Post session - Quick review

The penultimate day of the April F&O series remained range-bound with benchmark indices witnessing bout of volatility during the noon session and suffering sharp plunge after the rating agency S&P lowered the outlook on India's sovereign rating to negative from stable, though the agency retained the sovereign rating at BBB- for the time being but the outlook revision raised fears of a possible downgrade if growth is hit due to the absence of fiscal and policy reforms. The markets that were finding it difficult to move up showed a knee-jerk reaction to the news and slumped all of a sudden.

Earlier the day started on a flat not under a mixed global set-up as the US markets closed mixed and the Asian markets despite some good earnings from the US showed sideways trend. However, the domestic indices despite come choppiness tried hard to keep their heads above the water before the announcements by the S&P. The mood was subdued since morning as the IT major Wipro reported slightly lower than expected numbers coupled with forecast of a muted revenue growth for its key IT services unit due to a fragile global economy.  Its IT services unit reported sales of $1.54 billion in January-March, rising just 2 per cent from the December quarter. The whole IT sector that has moved higher in last session came under pressure and suffered profit booking.

It was the buzz of divergent view of the other global ratings agency Moody’s that helped the markets bounce back. It was said that the rating agency has re-affirmed the Indian rating at Baa3, and kept the outlook stable‎. However, later a clarification from the agency came that they have not issued any new statement on India’s sovereign rating and outlook and that might have restricted the Indian markets returning to green in the last. The government, however, said there was no cause for panic, finance minister Pranab Mukherjee stated that the situation may be difficult, but we will be surely able to overcome it.

Back on street though, the trade remained rangebound but lots of sectors that have been moving higher in last couple of days suffered selling pressure and rollover of position was witnessed ahead of the F&O series expiry. Weighed down by the performance of Wipro, IT sector plunged along with consumer durables and PSU stocks, while defensive sector FMCG along with healthcare and auto were the only gainers. Broader markets that suffered in last session, once again underperformed the benchmarks despite a good show in the beginning.

The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1090:1630 while 132 scrips remained unchanged. (Provisional)

The BSE Sensex lost 36.52 points or 0.21% and settled at 17,170.77. The index touched a high and a low of 17,249.61 and 17,019.24 respectively. 14 stocks advanced against 16 declining ones on the index (Provisional)

The BSE Mid-cap index lost 0.52% while Small-cap index was down 0.53%. (Provisional) On the BSE Sectoral front, FMCG was up 0.55% and Auto up 0.23% were the only gainers while Consumer Durables down 1.57%, PSU down 1.48%, Power down 1.45%, Realty down 1.37% and IT down 1.31% were the top losers.

There top gainers on the Sensex were Bharti Airtel up 2.17%, Sterlite Industries up 1.94%, Maruti Suzuki up 1.65%, Hero MotoCorp up 1.45% and Tata Power up 1.10% while, Wipro down 7.21%, GAIL India down 3.53%, BHEL down 2.61%, TCS down 1.74% and ONGC down 1.53% were the top losers in the index. (Provisional)

Credit ratings agency, Standard & Poor (S&P) has revised India’s economic outlook to negative. The reason cited for the downgrade is the large fiscal deficit, low expectations of economic reforms and a slowing down of GDP growth. The ratings agency has slashed its outlook on India’s long-term rating to negative from stable and affirmed its lowest investment grade rating of BBB (-). However, India was earlier rated at BBB levels by the agency.

S&P has further gone ahead and said that there is at least one-in-three likelihood of a ratings downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting (in the next two years). The reforms that the credit ratings agency is referring to is reducing fuel and fertiliser subsidies, introducing a nationwide goods and services tax, and easing of restrictions on foreign ownership of various sectors such as banking, insurance, and retail sectors.

S&P has also warned that government's policy reversals may diminish FIIs confidence. The rating agency has pegged India’s GDP growth at 5.3% in 2012-13 as compared to the Indian government’s expectation of over 7%. The agency is also not confident about the government achieving control over fiscal deficit. The fiscal deficit is targeted at 5.1% of GDP for the FY’13 and stood at 5.9% of GDP in FY’12, which is one of the highest amongst emerging economies.

On a slightly more positive note it has stated that India's favorable long-term growth prospects and high level of foreign exchange reserves support the ratings, but they are restrained by large fiscal deficits and debt, as well as its lower middle-income economy.

The government is of the opinion that the rating outlook change was not unanticipated and the good thing is that India's rating has not been downgraded. Moody's has a Baa3 rating on India, while Fitch rates India BBB (-). Both are also the minimum investment grade ratings, one step above so-called junk status. Moody's in December issued a stable outlook for India. 

India VIX, a gauge for market’s short term expectation of volatility lost 1.61% at 18.94 from its previous close of 19.25 on Tuesday. (Provisional)

The S&P CNX Nifty lost 21.15 points or 0.40% to settle at 5,201.50. The index touched high and low of 5,236.10 and 5,160.65 respectively. 16 stocks advanced against 34 declining ones on the index. (Provisional)

The top gainers on the Nifty were Hero MotoCorp up 2.34%, Sterlite Industries up 2.22%, Sesa Goa up 2.08%, Maruti Suzuki up 1.76% and Bharti Airtel up 1.71%.On the other hand, Wipro down 6.99%, Reliance Power down 3.95%, GAIL India down 3.43%, Siemens down 2.64% and IDFC down 2.62% were the top losers. (Provisional)

The European markets were trading in green, with France's CAC 40 up 1.61%, Germany's DAX up 1.29% and Britain’s FTSE 100 up 0.22%.

Sentiments across the Asian region remained cautious and Asian counters snapped the day’s trade on the mixed note on Wednesday as investors awaited key policy meetings at the central banks of the United States and Japan this week. The US central bank is likely show that it is slightly more upbeat on the economy but in little hurry to raise borrowing costs, although investors wishing for clues on the prospect of a further monetary easing may be disappointed. While Japanese central bank will make its next rate decision on Friday, with market-players hoping for more easing measures to kick-start the stuttering economy, which is struggling to recover from last year's March 11 disasters. The BoJ has this year already pledged tens of billions of dollars to help businesses but economic growth remains anemic.

Meanwhile, Chinese benchmark garnered 0.75 percent, as property developers gained on expectations of further easing policies from the government while start-up companies listed on the ChiNext board rebounded after recent sharp losses while, Japanese Nikkei advanced about a percentage point, snapping recent losses, as investors cheered strong US corporate results from the likes of Apple.