Global tremors continue to assault local benchmarks

The carnage in Indian equity markets prolonged for yet another session as the frontline indices  continued to sway to the tune of gloomy global developments and deposed another half a percentage point on the last trading session of the week. The session was characterized by extreme volatility as nervous investors fretted over the potential outcome of the US presidential election, which has become too close to call, on November 8, 2016. Investors had largely priced in a Hillary Clinton win in the election, but nerves creeped in when news broke last week that the FBI was investigating new emails linked to the Democratic candidate. On domestic front, Sun Pharmaceuticals and Reliance Industries (RIL) have proved to be the main culprits for today's major fall. RIL, with the highest weightage on Sensex, got bludgeoned by close to two percent in the session after the Centre issued a penalty of $1.55 billion (approximately Rs 10,340 crore) on Reliance Industries for drawing and selling natural gas from the state-owned Oil and Natural Gas Corporation's idle block in the Krishna-Godavari basin. Further, Pharma stocks including Sun Pharmaceuticals edged lower after US prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that’s already reeling from public outrage over the spiraling costs of some medicines. Meanwhile, investors also overlooked reports that the GST Council fixed a four-slab tax structure for GST implementation. Four-tier GST tax structure of 5, 12, 18 and 28 per cent that aims to lower tax incidence on most goods and keep out essential items was decided by a high-powered council, a major breakthrough for rollout of the Goods and Services Tax regime from April 1 next year. According to Chief Economic Advisor Arvind Subramanian, the GST Council’s decision to peg the tax rate on items of mass consumption at 5 per cent will bring down prices and soften inflation.

On the global front, growing uncertainty about the outcome of the US presidential election has sent European and Asian shares falling again, while the market’s fear gauge jumped for the eighth day in a row. Stocks in Japan, Australia and South Korea saw a broad selloff as investors pondered the possible ramifications of a Donald Trump presidency, overshadowing important market data including Friday’s US employment figures for October. However, some comfort came from china as Chinese Finance Minister Lou Jiwei stated that the country is actively pushing forward reforms on property taxes as it overhauls its fiscal system. Any progress on expanding the tax would be a major development in China’s red-hot housing market.

Back home, the local benchmark got off to a somber opening, extending the downtrend for the third straight session as pessimistic sentiments prevailed across Asian markets. The selling pressure accentuated in the afternoon trades as investors took to across the board risk aversion. However, late short covering in blue-chip stocks ensured that local bourses go home with relatively small losses. Finally, the NSE’s broadly followed index Nifty, took a cut of about over half a percent to settle below the crucial 8450 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over one fifty points and closed below the psychological 27300 mark. On the BSE sectoral space, the Realty and Metal pockets remained among top laggards in the space as they got lacerated by over two percent, while sectors like Capital Goods, Consumer Durables and PSU too got pounded heavily in the session. On the flipside, FMCG and IT pocket managed to go home with moderate gains.

The market breadth remained pessimistic as there were 681 shares on the gaining side against 2224 shares on the losing side, while 115 shares remained unchanged.

Finally, the BSE Sensex declined by 156.13 points or 0.57% to 27274.15, while the CNX Nifty dropped 51.20 points or 0.60% to 8,433.75. 

The BSE Sensex touched a high and a low of 27498.91 and 27193.61, respectively and there were 12 stocks on gainers side against 18 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower by 1.34%, while Small cap index was down by 2.20%.

The few gaining sectoral indices on the BSE were FMCG up by 1.41%, IT up by 0.66% and TECK up by 0.31%, while Realty down by 2.44%, Metal down by 2.41%, Capital Goods down by 1.72%, Consumer Durables down by 1.60% and PSU down by 1.31% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 3.64%, Mahindra & Mahindra up by 1.02%, Wipro up by 0.91%, Hindustan Unilever up by 0.91% and ONGC up by 0.78%. On the flip side, Sun Pharma down by 7.41%, Dr. Reddys Lab down by 6.23%, Lupin down by 3.57%, Coal India down by 3.44% and Hero MotoCorp down by 2.86% were the top losers.

Meanwhile, In order to bring down coal imports at a faster rate, government said that power sector public sector units (PSUs) will follow 'zero coal imports' policy from the next fiscal onwards, this will also boost domestic coal production. The government has also set a target to produce 1.5 billion tonnes of coal domestically by 2020. Coal Ministry Secretary Anil Swarup has said that in the power sector, there will be zero coal imports by all the public sector entities by March 31 of this fiscal year and there will be no imports thereafter.

The Coal Secretary said that this year, they should be able to reduce imports by 15 million tones, as they have done a detailed analysis of how to handle imports and the strategy related to both power and non-power sector. Further, on private sector he said that to discourage coal imports by private sector, they are increasing the amount of coal which is available through e-auction. Since, e-auction prices have come down, the coal is available at a much cheaper rate. He added that with the firming up of international prices, chances increase that this coal (coal available through e-auction) would be picked up.

Regarding commercial mining, Swarup said the ministry is going in steps. The first steps have already been taken through allocations of coal mines to state governments. But in terms of offering mines to private sector for commercial purposes, he said the ministry is ‘working towards it’. He said that there has been a paradigm shift in the problem from a phase of supply shortage to a phase of demand shortage and this demand shortage was due to low generation of the generation companies at Plant Load Factor (PLF) not more than 59-60 percent. In a demand shortage scenario, the inventory benchmark for the power plants has come down to 15 days from 20-25 days and this has happened because coal is available.

The CNX Nifty traded in a range of 8,504.00 and 8,400.25. There were 17 stocks in green against 34 stocks in red on the index.

The top gainers on Nifty were HCL Tech up by 3.92%, ITC up by 3.14%, Tata Motors - DVR up by 1.25%, Wipro up by 0.97% and Hindustan Unilever up by 0.95%. On the flip side, Sun Pharma down by 7.08%, Dr. Reddys Lab down by 5.22%, Bharti Infratel down by 4.57%, Aurobindo Pharma down by 3.16% and Hero MotoCorp down by 3% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 74.88 points or 1.1% to 6,715.63, Germany’s DAX decreased 98.76 points or 0.96% to 10,227.12 and France’s CAC decreased 34.62 points or 0.78% to 4,377.06.

Asian equity markets ended mostly in red on Friday, as investors fretted over the potential outcome of next week's US presidential election and waited for cues from the US government's October jobs report due out tonight. The non-farm payrolls report is expected to show continued job growth and lower unemployment, bolstering the Fed's case to raise short-term interest rates next month. Investors ignored a private report, which showed that activity in Japan's services sector expanded for the first time in three months in October. Japanese shares tumbled on a firmer yen as polls showed an extremely tight race in the US presidential election. Chinese shares inched down but notched up its fourth straight week of gains as on some signs showing stability in world's second-largest economy.