Benchmarks end a lackluster session with modest cut; Nifty ends below 8750 mark

Wednesday turned out to be a weak day for the Indian equity indices, which got pounded by over quarter percentage on feeble global cues. Domestic sentiment was hit as US equities ended lower in wake of a report that the European Central Bank could start winding down its quantitative-easing program ahead of schedule. Through, the domestic indices ended the session in negative territory, it was more or less stable day as the indices remained in tight range below neutral line with minute losses for most part of the session as a drop in Banking, information technology (IT) and Oil & Gas counters were offset by some gains in Realty, Metal and Auto stocks.  Good buying was witnessed in select mid-cap and small-cap stocks. Steel stocks edged higher after the government extended the minimum import price (MIP) on 66 steel products by another two months to protect the industry against cheap imports. Telecom stocks remained on buyers' radar on the reports that spectrum auction received additional bids worth Rs 3,100 crore on the third day to take total commitments to Rs 59,981 crore, leaving two-thirds of total quantum of on-offer airwaves unsold as bidders stayed away from high-cost 700 Mhz and 900 Mhz bands. Further, Tyre and Paints stocks too remained in focus on expectation of healthy earnings growth for the quarter ended September 2016. Investors got some disappointment with slower growth in the services sector in September as pace of new orders moderated amid competitive pressure and unfavourable weather conditions. The widely tracked Nikkei India services Purchasing Managers Index (PMI) which tracks services sector companies on a monthly basis, stood at 52 in September, down from the 43-month high of 54.7 in the previous month of August 2016. Adding anxiety among market patients World Bank came up with report indicating that automation threatens 69 per cent of the jobs in India, while 77 percent in China. However, sentiments got some support as International Monetary Fund (IMF) in its latest assessment of global growth said India’s economy is recovering strongly, bumping up the country’s growth forecast for the current and next year as it warned of subdued global growth that could fuel protectionism. The IMF now expects the economy to expand 7.6% in 2016-17, up from its earlier projection of 7.4%. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 344.13 crore on October 04, 2016.

On the global front, the Asian markets ended mixed on Wednesday as comments from Federal Reserve officials strengthened expectations of a rate hike by the Fed within this year. On Tuesday, Richmond Fed President Jeffrey Lacker said there was a strong case for raising interest rates, while on Wednesday, in a speech in New Zealand, Chicago Fed President Charles Evans said he would be ‘fine’ with hiking rates by year-end if the data remained supportive. The regional markets were also rattled by a report flagging the possible withdrawal of the European Central Bank's bond buying program. However, Japanese market extended its gains for one more session, with export related stocks advancing on a weaker yen. Meanwhile, European markets declined in early trade as markets digested hawkish comments from US Federal Reserve officials. Sentiments remained subdued after IMF in its latest report indicated that  global economic growth will remain subdued this year following a slowdown in the United States and Britain's vote to leave the European Union.

Back home, after getting firm start, the local benchmarks slipped in to lower level in late morning session on account of profit-booking by funds and retail investors in frontline blue-chip stocks amid weak trade in other regional markets. However, losses were restricted in noon session and the indices traded in tight range throughout the remaining session, ending with moderate losses.  Finally, the NSE’s 50-share broadly followed index - Nifty declined by over quarter percent to settle below the crucial 8750 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over hundred points but managed to close above the psychological 28,200 mark. The broader markets outperformed benchmark indices as investors turned their focus on fundamentally sound mid-cap and small-cap stocks as valuations in large-cap stocks seem stretched after recent rally.

The market breadth remained optimistic, as there were 1745 shares on the gaining side against 1135 shares on the losing side, while 124 shares remained unchanged.

Finally, the BSE Sensex declined by 113.57 points or 0.40% to 28220.98, while the CNX Nifty dropped 25.20 points or 0.29% to 8,743.95. 

The BSE Sensex touched a high and a low of 28477.65 and 28188.90, respectively and there were 11 stocks on gainers side against 19 stocks on the losers side on the index. The broader indices made a positive closing; the BSE Mid cap index ended higher by 0.50%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Realty up by 1.69%, Metal up by 0.69%, Auto up by 0.35%, FMCG up by 0.29% and Power up by 0.28%, while Bankex down by 0.78%, IT down by 0.56%, TECK down by 0.38%, Oil & Gas down by 0.33% and Consumer Durables down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.59%, Asian Paints up by 1.39%, Hindustan Unilever up by 1.32%, NTPC up by 0.63% and SBI up by 0.50%. On the flip side, ONGC down by 2.56%, Axis Bank down by 2.03%, Bajaj Auto down by 1.28%, Hero MotoCorp down by 1.17% and Mahindra & Mahindra down by 1.16% were the top losers.

Meanwhile, India's newly appointed Monetary Policy Committee (MPC), in its first meeting, decided to cut the policy rates under the liquidity adjustment facility (LAF) by 25 basis points to 6.25 per cent from 6.5 per cent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.

All the six members of MPC were in favour of the rate cut, the Reserve Bank of India (RBI) said that the decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17. The committee also retained the projection of growth of real gross value added (GVA) for 2016-17 at 7.6 per cent, with risks evenly balanced around it.

The RBI said that the committee expects strong improvement in sowing, along with supply management measures, which will improve the food inflation outlook. The sharp drop in inflation reflects a downward shift in the momentum of food inflation - which holds the key to future inflation outcomes -rather than merely the statistical effects of a favorable base effect.

The RBI also said that the momentum of growth is expected to quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission’s award. The accommodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors. It said that international financial markets were overwhelmed by the Brexit vote in Q2, with equity markets losing valuations worldwide, currencies plunging and turning volatile, and investors rushing for safe havens. Markets, however, recovered quickly and reclaimed lost ground in Q3, with a return of risk appetite propelling capital flows back into EMEs.

The CNX Nifty traded in a range of 8,806.95 and 8,731.40. There were 17 stocks in green against 34 stocks in red on the index.

The top gainers on Nifty were Tata Motors - DVR up by 2.29%, BPCL up by 2.17%, Ultratech Cement up by 1.90%, Eicher Motors up by 1.58% and Hindalco up by 1.46%. On the flip side, ONGC down by 2.36%, Axis Bank down by 2.31%, Idea Cellular down by 1.54%, Bajaj Auto down by 1.44% and M&M down by 1.44% were the top losers.

European markets were trading in red; Germany’s DAX declined 71.4 points or 0.67% to 10,548.21, UK’s FTSE 100 decreased 34.45 points or 0.49% to 7,039.89 and France’s CAC was down by 31.42 points or 0.7% to 4,471.67.

Asian equity markets ended mostly lower on Wednesday, as hawkish comments from Federal Reserve officials and speculation that the European Central Bank may start unwinding its quantitative easing program offset gains by energy companies.  On Tuesday, Richmond Fed President Jeffrey Lacker said there was a strong case for raising interest rates, while on Wednesday, in a speech in New Zealand, Chicago Fed President Charles Evans said he would be ‘fine’ with hiking rates by year-end if the data remained supportive. Japanese shares closed higher on a weaker yen. Investors shrugged off the Nikkei services PMI report, which showed that Japan's services sector activity contracted at the fastest pace since April 2014 in September. Hong Kong stocks posted modest gains in thin trading, lifted by energy shares with an overnight surge in oil prices and helped by some short covering. Markets in mainland China remain closed all week.