Southbound journey continues for second consecutive session; Sensex sinks over 500 pts

The carnage in Indian stock markets prolonged for yet another session as the benchmarks continued to correct further for the second-straight session on Tuesday amid rupee plunging by over 115 paise in last three trading days. Indian rupee extended fall for the third consecutive session to hit over four-and-a-half-month low on Tuesday as the American currency strengthened overseas. A weak rupee does not auger well for foreign inflows, as any depreciation in local currency eats into profits of foreign investors when they redeem their investments. FPIs have already sold Rs 3,175 crore worth of domestic stocks this month following a Rs 4,306 crore worth of selloff in the previous month. Furthermore, muted second quarterly earnings posted by some more bluechip companies as well as poor growth in factory output, also accelerated selling activity in the local markets. The industrial production (IIP) data was announced after market hours on November 11, showed that Industrial production grew a meagre 0.7% in September mainly due to poor show by manufacturing and mining sectors coupled with decline in capital goods output. Sentiments also remained somber with many agencies criticizing the government over demonetisation of Rs 500 and Rs 1,000 notes, saying the move has led to 'financial chaos' across the country as well as condemning that the decision was taken without proper planning or preparation. Also, the sudden decline in money supply and simultaneous rise in bank deposits post demonetisation is going to adversely impact consumption in the economy in the short term and may lead to a lower GDP growth.  Meanwhile, aviation stocks came under pressure with the government's decision to levy up to Rs 8,500 per flight on major routes to fund the regional air connectivity scheme. The levy amount would be for an entire flight and the price of each ticket could go up depending on the number of seats in that particular flight. Also, Gems & Jewellery stocks extended their losses on Tuesday after Prime Minister Narendra Modi hinted that his government may come out with more stricter measures to curb black money. The Central excise department has asked city’s top jewellers to immediately declare their stock and sale of the past four days.

On the global front, Asian markets ended mostly lower on Tuesday amid rising fears of a rate hike by the US Federal Reserve. Investors braced for higher inflation in the US amid expectations of fiscally expansionary polices under Donald Trump’s presidency. The risks of faster-than-expected Federal Reserve rate increases have dragged on emerging market assets, particularly equities and currencies, which have benefited from large capital inflows. Further, Chinese shares ended lower as investors await October FDI figures due out later in the day, while Japanese market ended marginally lower in choppy trade as investors took profits from sharp gains in the past few days, offsetting gains in banking stocks, which rose on better-than-expected half-year earnings. Meanwhile, European markets edged higher on Tuesday, as energy shares moved up, but technology shares lost ground.

Back home, the local benchmarks got off to a somber opening, extending the downtrend for the second 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. The indices barely managed to show signs of stabilizing in the session as the downward drift halted only with the session’s close after suffering gargantuan losses. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over two percent to settle below the crucial 8,150 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by five hundred points and closed above the psychological 26,300 mark. Moreover, the broader markets too succumbed to the selling pressure and closed with losses of over three percent. On the sectoral front, Realty, Automobile and Metal witnessed brutal assaults as they got clobbered by 5.13%, 5.07% and 4.75% respectively. While counters like Consumer Durables and FMCG too suffered severe pounding. The market breadth remained awful as there were 346 shares on the gaining side against 2354 shares on the losing side while 113 shares remained unchanged.

Finally, the BSE Sensex declined 514.19 points or 1.92% to 26304.63, while the CNX Nifty dropped 187.85 points or 2.26% to 8,108.45. 

The BSE Sensex touched a high and a low of 27344.85 and 26777.18, respectively and there were 10 stocks on gainers side against 20 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower by 3.91%, while Small cap index was down by 4.67%.

The sole gaining sectoral index on the BSE was IT up by 0.30%, while Realty down by 5.13%, Auto down by 5.07%, Metal down by 4.75%, Consumer Durables down by 3.48% and FMCG down by 2.68% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.91%, Wipro up by 1.51%, Dr. Reddys Lab up by 1.47%, ONGC up by 0.90% and TCS up by 0.81%. On the flip side, Tata Motors down by 9.88%, Tata Steel down by 7.80%, Asian Paints down by 7.41%, Maruti Suzuki down by 5.71% and Axis Bank down by 3.86% were the top losers.

Meanwhile, CBEC Chairman Najib Shah has said that the government will share the model GST law with the states, which has been redrafted after taking into account the comments of stakeholders. He further said that the Compensation law will also be shared with the states on November 16 detailing the procedure for making good revenue loss of states in the first five years of GST rollout.

The Centre and states have already decided on a four-tier GST rates-- 5, 12, 18 and 28 percent-- but is yet to decide on the issue of cross empowerment to avoid dual control. Differences arose with the states demanding control over 11 lakh service tax assessees, and the Centre proposing to do away with the states having exclusive control over all dealers up to an annual revenue threshold of Rs 1.5 crore -- an issue which was settled in the first meeting of the GST Council.

The Council has came up with two proposals -- horizontal division and vertical division options, 'Horizontal division' would mean taxpayers would be divided both for administrative and audit purposes based on a cut off turnover. Those with a turnover over Rs 1.5 crore would be administered both by the Centre and states, while those with below Rs 1.5 crore would be administered solely by the states. While, under the 'vertical division', taxpayers could be divided in a ratio which would balance the interest of the Centre and the state, both with respect to revenue and spread of numbers.

The CNX Nifty traded in a range of 8,288.55 and 8,093.20. There were 12 stocks in green against 39 stocks in red on the index.

The top gainers on Nifty were Bank of Baroda up by 8.35%, SBI up by 1.83%, TCS up by 1.77%, IDEA up by 1.50% and Dr. Reddys Lab up by 1.38%. On the flip side, Tata Motors down by 9.28%, Tata Motors - DVR down by 8.90%, Indusind Bank down by 8.45%, Grasim Industries down by 8.34% and Tata Steel down by 7.97% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 61.52 points or 0.91% to 6,814.70, Germany’s DAX increased 0.69 points or 0.01% to 10,694.38 and France’s CAC increased 16.71 points or 0.37% to 4,525.26.

Asian equity markets ended mostly in red on Tuesday on a rising dollar, falling oil prices and the extended weakness of the yuan that kept underlying sentiment somewhat cautious. China's yuan hit its lowest level in nearly eight years as the dollar remained strong on expectations of faster growth, higher US inflation and interest rates under President-elect Donald Trump. Chinese shares ended lower as investors await October FDI figures due out later in the day. Japanese shares ended marginally lower in choppy trade as investors took profits from sharp gains in the past few days, offsetting gains in banking stocks, which rose on better-than-expected half-year earnings.