Benchmarks kickoff new F&O series on a pessimistic note

Wary investors, hesitant to carry large positions ahead of a speech by Federal Reserve chairwoman Janet Yellen that may shed light on the US interest-rate outlook, turned sellers on Friday, sending the frontline indices southward for the second consecutive day. The day was the first day of new F&O series and normally this day heavy build up of long positions are observed, but fall in the frontline indices indicated that some FIIs and DIIs were shedding their positions. Anxiety among the market participants also increased by the report that India Inc's overseas borrowings fell by 44 percent to $1.2 billion in July this year as against $2.14 billion in the same period a year ago, indicating slowdown in capital expenditure (capex) plans by many major firms.  Indian firms raised $183.7 million via approval route, while rest $1.02 billion was raised by way of automatic channel. Also, India Meteorological Department (IMD) in its latest monsoon update said that for the country as a whole, cumulative rainfall during this year's monsoon so far (till 24 August 2016) was 2% below the long period average (LPA), adding pessimism among the local investors.

Market participants failed to drew any solace with the RBI's package of measures for the development of fixed income and currency markets.  The central bank has decided to enhance the aggregate limit of partial credit enhancement (PCE) provided by banks, permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds and encourage credit supply for large borrowers through market mechanism. RBI has allowed banks to issue issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing. Foreign Portfolio Investors will be given direct access to NDS-OM to ease the process of investment in debt securities.

Meanwhile, some buying was observed in selected jewellery stocks after the report that exports of gems and jewellery grew 11.7 per cent to $11.4 billion during the first four months of the current fiscal, driven largely by demand in major markets such as the US. Shares of credit rating agencies like ICRA, CRISIL and Credit Analysis and Research (CARE) rallied on the hopes that rating firms may get more business due to the RBI’s new norms on corporate bond markets. In scrip specific development, Auto major Tata Motors jumped in final hour of trade as the company reported consolidated revenue of Rs 67,056 crore in Q1FY16 as against Rs 61,510 crore for the corresponding quarter last year, driven by strong sales volume growth in all regions for Jaguar Land Rover (JLR) and continued growth in M&HCV and LCV segments. Moreover, JB Chemicals & Pharmaceuticals rallied and hit its lifetime high on the BSE, after the company reported a strong 26% year on year jump in consolidated net profit at Rs 49.85 crore for the quarter ended June 30, 2016.

On the global front, Asian markets ended mixed on Friday, with investors preferring to sit on the sidelines ahead of US Federal Reserve Chairman Janet Yellen's speech for cues on the timing of the next policy rate hike. Trading volumes and momentum also faded in the backdrop of slumping commodities, weak demand and overcapacity in emerging economies.  Japanese shares hit three-week lows as the yen firmed up against the dollar and an official report showed Japan's consumer prices dropped for the fifth straight month in July due mainly to declining crude oil prices.

Back home, the local benchmarks got off to an optimistic opening, shrugging the sluggish sentiments prevailing in Asian markets post weak closing of US markets overnight. However, the indices slipped into the negative territory in late morning trade and even went on to test important psychological 27,700 (Sensex) and 8,550 (Nifty) levels in afternoon trade. However, some short covering in the dying hours of trade ensured that the bourses snap the session with moderate cuts.  Finally the NSE’s 50-share broadly followed index Nifty, took a cut of around quarter percent to settle below the crucial 8,600 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over fifty points and closed below the psychological 27,800 mark.

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 declined by 53.66 points or 0.19% to 27782.25, while the CNX Nifty dropped 19.65 points or 0.23% to 8,572.55. 

The BSE Sensex touched a high and a low 27935.88 and 27696.99, respectively. The broader indices made mixed closing; the BSE Mid cap index ended up by 0.17%, while Small cap index was lower by 0.12%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.46%, Oil & Gas up by 0.70% and Auto up by 0.62%, while IT down by 1.25%, Capital Goods down by 1.24%, Realty down by 1.15%, TECK down by 0.98% and Bankex down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.01%, GAIL India up by 1.61%, Asian Paints up by 1.51%, Reliance Industries up by 1.44% and Cipla up by 0.88%. On the flip side, Wipro down by 3.00%, Larsen & Toubro down by 2.02%, Adani Ports &Special down by 1.75%, Infosys down by 1.52% and SBI down by 1.34% were the top losers.

Meanwhile, domestic rating agency, Indian Credit Rating Agency (ICRA) in its latest report has estimated the Gross Domestic Product (GDP) growth to remain flat at 7.2% in the June quarter 2016 under the Gross Value Added (GVA) calculation. This growth will be lower than the GDP notched up in the March quarter at 7.4%. Further, it stated that pick-up in the industrial sector will help offset the decline in service and agriculture and allied activities which will help the economy to grow, the estimation for pick-up in industrial growth is 7.1% in June 2016, up from 6.7% a year ago.

The report anticipates real manufacturing growth to improve to 8% from 7.3% a year ago, supporting a pick-up in industrial growth. Besides, it said that growth of power generation improved sharply to 9% from 2.3% a year ago, led by a pick-up in thermal electricity generation growth which jumped to 13% from a paltry 1% in the corresponding period last fiscal year. Further, it stated that corporate earnings for Q1 suggest the full impact of increase in commodity prices is yet to be felt in the current fiscal. As a result, earnings growth has been higher than revenue growth, and is also likely to have exceeded the volume trend revealed by the index of industrial production.

The rating agency also expects the pace of growth of agriculture, forestry and fishing to ease to 2.2% from 2.6%. This is despite the boost from aggregate rise in production of rabi crops (led by wheat) even after drought-like conditions that prevailed in Q1 over most parts of the country. Service sector growth is likely to report only 8.5% growth, down from 8.8% a year ago, following the moderation in expansion of bank deposits and credit and lead indicators of trade such as air cargo traffic and railway revenue from freight.

The CNX Nifty traded in a range of 8,622.95 and 8,547.55. There were 21 stocks advancing against 30 decliners on the index.

The top gainers on Nifty were Tata Motors - DVR up by 5.42%, Tata Motors up by 4.13%, Bharti Infratel up by 1.81%, Asian Paints up by 1.55% and Reliance Industries up by 1.37%. On the flip side, Wipro down by 2.78%, HCL Tech down by 2.39%, Bank of Baroda down by 2.13%, Adani Ports and Special Economic Zone down by 2.01% and Larsen & Toubro down by 1.85% were the top losers.

The European markets were trading mostly in red, Germany’s DAX decreased 14.88 points or 0.14% to 10,514.71 and France’s CAC decreased 2.48 points or 0.06% to 4,404.13, while UK’s FTSE 100 increased 2.82 points or 0.04% to 6,819.72.

Asian equity markets made a mixed closing on Friday, as investors awaited Fed Chair Janet Yellen's Jackson Hole speech later in the day for clues to the timing of the central bank's next rate increase. Japanese shares hit three-week lows as the yen firmed up against the dollar and an official report showed Japan's consumer prices dropped for the fifth straight month in July due mainly to declining crude oil prices. Core consumer prices fell 0.5 percent in July from a year earlier, marking the biggest fall in more than three years. Meanwhile, Chinese shares ended flat as signs of cooling in the housing market as well as receding expectations of aggressive monetary easing dragged down property stocks.