Indian markets suffer sharp selling under global pressure; Sensex ends below 27700 mark

Sentiments in the local markets worsened as lack of significant upside triggers on the domestic front and discouraging developments from the global front continue to dissuade investors from Indian equities. The session was marred by panic selling in equity bourses across the globe 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. On the domestic front, sentiments remained dismal on the report that Industrial production 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.  Markets participants remained on the sidelines and refrained from any buying activity ahead of monthly inflation data based on consumer price index (CPI) for September due later in the day and wholesale price index (WPI) due on Friday. Besides, the proposed investigation of investment through P-Notes and weakness in the rupee against the dollar too dampened sentiment. Indian rupee weakened by 39 paise to trade at 66.53 against the US dollar at the time of equity markets closing, due to fresh buying of the American currency by banks and importers. Further, special investigation team (SIT) on black money asked the SEBI to furnish the details of all those investing through participatory notes (P-Notes). This is the first time the government-constituted body has sought such massive amount of data, which includes the list of beneficial owners and transfer trials of investors taking the P-Note route to invest in domestic equity and debt markets. Investors failed to draw any sense of relief with the report that the government’s revenue collection in April to September -- the first half of the current fiscal -- saw indirect tax-mop up growing at an impressive 26 percent. The total direct and indirect tax collections at the end of September stood at Rs 7.35 lakh crore, almost half the Rs 16.26 lakh crore target for 2016-17.

On the global front, Asian markets ended lower on Thursday as investors turned cautious after China's September trade data showed a sharp decline in exports, raising fresh concerns about the health of the world's second-biggest economy.  China's September exports fell 10% from a year earlier, far worse than expected, while imports unexpectedly shrank 1.9% after picking up in August, suggesting signs of stability in the world's second-largest economy may be short-lived. Investors’ sentiments also weighed on minutes from the Federal Reserve’s September meeting, which showed several policy makers said a rate increase was needed relatively soon. Risky assets have had a torrid start to the final quarter of 2016 after recent outperformance as concerns around the outcome of US elections, the fallout from a ‘hard Brexit’ and a struggling German banking sector spread turmoil in markets. Meanwhile, stocks in Europe traded lower, with technology shares getting hit after Ericsson AB tumbled in the wake of a profit warning, while energy stocks followed a selloff in oil prices.

Back home, the local benchmarks got off to a gap down opening, in tandem with the somber sentiments prevailing in Asian markets. Thereafter, the indices couldn’t show any respite and continued their southward journey throughout the session as investors refrained from taking any bets ahead of earnings season, which will commence from this week as Tata Consultancy Services is scheduled to announce its September quarter result today and Infosys will announce its results tomorrow. The key gauges suffered a setback in afternoon trades as sharp selling emerged in the local markets immediately after a somber European market opening. Though the bourses recovered from the lows of the day but could not succeed in minimizing the huge losses by the end of trading session. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of about one and half percent to settle below the crucial 8,600 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by four hundred points and closed below the psychological 27,700 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around one and half a percent.

The market breadth remained pessimistic as there were 933 shares on the gaining side against 1931 shares on the losing side, while 116 shares remained unchanged.

Finally, the BSE Sensex declined by 439.23 points or 1.56% to 27643.11, while the CNX Nifty dropped 135.45 points or 1.56% to 8,573.35. 

The BSE Sensex touched a high and a low of 28042.62 and 27563.84, respectively and there were 6 stocks on gainers side against 24 stocks on the losers side on the index. The broader indices made a negative closing; the BSE Mid cap index ended lower by 1.50%, while Small cap index was down by 1.41%.

The sole gaining sectoral index on the BSE was IT up by 0.18%, while Bankex down by 2.19%, Realty down by 2.17%, Metal down by 1.91%, Consumer Durables down by 1.88% and Power down by 1.85% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.19%, ONGC up by 1.70%, Maruti Suzuki up by 0.49%, Cipla up by 0.22% and Hero MotoCorp up by 0.11%. On the flip side, Adani Ports &Special down by 4.68%, HDFC down by 3.83%, ICICI Bank down by 3.56%, Reliance Industries down by 3.49% and Tata Motors down by 3.17% were the top losers.

Meanwhile, Global Ratings agency S&P in its latest report titled 'Asia-Pacific steadies while China goes silent' has said that India’s Goods and Services Tax (GST) passage gives more weight to the country's target of 8 per cent economic growth projection in the next few years.   

The rating agency had recently said that India will clock a “steroid-free” growth of 8 per cent in coming years, adding that the GST passage is arguably the most important structural reform to date by the Modi government and will improve efficiency, cross-state trade and tax buoyancy.

S&P had stated in its ‘APAC Economic Snapshots - September 2016’ report, that India’s structural reforms agenda had maintained strong momentum and, most recently with the GST passage, should propel growth higher. It added that for India, they are still forecasting GDP growth at about 8 per cent over the next few years. Moreover, this is relatively high quality, steroid-free growth backed by a broadening consumption base.

Reserve Bank of India too gave a positive growth outlook for the near future and said the country's growth projections seem brighter than last fiscal's and the economy is likely to expand at 7.6 per cent in 2016-17. However, Inflation remains a risk, given the large weights on food, fuel, and other volatile items in the Reserve Bank of India’s target basket. In comparison, S&P has said that China has been nudged up as it raised the GDP growth forecast by about a quarter percentage point in 2016 and 2017 to 6.6 per cent and 6.4 per cent, respectively, and has kept its 2018 forecast roughly unchanged at 6.1 per cent.

The CNX Nifty traded in a range of 8,681.55 and 8,541.35. There were 11 stocks in green against 40 stocks in red on the index.

The top gainers on Nifty were ONGC up by 1.99%, Infosys up by 1.96%, Maruti Suzuki India up by 0.54%, Cipla up by 0.37% and Hero MotoCorp up by 0.32%. On the flip side, Bank Of Baroda down by 4.88%, Adani Ports &SEZ down by 4.75%, Idea Cellular down by 4.70%, Aurobindo Pharma down by 4.06% and HDFC down by 3.99% were the top losers.

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.