Benchmarks end a disappointing day with over a quarter percent cut

Indian benchmark indices started the new week on a disturbing note as they went on to extend the declining streak for the second successive session as market participants resorted to hefty across the board position squaring. Investors turned cautious after Ministry of Finance said that Urjit Patel has been appointed as the new Governor of Reserve Bank of India (RBI). Urjit Patel is known for his hawkish view on inflation just like Raghuram Rajan whose term as the RBI governor ends on September 4, 2016. By naming Patel who is a deputy governor at the central bank as the new RBI governor, the government is sending signal to markets that there will be continuity of central bank's policies. Besides, weak trend in Asian stocks coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. Indian rupee was trading lower by 16 paise at 67.18 against the US dollar at the time of equity markets closing on Monday on higher demand for the American currency from importers and banks. However, investors got some comfort with Francis Gurry, director-general at the World Intellectual Property Organization stating that India can break into the top-25 rank in the next 10 years. Also, the global rating agency Moody’s Investors Service in its latest report said that it may consider India for a rating upgrade if the government is successful in introducing more growth enhancing economic and institutional reform. Policies like relaxation of thresholds for Foreign Direct Investment (FDI) and a change in the monetary policy framework that fosters credibility will contribute to more stable economic environment.

On the global front, Asian markets ended mixed on Monday as investors looked ahead to the Fed's meeting in Jackson Hole, Wyoming, for clues on timing for possible interest rate hikes. While the odds the Fed will raise borrowing costs in December climbed to 51 percent, traders are betting there’s only a 22 percent chance of tightening next month. However, Japanese market gained some traction on the hope that the Bank of Japan might cut rates further into negative territory at its next meeting in September in a bid to prop up the country's moribund economy. Meanwhile, European stocks traded mostly higher in early trade, even as miners and energy stocks succumbed to selling pressure in London amid weakness in the commodity space.

Back home, the local benchmarks got off to a sluggish opening in tandem with the pessimistic sentiments prevailing in Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The selling pressure accentuated in the early afternoon trades as investors took to across the board risk aversion. However, 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, declined by around thirty seven points to settle below the crucial 8,650 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex lost over ninety points and ended below the psychological 28,000 mark. On the BSE sectoral space, the information technology (IT) and Auto pockets remained among top laggards in the space as they got lacerated by around a percent, while sectors like Metal and Power too got pounded heavily in the session. However, defensive sectors like FMCG and Consumer Durables pocket managed to go home with moderate gains.

The market breadth remained pessimistic, as there were 1257 shares on the gaining side against 1456 shares on the losing side, while 206 shares remained unchanged.

Finally, the BSE Sensex slumped by 91.46 points or 0.33% to 27985.54, while the CNX Nifty dropped 37.75 points or 0.44% to 8,629.15. 

The BSE Sensex touched a high and a low 28143.28 and 27918.05, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.42%, while Small cap index was lower by 0.14%.

The top gaining sectoral indices on the BSE were FMCG up by 0.62% and Consumer Durables up by 0.23%, while IT down by 1.07%, TECK down by 0.90%, Auto down by 0.89%, Metal down by 0.63% and Power down by 0.54% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.94%, ITC up by 1.19%, HDFC up by 0.59%, Coal India up by 0.36% and Cipla up by 0.34%. On the flip side, Lupin down by 2.03%, TCS down by 2.02%, NTPC down by 1.92%, Sun Pharma down by 1.63% and Axis Bank down by 1.40% were the top losers.

Meanwhile, in order to restrict cheaper shipment coming from overseas market, the government is contemplating to impose a minimum import price (MIP) on aluminium import. The petition for the same is filed by domestic manufacturers like Vedanta, Nalco, Hindalco and Balco to the Ministry of Finance, Revenue Department. Domestic manufacturers sought expeditious imposition of import restrictions like MIP on aluminium import on lines of the once imposed on steel.

The aluminium industry said that the primary aluminium producers have incurred huge losses of Rs 4025 crore in 2015-16 fiscal, which was substantially higher that losses Rs 1480 crore in fiscal year 2014-15. The country is facing a situation wherein 50% of its demand is met through imports, particularly from China, where aluminium industry is subsidised by the Chinese government. Industry further said that the increasing imports have rendered less than 60% capacity utilisation of primary producers and creating immense threat for the domestic aluminium industry.

Vedanta CEO Tom Albanese said that discussions are on with states and the government to find a long-term solution so that supply chain for the aluminium business is actually a domestic supply chain. Currently steel industry has number of protection from imports and only about 15% of steel comes from imports whereas 50% of aluminium comes from imports in India. There is much greater import penetration in the aluminium sector as compared to steel sector.

Albanese further said that China has the world’s biggest unutilised aluminium production capacity and is exporting surplus aluminium amid weak domestic demand and if that Chinese capacity gets turned out with subsidised power then there will be a flood of new imported aluminium coming into Indian market. He said India had bauxite resources to produce aluminium and should use that instead of resorting to imports.

The CNX Nifty traded in a range of 8,684.85 and 8,614.00. There were 15 stocks advancing against 36 decliners on the index.

The top gainers on Nifty were Hindustan Unilever up by 2.12%, Zee Entertainment up by 1.48%, ITC up by 1.32%, BHEL up by 1.09% and Idea Cellular up by 1.01%. On the flip side, Grasim Industries down by 3.07%, Aurobindo Pharma down by 2.36%, Ambuja Cement down by 2.33%, Lupin down by 2.29% and ACC down by 2.14% were the top losers.

The European markets were trading mostly in green; Germany’s DAX increased 35.16 points or 0.33% to 10,579.52, France’s CAC increased 12.78 points or 0.29% to 4,413.30, while UK’s FTSE 100 decreased 23.26 points or 0.34% to 6,835.69.

Asian equity markets showed a mixed closing on Monday, as oil prices pulled back after surging dramatically in the last two weeks, with hawkish comments from another Federal Reserve official revived talk of a US rate hike as soon as September. Fed Chair Janet Yellen will speak at a meeting of global policy makers in Jackson Hole, Wyoming later this week, with investors looking for further clarity on the pace of future rate increases. Chinese shares fell as the yuan hit a two-week low against the dollar on global dollar strength. Meanwhile, Japanese shares eked out modest gains on a weaker yen after BOJ Governor Haruhiko Kuroda said there is ‘sufficient chance’ the central bank will add to its unprecedented easing at next month's policy meeting.