Indian markets collapse on F&O expiry day; Sensex deposes over 200 pts

August series futures and options (F&O) contract expiry day turned out to be an extremely disappointing affair for the Indian markets as the local benchmarks capitulated to the unrelenting selling pressure amid extremely high volatility. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted into the negative territory despite getting off to a gap-up opening. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. German business sentiment unexpectedly declined the most in more than four years in August in a sign that companies are waking up to the consequences Britain’s decision to quit the European Union will have on the economy. Further, market participants across the globe are keenly awaiting signals on key policy rates from US Federal Reserve Chair Janet Yellen at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming. On the domestic front, sentiments were undermined by the private report indicating that India Inc is enduring its worst earnings drawdown of the last 20 years, burdened by weak growth, high interest costs with excessive private sector debt and over-capitalised balance sheets. Also raising anxiety among investors Reserve Bank Deputy Governor S. S. Mundra said the level of bad loans and restructured assets rose to 12%, while for the public sector banks it has jumped to 15.4% as of the June quarter. However, investors got some comfort with Goldman Sachs’ report that Indian economy is expected to clock 7.9 per cent growth in the current fiscal driven by better monsoon, government pay hike, key reforms and FDI inflows.

On the global front, Asian equity markets remained under pressure for most part of Thursday’s session, with the uninspiring lead from Wall Street overnight, muted performance by commodities and Fed Chair Janet Yellen's Jackson Hole address due on Friday all playing out in the minds of traders. China stocks declined as banks and property companies eased after the government imposed stricter rules on lending to head off growing risks in the financial system, while Japanese market succumbed to the yen's strength.

Back home, the local benchmark got off to a positive start in the morning trade as investors sentiments got buoyed after Commerce and Industry Minister Nirmala Sitharaman pitched for as much as 200 basis points or 2%, interest rate cut by RBI to help the cash-starved MSME sector. The key indices soon capitalized on the momentum and touched intraday highs in early morning session but the indices failed to hold onto the highs and drifted in to the negative territory in noon trades post weak European market opening. Thereafter, the indices barely managed to show signs of stabilizing as the downward drift halted only with the session’s close after suffering hefty losses. Finally the NSE’s 50-share broadly followed index Nifty, suffered a nasty over half percent laceration to settle below the crucial 8,600 support level, while Bombay Stock Exchange’s sensitive Index Sensex got obliterated by over two hundred points and closed below the psychological 27,900 mark. The broader markets though, managed to close with relatively smaller cuts, performing better than their larger peers. On the BSE sectoral space, the Metal and information technology (IT) pockets remained among top laggards in the space as they got lacerated by over a percent, while sectors like Consumer Durables and Auto too got pounded heavily in the session. However, the sectors like FMCG and Oil & Gas 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 224.03 points or 0.80% to 27835.91, while the CNX Nifty dropped 58.10 points or 0.67% to 8,592.20. 

The BSE Sensex touched a high and a low 28154.21 and 27803.24, 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 0.11%.

The top gaining sectoral indices on the BSE were FMCG up by 0.31% and Oil & Gas up by 0.29%, while Metal down by 1.43%, TECK down by 1.36%, IT down by 1.28%, Consumer Durables down by 0.83% and Auto down by 0.60% were the top losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 2.04%, ITC up by 1.24%, Axis Bank up by 0.47%, Dr. Reddys Lab up by 0.34% and Power Grid up by 0.30%. On the flip side, Adani Ports &Special down by 3.02%, Wipro down by 2.84%, Tata Steel down by 2.04%, Infosys down by 1.99% and HDFC down by 1.93% were the top losers.

Meanwhile, the India Meteorological Department (IMD) has stuck to its initial forecast of above normal rainfall this season as the La Nina phenomena, which gives a boost to Southwest Monsoon and was expected to give a good rainfall in September, has been delayed. IMD has made a forecast of 106 percent of the Long Period Average (LPA) with the model error of plus or minus four per cent.

IMD stated that as far as India is considered the El Nino which was harmful to the Indian monsoon has faded and reached a neutral level. In the initial stages they were expecting La Nina to start, but it has been delayed now. However, they refused to make any amends to the forecast. The La Nina was to start by August-September, but the cooling of ocean surface temperature is taking a longer time for the phenomenon to occur. As per the initial forecast, September was to receive excess rains due to this phenomenon.

El Nino is the unusual warming of sea-surface Pacific waters off the South American coast. La Nina is the positive phase of the El Nino and is associated with cooler than average sea surface temperatures. As per the IMD parameter rainfall between 96-104 percent of LPA is considered as normal rainfall, between 104-110 percent is considered as above normal and above 110 percent of LPA is considered as excess.

The CNX Nifty traded in a range of 8,683.05 and 8,583.65. There were 15 stocks advancing against 36 decliners on the index.

The top gainers on Nifty were BHEL up by 3.22%, BPCL up by 2.38%, GAIL India up by 2.09%, ITC up by 1.10% and HCL Tech up by 0.97%. On the flip side, Wipro down by 3.15%, Adani Ports &Special down by 2.89%, Idea Cellular down by 2.69%, Zee Entertainment down by 2.17% and Tech Mahindra down by 2.1% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 18.27 points or 0.27% to 6,817.51, Germany’s DAX decreased 83.79 points or 0.79% to 10,539.18 and France’s CAC decreased 27.37 points or 0.62% to 4,408.10.

Asian equity markets showed a mixed closing on Thursday, with Japanese stocks dropped as investors traded cautiously ahead of the US Federal Reserve's annual symposium in Jackson Hole, Wyoming, that starts later in the day. Federal Reserve Chair Janet Yellen will speak on Friday at the symposium and investors will keep a close eye on her remarks for clues about the outlook for US interest rates. Meanwhile, China stocks ended at their lowest in nearly two weeks as banks and property companies eased after the government imposed stricter rules on lending to head off growing risks in the financial system.