Sensex collapses on largely across the board risk aversion

It turned out to be a daunting session of trade for the Indian stock markets, which extended the southbound journey for second straight session on Thursday and gave up around a percentage points. The frontline gauges remained choppy through the day and drifted to lowest point in the session in the last leg of trade. After consolidating around the psychological 17,300 (Sensex) and 5,250 (Nifty) levels for last two trading sessions, the benchmark gauges got a breakdown and only found support around the 17,150 (Sensex) and 5,200 (Nifty) levels.

Domestic markets, after a sedate opening, failed to show any strength as sentiments remain bleak across the Asian region since investors pondered over the disappointing employment reports from the US and Euro-zone, which showed far fewer than expected jobs were added in April, intensifying concerns over slowing down global economic recovery.

On the domestic front, a survey showed India’s service sector activity grew in April thanks to a rise in new business, signaling a below-trend rate of expansion of services output. However, business optimism hit its highest level since last June. Meanwhile, the weakness in rupee persisted for yet another session after it declined to hit fresh four-month low of Rs 53.26 against the American currency as several factors including trade deficit and volatile inflows continued to put pressure on the Indian currency.

The rate sensitive counters like Automobile, Banking and Real Estate remained the top laggards in the session as they traded with over a percent cuts each. The weak sales numbers by some major Auto companies and the colossal over 7% collapse in Hero Moto on worries about the impact from the expiration of a state tax exemption it currently enjoys in Haridwar dragged the Auto index.

While the RBI, in order to strengthen risk management mechanism, lay out tighter norms for Indian banks under Basel III international accounting standards, which did not go down well with investors as they brutally pummeled the banking shares. The RBI’s recent Basel III guidelines mandate the banks over up-keeping of their total capital adequacy ratio at 9 percent, higher than the minimum recommended requirement of 8 percent.

Meanwhile, airline stocks like Kingfisher, Jet Airways and Spice Jet got bludgeoned by over four percent each after reports that the government is unlikely to take a decision on the 49% foreign direct investment in the ongoing Parliamentary session.

On the flipside, the gains in IT and TECk counters provided some support to the benchmarks. Besides, sugar stocks rallied with fervor after government removed the cap on sugar exports, placing the commodity under the open general licence category like wheat and rice.

On the global front, cues from Asian region remained sluggish with most markets ending weak. Sentiments in the region got undermined after the non-manufacturing (PMI) index in China indicated that the services sector activity moderated from March's ten-month high to hit 56.1 in April. Though the index stayed above the 50 level, which separates contraction and expansion however declining new orders kept investors worried.

On the other hand, the European markets traded on an encouraging note ahead of European Central Bank’s meeting amid expectations of further stimulus measures.

The NSE’s 50-share broadly followed index Nifty, plunged by a percent to settle below the psychological 5,200 support level while Bombay Stock Exchange’s Sensitive Index - Sensex sank by one hundred fifty points to finish above the crucial 17,150 mark. Moreover, the broader markets too finished on a bleak note with large cuts of around a percent in tandem with their larger peers.

The markets rose on good volumes of over Rs 1.14 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Wednesday, at over Rs 0.81 lakh crore. The market breadth remained pessimistic through the day as there were 1,055 shares on the gaining side against 1,719 shares on the losing side while 107 shares remained unchanged.

Finally, the BSE Sensex lost 150.72 points or 0.87% to settle at 17,151.19, while the S&P CNX Nifty declined by 50.75 points or 0.97% to close at 5,188.40.

The BSE Sensex touched a high and a low of 17,271.77 and 17,120.86 respectively. The BSE Mid cap and Small cap indices were down by 1.02% and 1.00% respectively.

The major gainers on the Sensex were Hindustan Unilever up by 2.02%, Wipro up by 1.93%, TCS up by 1.00%, BHEL up by 0.60%, and Infosys up by 0.53% while Hero MotoCorp down by 7.69%, Maruti Suzuki down by 3.06%, Tata Steel down by 3.00%, ICICI Bank down by 2.74% and SBI down by 2.54% were the major losers on the index.

The only gainers on the BSE sectoral space were IT up by 0.71% and TECk up by 0.37%, while Auto down by 2.43%, Metal down by 1.75%, Bankex down 1.74%, PSU down by 1.45% and Realty down by 1.43% were major losers on the BSE sectoral space.

Meanwhile, India’s service sector expanded slightly in the month of April. The HSBC PMI services index rose marginally to 52.8 in April as compared to 52.3 in March. Even though growth has been witnessed in the index, it continues to be below the trend. Inflationary pressures have continued in the month of April as well.

On a more positive note there has been an improvement in new orders which has extended the current period of expansion to three years. The expansion has also allowed service firms to add jobs for the second month in a row. Also survey respondents are significantly more optimistic about the outlook over the coming 12 months.

Inflation, however, has continued its rising trend with costs of input rising. Service providers also passed on the increased costs to clients by increasing output charges in April. Going forward inflationary pressures are expected to continue and the RBI has been advised caution if contemplating any further rate cuts. The recent rate cuts were termed as ‘premature’ and ‘too aggressive’ by the bank.

The bank had also come out with the manufacturing purchasing manager’s index yesterday which inched up to 54.9 in April, from 54.7 in March, showing a positive move after three months of declines.  Consequently, the HSBC composite output index (covering manufacturing and services) remained broadly unmoved at 53.8 in April.

The S&P CNX Nifty touched a high and low of 5,217.30 and 5,180.65 respectively.

The top gainers on the Nifty were Asian Paints up by 2.37%, HUL up by 2.32%, Wipro up by 2.05%, BPCL up by 0.94% and TCS up by 0.74%.

On the flip side, Hero MotoCorp down by 7.55%, Axis Bank down by 3.94%, Bank of Baroda down by 3.39%, Maruti Suzuki down by 3.24%, and IDFC down by 2.89% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 up 1.29%, Britain’s FTSE 100 down 0.50%, while Germany's DAX was up by 1.13%.

Sentiments turned bearish in the Asian region on Thursday and most of the Asian counters snapped the day’s trade in the negative terrain after disappointing economic data from both sides of the Atlantic rekindled concerns about the strength of global growth. US payrolls firm ADP reported that just 119,000 private sector jobs were created in April, well off the forecast 170,000, indicating the recent surge in employment could be tailing off. The news from the eurozone too dampened the sentiments that manufacturing in the region continued to taper as nations tighten their belts with austere budget cuts as part of a drive to cut their huge public deficits.

Meanwhile, Hong Kong shares suffered their first loss in three sessions on Thursday, dragged by Chinese banks after Singapore state investor Temasek Holdings priced the sale of stakes in two of China's largest at the bottom of an indicative range while, Seoul shares edged lower on Thursday to snap a four-day winning streak as sentiment was pressured by data showing weaker-than-expected US private sector hiring. However, China shares closed nearly flat as the impact of the latest step in the government’s market-boosting policy to cut transaction fees faded.