the global front, Asian markets ended mostly higher on Tuesday as fresh Chinese data provided signs of improving conditions for the world’s second largest economy. Chinese producer prices fell in July at their slowest rate in nearly two years, fuelling hopes the end of a painful slowdown could be in sight for the Asian powerhouse which is a key driver of the global economy.  Japanese shares ended higher, touching a 2-week peak in thin trade thanks to a wobbly yen. Meanwhile, European stocks rose slightly in early trade, led by buoyant energy shares. Energy stocks rose after OPEC said it would hold an informal meeting in Algeria next month -- hinting it could take action to stabilise the crude market.

Back home, the benchmark got off to a soft start as the indices showed signs of consolidation in early trade, tracking mixed trade in Asian peers and sluggish cues from Wall Street in overnight trades. Thereafter, the key indices failed to show any fervor lacking encouraging leads. The key gauges suffered a setback in noon trades as sudden bouts of profit booking emerged in the local markets immediately after RBI governor hinted upside risks to inflation, while keeping key policy rates unchanged. Though, the bourses recovered from the lows of the day, 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, took a cut of over three tens of a percent to settle below the crucial 8,700 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around hundred points and closed below the psychological 28,100 mark. Moreover, the broader markets too closed with losses of half a percent. On the BSE sectoral space, Oil & Gas, Metal and FMCG pockets remained among top laggards in the space as they got lacerated by over half a percent, while sectors like Auto and Capital Goods too got pounded heavily in the session. However, Consumer Durables pocket managed to go home with moderate gains of around half a percent.

The market breadth remained pessimistic, as there were 1182 shares on the gaining side against 1572 shares on the losing side, while 133 shares remained unchanged.

Finally, the BSE Sensex ended lower by 97.41 points or 0.35% to 28085.16, while the CNX Nifty dropped 33.10 points or 0.38% to 8,678.25. 

The BSE Sensex touched a high and a low 28289.96 and 27956.77, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.35%, while Small cap index was lower by 0.45%.

The only gaining sectoral index on the BSE was Consumer Durables up by 0.45%, while Oil & Gas down by 0.88%, Metal down by 0.69%, FMCG down by 0.58%, Auto down by 0.57% and Capital Goods down by 0.36% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.48%, ONGC up by 1.33%, SBI up by 0.67%, Axis Bank up by 0.50% and Hindustan Unilever up by 0.50%. On the flip side, Lupin down by 5.03%, HDFC down by 1.81%, Hero MotoCorp down by 1.43%, Power Grid Corpn. down by 1.35% and Mahindra & Mahindra down by 1.13% were the top losers.

Meanwhile, Railway Minister Suresh Prabhu has said that major reforms are underway in the freight sector and with reduction of cargo charges announced in the rail budget for the first time; the benefits in a big way during the coming days will be seen. Prabhu, while pointing that due to non-running of time-tabled freight trains, most of the cargo does not come to railways in the country, said that to change this scenario we have already started a programme and two pairs of time-tabled container trains - ‘Cargo Express’ - have commenced.

Prabhu said that though two-thirds of earnings of Railways come from freight traffic, we did not focus on this and because we ignored it, the railways’ share in cargo has been on the decline and in the coming days it will be a matter of concern how the railways will support itself.

The Rail minister further said that for the first time in the history of rail budget, from this year we have initiated to bring down the cargo charges. The reforms going on in freight sector in the country are mind-boggling, and the reforms will benefit railways in the coming days. Minister added that efforts were also on to reduce expenditure on power. Indian Railways, which is a big consumer of electricity, is on energy saving mission. In order to minimize the consumption of power, Railways was tapping renewable energy sources, illuminating the stations through LED lighting, practice of prudent energy audit methods in a big way.

The CNX Nifty traded in a range of 8,728.35 and 8,638.20. There were 17 stocks advancing against 34 decliners on the index.

The top gainers on Nifty were Tata Power up by 3.57%, Zee Entertainment up by 2.22%, Bharti Infratel up by 1.59%, Coal India up by 1.52% and ONGC up by 1.19%. On the flip side, Idea Cellular down by 5.97%, Lupin down by 5.52%, Ambuja Cement down by 2.53%, Grasim Industries down by 2.22% and Eicher Motors down by 1.97% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 23.3 points or 0.34% to 6,832.43, Germany’s DAX increased 50.24 points or 0.48% to 10,482.60 and France’s CAC increased 19.96 points or 0.45% to 4,435.42.

Asian equity markets showed a mixed performance on Tuesday, as losses on Wall Street overnight and a decline in oil prices in Asian deals offset hopes that lower inflation figures will give Beijing room to ease monetary policy in the world's second-largest economy. Chinese shares rose notably as trade data released the previous day and today's inflation numbers offered scope for more growth-supportive policies by the Chinese authorities. Reports showed that China's consumer inflation rose 1.8 percent year-over-year in July, in line with expectations and down from 1.9 percent in June. The producer price index dropped 1.7 percent in the month, smaller than June's 2.6 percent decline. Japanese shares ended higher, touching a 2-week peak in thin trade thanks to a wobbly yen. Hong Kong shares ended little changed, taking a breather after hitting eight-month highs the previous session, as fall in IT and utility stocks offset gains in energy and property plays. Markets in Singapore were shut for a holiday.