Dalal Street witnesses bloodbath; Nifty slips below 8,600 mark

Wednesday’s trading session turned out to be an awful session for the Indian benchmark indices, which crumbled like a ‘house of cards’ and went on to breach various key technical levels in the over a percent freefall. Marketmen looked at every rise as opportunity to take profits off the table as there emerged no encouraging factor that could halt the unrelenting selling. The sentiments were also undermined by reports that noted that the gross non-performing assets (GNPAs) of the public sector banks increased Rs 2.16 lakh crore in 2013-14 to Rs 4.76 lakh crore in 2015-16.  The report also said that the top 100 borrowers of public sector banks owe nearly Rs 14 lakh crore to them. Further, traders failed to draw any sense of relief with the report that tax collections have grown up at a robust pace in the first four months of the current fiscal with central excise and personal income tax showing impressive gains. Direct tax collections grew 24% in April-July over corresponding period last year, while indirect taxes were up by 29.9% over the same period.  Meanwhile, the Oil & Gas counter did the maximum damage as Oil prices extended losses in early trade after industry data showed a rise in US crude stockpiles, supporting oversupply concerns. Sugar stocks also came under pressure after the food ministry recommended suspending futures trade in sugar for the time being and imposed stock holding limits on sugar mills. The steps have been taken in view of the upcoming festival season. Further, banking stocks continued their southward journey for the second straight session after Raghuram Rajan at his last monetary policy review meeting as RBI governor hinted upside risks to inflation, while keeping key policy rates unchanged.

On the global front, Asian markets ended on a mixed note on Wednesday as investors pared expectations slightly for a Federal Reserve interest rate increase following weak US productivity data, through commodity companies led losses across the region.  Chinese shares ended lower as investors awaited industrial output, fixed asset investment and retail sales data due Friday, while Japanese shares fell as the dollar weakened against the yen and investors moved to the sidelines ahead of a public holiday in Japan on Thursday. Meanwhile, European stocks traded lower in early trade as global investors tread cautiously, considering the timing of the next interest rate hike by the US Federal Reserve as well as the outlook for oil prices.

Back home, the benchmark got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed in global markets. Thereafter, the frontline indices lost the plot and kept tumbling down the hill without any stoppage. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session’s close after suffering gargantuan losses. Finally the NSE’s 50-share broadly followed index Nifty, suffered a nasty hundred point laceration to settle below the crucial 8,600 support level, while Bombay Stock Exchange’s Sensitive Index Sensex got obliterated by over three hundred points and closed below the psychological 27,800 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with large cuts of over a percent. On the sectoral front, Oil & Gas, Automobile and Power witnessed brutal assaults as they got clobbered by 2.19%, 1.93% and 1.56% respectively. While counters like Consumer Durables and PSU too suffered severe pounding.  Though there were no sectoral gainers in the space, however, stocks like Adani Ports & Special, TCS, and Bank of Baroda climbed higher on short-covering.

The market breadth remained pessimistic, as there were 835 shares on the gaining side against 1895 shares on the losing side, while 135 shares remained unchanged.

Finally, the BSE Sensex slumped by 310.28 points or 1.10% to 27774.88, while the CNX Nifty dropped 102.95 points or 1.19% to 8,575.30. 

The BSE Sensex touched a high and a low 28143.28 and 27736.62, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.06%, while Small cap index was lower by 1.18%.

The top losing sectoral indices on the BSE were Oil & Gas down by 2.19%, Auto down by 1.93%, Power down by 1.56%, Consumer Durables down by 1.55% and PSU down by 1.40%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were Adani Ports & SEZ up by 7.93%, TCS up by 0.88% and Coal India up by 0.31%. On the flip side, Lupin down by 3.89%, Reliance Industries down by 2.63%, Hero MotoCorp down by 2.56%, ICICI Bank down by 2.47% and Mahindra & Mahindra down by 2.21% were the top losers.

Meanwhile, international rating agency Moody’s Investors Service in its latest report has said that food price inflation will remain moderate in the near term aided by larger than average monsoon rainfall and contributing to keeping headline inflation within or close to target this year, but implementation of the 7th Pay Commission award could stoke prices.

Moody’s said that there is upside risks related to the implications of the rise in public sector wages with the implementation of some of the Pay Commission’s recommendations. However, the less accommodative monetary policy stance at present than in 2009-13, when the RBI’s policy interest rates were well below inflation, mitigates these risks. Further it said higher wages boost consumption significantly, but inflationary pressures could rise. When the full 7th Pay panel recommendations are implemented, further inflationary pressure could arise as a consequence of the increase in housing allowances.

The government has notified 2.57 time hike in basic salary of 1 crore government employees and pensioners as per the 7th Pay Commission recommendations, consequently the pay hike has been made effective from January 1, 2016. The RBI in its bi-monthly monetary policy too had said it expects some upside risk to 5 per cent inflation target by March 2017 mainly on account of the 7th Pay Commission award and maintained status quo on key rates, citing upside risks to the Reserve Bank’s inflation target.

The CNX Nifty traded in a range of 8,690.10 and 8,564.60. There were 7 stocks advancing against 44 decliners on the index.

The top gainers on Nifty were Adani Ports & Special up by 7.45%, Bank of Baroda up by 1.01%, TCS up by 0.97%, HCL Tech up by 0.88% and Zee Entertainment up by 0.70%. On the flip side, Grasim Industries down by 7.28%, ACC down by 4.39%, Idea Cellular down by 4.27%, Ambuja Cement down by 4.07% and Lupin down by 3.96% were the top losers.The European markets were trading in red; UK’s FTSE 100 decreased 7.88 points or 0.12% to 6,843.42, Germany’s DAX decreased 37.09 points or 0.35% to 10,655.81 and France’s CAC decreased 12.47 points or 0.28% to 4,455.60.

Asian equity markets showed a mixed performance on Wednesday, with traders eyeing moves in oil prices ahead of a flurry of Chinese data later in the week. Chinese shares ended lower as investors awaited industrial output, fixed asset investment and retail sales data due Friday. Japanese shares fell as the dollar weakened against the yen and investors moved to the sidelines ahead of a public holiday in Japan on Thursday. Investor reaction to better-than-expected core machinery orders data was muted. Reports showed that Core machine orders surged 8.3 percent in June from the previous month after falling for two straight months. Meanwhile, Hong Kong stocks touched a fresh eight-month high on Wednesday, before slipping back, as yield-hungry investors continued to hunt for bargains.