Benchmarks finish lower for second straight day; Sensex, Nifty manages to hold important psychological levels

Indian benchmark indices reversed their earlier gains to end lower on Thursday, as investors turned jittery after weak opening of European markets. All eyes are now on the European Central Bank, which will release the minutes of the latest policy meeting. Yesterday the local market came under pressure on the report that the European Central Bank could start winding down its quantitative-easing program ahead of schedule. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory to extend their southward journey for second straight day despite getting off to a gap-up opening. Sentiments remained subdued with International Monetary Fund’s (IMF’s) report that countries such as India have taken steps to reduce non-performing loans, but stressed that additional and more timely actions is needed. The IMF report also warned of rising medium-term risks and said global financial stability will now depend on how well financial institutions adapt to the new era of low growth and low interest rates. Also, India's service activity lost steam in September after touching a three year high last month. The seasonally adjusted Nikkei India Services Business Activity Index was down to 52.0 in September from August’s 43-month high of 54.7, the latest reading pointed to a slower rate of expansion that was moderate overall. Besides, weakness in Indian rupee against the dollar too dampened sentiments. The rupee depreciated by 16 paise to trade at 66.67 against the US dollar at the time of equity markets closing. However, losses remained capped as the RBI Governor Urjit Patel signaled a marked departure in policy approach from his predecessor’s unwavering focus on price stability. He said that the NPA situation is an important issue for the RBI in India. We will be dealing with it with firmness but also with pragmatism so that the economy does not feel any lack of credit. Some support also came in from report that foreign portfolio investors (FPIs) bought shares worth a net Rs 243 crore on October 05, 2016.

Market participants were seen piling up the position in Oil & Gas, PSU and Metal sector, while selling was witnessed in Realty, IT and Banking sector. In scrip specific development, banging the door Goa Carbon started the result session reporting a net profit of Rs 4.62 crore for the quarter ended September 30, 2016 (Q2FY17). The company had posted a net loss of Rs 2.96 crore in the same quarter year ago. Among other shares, Transformers and Rectifiers India (TRIL) jumped after the company said it entered into a joint venture (JV) agreement with Chinese firm Jiangsu Jingke Smart Electric Company (Jingke). On the flip side, Jindal Steel and Power (JSPL) declined after the company defaulted on interest repayments to its bondholders due on September 30, 2016. Those NCDs had a coupon rate of 9.8 per cent with about two-10 year maturities with banks, provident funds believed to be the investors.

On the global front, after trading on jolly note for most part of the session, most of the Asian markets ended in green on Thursday as a healthy US economic report and rising oil prices overnight bolstered investor optimism. September ISM non-manufacturing came in stronger than expected at 57.1. Factory orders also increased slightly in August, while the trade deficit in the US widened more than expected in August and mortgage applications increased 2.9% last week. Japan's Nikkei share average rose as a weaker yen boosted investors' risk appetite. Meanwhile, European equity benchmarks were having a choppy session on worries that the European Central Bank might wind down the pace of bond-buying before the end of its asset-purchase programme.

Back home, the local benchmarks started the session on optimistic note as investors were largely influenced by upbeat global cause after data showed US services sector activity rebounded to an 11-month high in September, an encouraging sign for economic growth. Thereafter, the frontline indices maintained their early gains throughout the morning trade, but weak start of European markets inserted anxiety among investors, which led the indices to lowest point of the session in the late afternoon trade. However, late short covering in blue-chip stocks ensured that local bourses go home with relatively small losses. Finally, the NSE’s 50-share broadly followed index - Nifty declined by over quarter percent and settled above the crucial 8,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex took a triple digit cut and closed above the psychological 28,100 mark. Moreover, the broader markets too succumbed to the selling pressure evident in their larger peers and plunged by around half a percent.

The market breadth remained pessimistic, as there were 1345 shares on the gaining side against 1529 shares on the losing side, while 129 shares remained unchanged.

Finally, the BSE Sensex declined by 114.77 points or 0.41% to 28106.21, while the CNX Nifty dropped 34.40 points or 0.39% to 8,709.55. 

The BSE Sensex touched a high and a low of 28328.56 and 28031.22, respectively and there were 8 stocks on gainers side against 22 stocks on the losers side on the index. The broader indices made a negative closing; the BSE Mid cap index ended lower by 0.56%, while Small cap index was down by 0.48%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.64%, PSU up by 0.18% and Metal up by 0.07%, while Realty down by 1.48%, Power down by 1.18%, IT down by 0.87%, TECK down by 0.78% and Bankex down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 3.48%, Reliance Industries up by 2.00%, Hindustan Unilever up by 1.42%, ONGC up by 0.73% and Maruti Suzuki up by 0.35%. On the flip side, NTPC down by 2.42%, Cipla down by 2.30%, Mahindra & Mahindra down by 1.90%, Power Grid down by 1.60% and ICICI Bank down by 1.58% were the top losers.

Meanwhile, giving a big push to infra, the National Highways Authority of India (NHAI) will be awarding projects worth Rs 1 lakh crore to construct about 6,500 km of highways during the current financial year.

NHAI Chairman Raghav Chandra said that the focus of NHAI is on development with a changed approach from output-based thinking to outcome-based thinking where Public Private Partnerships (PPP) projects will be not only for construction component but for service aspect in highways development.

The NHAI Chairman further said that though NHAI has not received the formal detailing from the contractors who have arbitral awards in their favour but NHAI has requisite funds for it. Chandra added that NHAI will be making payments for arbitral awards and likewise all other organisations for their respective place and we have certain operating procedures so that these can go through seamlessly and expeditiously.

The government in August allowed contractors to move to the new speedier arbitration process, approved release of 75 per cent of the amount in dispute against bank guarantee and provided for a conciliation board comprising independent domain experts in new contracts.

The CNX Nifty traded in a range of 8,781.15 and 8,684.65. There were 18 stocks in green against 33 stocks in red on the index.

The top gainers on Nifty were GAIL India up by 3.55%, BPCL up by 3.54%, Grasim Industries up by 2.26%, Reliance Industries up by 2.07% and Hindustan Unilever up by 1.42%. On the flip side, Bank of Baroda down by 2.89%, Cipla down by 2.31%, Power Grid down by 1.98%, NTPC down by 1.80% and M&M down by 1.80% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 28.22 points or 0.4% to 7,005.03, Germany’s DAX decreased 38.53 points or 0.36% to 10,547.25 and France’s CAC decreased 14.69 points or 0.33% to 4,475.26.

The Asian markets ended mostly higher on Thursday, with an overnight rally in oil prices and positive economic data from the US underpinning investor sentiment. The Institute of Supply Management reported on Wednesday that its non-manufacturing activity index surged to a reading of 57.1, hitting an 11-month high and well above market consensus of 53. Japanese shares extended gains for a fourth consecutive session as a weaker yen boosted investors' risk appetite. Hong Kong stocks ended higher, boosted by buying of Chinese shares as some investors built positions ahead of next week's reopening of the China market. However, gains remained capped ahead of the all-important US jobs report due on Friday, which could shed some light on whether there will be a rate increase at the Fed's policy meeting in early November.