Post Session: Quick Review

Today’s session turned out to be a disastrous day of trade for Indian equity markets. The frontline gauges ended the session with losses of around one and half percent on back of subdued global markets and weak macroeconomic data which dampened the sentiments. The benchmarks made a gap-down opening in early deals reacting to Industrial production data, which contracted once again for the month of August. IIP dipped 0.7 percent in August due to a slump in manufacturing and mining, in the manufacturing space, capital goods brought about the maximum fall. Foreign portfolio investors (FPIs) sold shares worth a net Rs 547.26 crore on 10 October 2016, as per provisional data released by the stock exchanges. Some selling crept as rupee was trading lower against the American currency at the Interbank Foreign Exchange market as the dollar strengthened overseas. The increased demand for the US currency from importers and the greenback’s gains against other currencies overseas after minutes of the Federal Reserve’s last meeting pointed at an interest rate hike this year, put pressure on the rupee.  Investors got jittery after China’s steel exports declined unexpectedly and the minutes of US Federal Reserve Open Market Committee indicated a strengthening case for a rate hike. Metal stocks were under pressure reflecting weakness in global metal prices after exports at the world's biggest metals consumer China, fell more than expected in the month of September. Investors are cautious ahead of the September-quarter results season. Investors remained cautious as India’s biggest outsourcer TCS will report its Q2 earnings scheduled later in the day. The street doesn’t expect India Inc’s to report blockbuster earnings for the September quarter but some see an improvement over the previous quarter.

On the global front, Asian markets ended mostly in red, Hong Kong shares fell after China’s September trade data showed a sharp decline in exports, raising fresh concerns about the trajectory of the world’s second-biggest economy and its currency the yuan. China’s September exports fell 10 percent from a year earlier, far worse than expected, while imports unexpectedly shrank 1.9 percent after picking up in August. European shares fell as underwhelming Chinese trade data knocked down mining stocks, while Standard Life and Aegon slid on broker downgrades.

The BSE Sensex ended at 27613.03, down by 469.31 points or 1.67% after trading in a range of 27563.84 and 28042.62. There were 5 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 1.47%, while Small cap index was down by 1.41%. (Provisional)

The top losing sectoral indices on the BSE were Realty down by 2.27%, Metal down by 2.09%, Bankex down by 2.09%, Power down by 1.94% and Consumer Durables down by 1.79%, while there were no gaining indices on the BSE sectoral front. (Provisional)

The top gainers on the Sensex were Infosys up by 1.89%, ONGC up by 1.31%, Maruti Suzuki up by 0.49%, Cipla up by 0.29% and Hero MotoCorp up by 0.18%. (Provisional)

On the flip side, Adani Ports & Special Economic Zone down by 4.72%, HDFC down by 4.07%, Reliance Industries down by 3.45%, ICICI Bank down by 3.36% and Tata Motors down by 3.04% were the top losers. (Provisional)

Meanwhile, the credit rating agency, CRISIL in its latest report has stated that a sharp decline in profitability and mounting losses could wipe out the revenue reserves of some of the public sector banks (PSBs) and hamper their near-term ability to pay interest on the bonds issued to meet Basel III norms. While government has committed capital support to PSBs, the coupon on additional Tier 1 (AT1) bonds can only be serviced through current year's profit or from revenue reserves and hence any capital infusion by government alone cannot improve the bank's ability to service coupon on these bonds.

As per the report, 14 PSBs have Rs 22,600 crore of AT1 bonds outstanding. As many as 13 of the 21 PSBs (taking the State Bank of India and its associates as a consolidated entity) reported losses for fiscal 2016, and almost half of them could do so again this fiscal. Apart from high probability of posting losses this fiscal, negative or low revenue reserves are likely to make six PSBs vulnerable. Of these, four have AT1 bonds outstanding, where continued losses could wipe out their revenue reserves and pose a challenge when it comes to coupon servicing and the other two have not issued any AT1 bonds so far.

Further, four other PSBs are also expected to post losses in the near term, but they have adequate revenue reserves to service coupon on AT1 bonds outstanding. However, their ability to continue to do so over the medium term will depend on a return to profitability. On the other hand, 11 banks are expected to report a profit in the near term or have sizeable revenue reserves despite weaker profitability, which would help them service coupon obligations on AT1 bonds over the medium term. But CRISIL did not name any bank in its report.

The CNX Nifty ended at 8571.55, down by 137.25 points or 1.58% after trading in a range of 8541.35 and 8681.55. There were 11 stocks advancing against 40 stocks declining on the index. (Provisional)

The top gainers on Nifty were ONGC up by 2.00%, Infosys up by 1.95%, Maruti Suzuki up by 0.57%, Cipla up by 0.40% and Hero MotoCorp up by 0.35%. (Provisional)

On the flip side, Idea Cellular down by 4.88%, Bank Of Baroda down by 4.75%, Adani Ports & Special Economic Zone down by 4.68%, Aurobindo Pharma down by 4.05% and Tata Power down by 4.02% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 42.58 points or 0.61% to 6,981.43, Germany’s DAX decreased 133.28 points or 1.27% to 10,389.79 and France’s CAC decreased 56.73 points or 1.27% to 4,395.51.

The Asian markets made a weak closing and barring the Chinese market all the indices in the region ended in red, with some even witnessing cuts of 1-1.5%. It was the concern of US Fed increasing rates in 2016 that led the soft start of the markets, after minutes of Fed's latest meeting indicated that though policy makers wanted more evidence of full employment and gains in inflation before feeling confident in raising rates, but the minutes also said a rate increase was in the cards relatively soon. Later, an unexpected drop in Chinese exports too spurred concern about the outlook for the global economy. China’s exports fell 10 percent in September from a year earlier, while imports declined 1.9 percent. Hang Seng lost the most, down by over one and half a percent, while the recovery in Yen dragged the Japanese market lower. However, the Chinese market itself managed a modestly positive close.