Bears hold strong grip on Dalal Street on weak global cues

Indian equity markets came under the bear’s grip on Monday with frontline gauges breaching their crucial 9,900 (Nifty) and 31,700 (Sensex) levels on subdued global cues. Markets started the session with a huge gap on the down side, as investors turned jittery on expectation of government to tinker its fiscal deficit target for FY18 by announcing an economic stimulus to revive the economy. Chief Economic Adviser (CEA) Arvind Subramanian has said that Indian economy continues to face multiple challenges and stressed on the need to tackle them on various fronts, such as exchange rate, public investments while maintaining macroeconomic stability. He said that there are lots of challenges ahead with growth slowing down and investment not picking up. He also identified rising level of stressed assets to be a key area of concern. Traders also remained cautious on account of the derivatives expiry due on Thursday and the recent spike in tensions on the Korean peninsula.

Adding to the pessimism, foreign investors remained in exit mode as they have already pulled out nearly Rs 5,500 crore from stock markets so far this month due to geopolitical concerns and a tendency to take profit. The net outflow by Foreign Portfolio Investors (FPIs) follows withdrawal of Rs 12,770 crore from equities in August. Prior to that, they had pumped in over Rs 62,000 crore in the past six months. Markets extended southward journey and domestic bourses even went to test psychological 31,500 (Sensex) and 9,850 (Nifty) levels, but the key gauges got some support near those intraday low levels as they managed to trim some of their losses to end off day’s lows, as traders took some solace with report that Prime Minister Narendra Modi would unveil the much-awaited stimulus package during a scheduled speech to the BJP national executive meeting later today.

On the global front, European counterparts were trading mostly in red. However, Germany’s DAX edged higher after Chancellor Angela Merkel secured a fourth term but saw her party weakened by a surge in support for the far-right. Asian markets, barring Nikkei, ended in red. Japanese manufacturing activity expanded in September at the fastest pace in four months as domestic and export orders picked up, a preliminary private survey showed in a sign of strengthening demand.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include realty, basic material and healthcare. Broader markets too got clobbered out of shape and ended the session with a cut of 1-2 percent. On the sectoral front, metal stocks lost their shine, as metal prices fell in global markets in response to North Korea tensions and S&P’s downgrade of China’s credit rating. However, power stocks like Tata Power Company, Torrent Power, Adani Power and Power Grid Corporation of India closed in green amid talk of sops for the sector to boost growth. The Cabinet had discussed new power scheme last week and it is likely to be called ‘Saubhagya’. Bucking the trend, Capacite Infraprojects made a stellar listing on the bourses today and went home with a gain of around 37%.

Finally, the BSE Sensex tumbled 295.81 points or 0.93% to 31,626.63, while the CNX Nifty was down by 91.80 points or 0.92% to 9,872.60.

The BSE Sensex touched a high and a low of 32,016.52 and 31,474.56, respectively and there were 6 stocks on gaining side as against 24 stocks on losing side, while 1 stock remained unchanged on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.14%, while Small cap index was down by 2.02%.

The top losing sectoral indices on the BSE were Realty down by 3.46%, Basic Materials down by 1.98%, Healthcare down by 1.75%, Capital Goods down by 1.58% and Industrials was down by 1.56%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were Coal India up by 1.20%, ICICI Bank up by 0.87%, Hindustan Unilever up by 0.55%, Reliance Industries up by 0.36% and TCS up by 0.23%. On the flip side, Adani Ports & SEZ down by 3.29%, Kotak Mahindra Bank down by 2.24%, Tata Steel down by 2.20%, Lupin down by 2.20% and ITC down by 2.18% were the top losers.

Meanwhile, attributing fall in India’s GDP growth to demonetisation and newly-rolled out Goods and Services Tax (GST) regime, Former Reserve Bank of India (RBI) governor C Rangarajan has said that the stimulus package being contemplated by the government to bolster the economy should emphasis on raising capital expenditure in order to catalyse private investment. He also made a case for recapitalisation of public sector banks (PSBs) so that they could provide more funding to the private sector.

For achieving a growth rate of 6.5 percent in FY18, Rangarajan has pointed out that the country would need to grow by at least 7 percent in the remaining three quarters of the current fiscal. Talking about demonetization move, he said that adequate preparation by the central bank could have reduced the pain which people had to undergo on account of ban on high value notes last November.

On the stimulus package, Former RBI governor has said that it should focus on increasing public expenditure with the aim to reinvigorate private investments. He suggested that two or three things can be done. Firstly, he noted that there have been a number of stalled projects, and the low hanging fruit is to ensure that these stalled projects are activated and those stalled projects which are viable must be immediately made operational. Secondly, he stressed on the need to recapitalization of the banking system so that they can provide additional credit for investment as well.

The CNX Nifty traded in a range of 9,960.50 and 9,816.05. There were 13 stocks in green as against 36 stocks, while two scrips remained unchanged in red on the index.

The top gainers on Nifty were Tata Power up by 1.99%, Coal India up by 1.46%, Zee Entertainment up by 0.84%, ICICI Bank up by 0.78% and Hindustan Unilever up by 0.70%. On the flip side, ACC down by 3.57%, Aurobindo Pharma down by 3.41%, Adani Ports & SEZ down by 3.33%, Ambuja Cement down by 2.78% and Ultratech Cement down by 2.52% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 18.77 points or 0.26% to 7,291.87 and France’s CAC was down by 15.02 points or 0.28% to 5,266.27, while Germany’s DAX was up by 17.93 points or 0.14% to 12,610.28.

Asian equity markets ended mostly lower on Monday as geopolitical tensions persisted and elections in Germany and New Zealand set the stage for periods of political uncertainty. Chinese stocks fell as developers slumped after a new round of government curbs to rein in the heated housing market. Meanwhile, Hong Kong stocks posted their biggest one-day loss in six weeks, with a slump in property shares hitting already fragile sentiment after the Federal Reserve’s hawkish stance and Standard & Poor’s downgrade of China’s credit rating last week. Seoul shares fell amid selling by foreign investors following a week of heated rhetoric between the leaders of the US and North Korea. Though, Japan’s Nikkei share average rose as a weaker yen lifted exporters, while expectations of economic stimulus measures after an election next month supported overall sentiment.