Indian markets reel under global pressure; Sensex slips below 26200 mark

Indian benchmarks carried forward their southbound journey for yet another session on Friday, as overall sentiment remained subdued after the US Federal Reserve chief indicated it may hike interest rates next month, leading to acceleration in capital outflows by foreign funds. Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) have already sold equity shares worth over $1 billion in the past few trading days. Prospects for a rate hike next month also got a boost from data on Thursday showing first-time applications for US unemployment benefits tumbling to a 43-year low last week and housing starts surging to a nine-year high in October. Besides, the rupee taking a sharp plunge of 32 paise to 68.14 against the dollar on Friday also dampened the market sentiments. Further, the demonetisation effect continue to weigh on the bourses as it started affecting not just demand but also the supply chain with cash crunch hitting the farmers. Prices of few key commodities have fallen considerably since the move was announced amid drying up of demand. Also, fears have risen regarding production of the key commodities as farmers are not getting enough cash to buy seeds for winter crops. However, downside remained capped with NITI Aayog Vice-Chairman Arvind Panagariya’s statement that India can become a $10 trillion economy in the next 15 years, like China did in last one and a half decade. He said there is much scope for India to benefit from Chinese experience in the manufacturing sector and make the country into a robust & steady economy. Meanwhile, sugar stocks moved higher in otherwise range bound market on the report that India’s sugar production has increased marginally by nearly two per cent to reach 7.87 lakh tonnes compared to last year, mainly on account of early crushing in states like Uttar Pradesh and Karnataka. On the flip side, IT stocks continued their southward journey for third straight day after Nasscom revised IT sector’s growth forecast downwards to 8-10 per cent this year, as its biggest members such as TCS, Wipro, Cognizant and Infosys struggle to grow faster because of an uncertain environment. Also, Gems and jewellery stocks too extended their losses one more trading sessions after the Government of India announced its decision to cancel the legal tender character of high denomination bank notes of Rs 500 and Rs 1,000 issued by the central bank.

On the global front, Asian equity markets ended on a mixed note on Friday, as concerns that emerging markets will face capital outflows continued to haunt investors. Sentiments took a hit after Federal Reserve Chair Janet Yellen signaled the U.S. central bank is close to raising interest rates. China stocks declined as energy and transport shares shed some recent gains, causing an end to the main indexes' five-week winning streak. However, Japanese shares ended higher as the yen continued to weaken, hitting a six-month low against the dollar, on the back of upbeat US data. US consumer prices recorded their biggest increase in six months in October on rising gasoline costs and rents, suggesting a pickup in inflation that potentially clears the way for the Federal Reserve to raise interest rates in December. Moreover, all the European counterparts were trading in the red, with major indices like CAC and FTSE all witnessing cut of around half a percent.

Back home, the benchmark got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. However, the key indices soon capitalized on the momentum and touched intraday highs in noon session but the indices failed to hold onto the highs and once again slipped to lower levels in afternoon trades, tracking weak trade in European markets. Finally the NSE’s 50-share broadly followed index Nifty, registered single digit losses to settle below the crucial 8,100 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by less than seventy points and closed above the psychological 26,100 mark. Moreover, the broader markets showed some resilience and settled on a positive note, outperforming their larger peers by quite a margin.

The market breadth remained optimistic as there were 1328 shares on the gaining side against 1253 shares on the losing side while 166 shares remained unchanged.

Finally, the BSE Sensex declined 77.38 points or 0.30% to 26150.24, while the CNX Nifty dropped 5.85 points or 0.07% to 8,074.10. 

The BSE Sensex touched a high and a low of 26349.02 and 26106.78, respectively and there were 14 stocks on gainers side against 16 stocks on the losers side on the index.

The broader indices made a positive closing; the BSE Mid cap index ended lower by 0.61%, while Small cap index was up by 0.25%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.45%, Realty up by 1.26%, Power up by 1.22%, PSU up by 0.96% and Auto up by 0.82%, while Consumer Durables down by 1.26%, Metal down by 1.19%, FMCG down by 0.96%, Bankex down by 0.60% and TECK down by 0.56% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 4.58%, Sun Pharma up by 2.62%, Bharti Airtel up by 2.24%, Hero MotoCorp up by 1.97% and Mahindra & Mahindra up by 1.59%. On the flip side, Tata Steel down by 2.00%, ITC down by 1.92%, GAIL India down by 1.76%, HDFC Bank down by 1.47% and Adani Ports &Special down by 1.25% were the top losers.

Meanwhile, in larger move to attract more overseas investments, Reserve Bank of India (RBI) has expand the list of eligible debt instruments for foreign portfolio investors (FPIs) to put their money in unlisted corporate debt securities as well as securitised debt instruments. FPIs can invest in any kind of debt instrument; provided the residual maturity of the paper is three years and the proceeds are not used in real estate.

As per the RBI circular, FPIs can invest in unlisted corporate debt securities in the form of non-convertible debentures/bonds having a minimum residual maturity of three years. However, investments in securitised debt instruments would not require having minimum three-year residual maturity. The apex bank added that FPIs would collectively be able to invest a maximum of Rs 35,000 crore in these instruments and that this Rs 35,000-crore limit would be a part of the overall limit that FPIs have to adhere to for investment in domestic corporate bonds.

The step was first announced in the Union Budget 2016-17. Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs 35,000 crore within the extant investment limits prescribed for corporate bond from time to time, which currently is Rs 2,44,323 crore and FPIs have utilised around 71 per cent of that limit, which amounts to slightly over Rs 1.68 lakh crore.

The CNX Nifty traded in a range of 8,128.95 and 8,048.30. There were 28 stocks in green against 23 stocks in red on the index.

The top gainers on Nifty were NTPC up by 4.41%, Eicher Motors up by 3.47%, Sun Pharma up by 2.65%, Bharti Airtel up by 2.04% and Hero MotoCorp up by 2.04%. On the flip side, Zee Entertainment down by 2.83%, Asian Paints down by 2.01%, Tata Steel down by 1.97%, Bharti Infratel down by 1.91% and GAIL India down by 1.91% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 43.41 points or 0.64% to 6,751.30, Germany’s DAX decreased 26.46 points or 0.25% to 10,659.08 and France’s CAC decreased 24.18 points or 0.53% to 4,503.59.

Asian equity markets ended on a mixed note on Friday, as concerns that emerging markets will face capital outflows continued to haunt investors. With bond yields rising in developing economies and the dollar gaining ground on signs of economic progress amid expectations for higher inflation and interest rates in the US, the outlook for emerging market assets seems to be far more uncertain now. China stocks slid as energy and transport shares shed some recent gains, causing an end to the main indexes' five-week winning streak. Share prices of property developers slipped after National Bureau of Statistics data pointed to slowing growth in property prices in top Chinese cities. Meanwhile, Japanese shares ended higher as the yen continued to weaken, hitting a six-month low against the dollar, on the back of upbeat US data and hawkish comments from Federal Reserve Chair Janet Yellen. While dismissing speculation that she may resign due to criticism from President-elect Donald Trump, Yellen on Thursday stressed that future interest rate hikes will likely be gradual.