Bears tighten grip over markets; Nifty tumbles below 5,300 mark

After remaining in a consolidation phase last week, the Indian equity markets snapped the Monday’s trade in the negative terrain, below their crucial 17,400 (Sensex) and 5,300 (Nifty) levels on the back of profit booking tailing weakness across the globe and Indian rupee. The Indian rupee slipped below 56 against the dollar on Monday tracing similar weakness in other Asian currencies on renewed concerns over the global economic growth. Rupee slumped to a low of 56.03 against a dollar, more than one percent down from its previous close of 55.40 on Friday. Besides, investors shifted their focus on quarterly earnings of IT biggies Infosys and TCS, and the index of industrial production (IIP) for May, which will be the key triggers going forward. Kicking off the April-June India Inc’s earnings season amongst the large-caps will be HDFC, which will announce its result on July 11, followed by Infosys, TCS on July 12 and HDFC Bank on July 13.

On the global front, all the Asian markets shut shop in the red on the first trading day of the week after poor US jobs data reinforced concerns about flagging global growth, while Japanese industrial machinery makers suffered losses on falling orders. The machinery orders, an indicator of capital spending, fell by 14.8 percent in May from the previous month, biggest decline since 2001. Meanwhile, Chinese annual consumer inflation cooled to 2.2% in June, from May’s 3.0%, giving Beijing more scope to ease monetary policy to support growth without stoking upward price pressures.

Back home, bourses made a lower opening tracking the weakness in the global markets and lower than expected US jobs data which was announced on Friday post the market hours. Immediately after the start, markets showcased a partial recovery in the morning trades on the back of buying in the IT and FMCG heavyweight pockets. The sentiments also got some support as shares of tyre firms extended recent gains triggered by decline in prices of natural rubber.

But in the early noon session, benchmarks suddenly extended losses and touched their intraday lows tracking subdued start in European counterparts. Moreover, fall in Metal space too dampened the sentiments. In addition, power stocks fell for the second straight day on profit booking after recent strong gains. Adani Power and JSW Energy dropped 5.2% each. Lanco Infratech, KSK Energy and Reliance Infra dipped 3-4%. Meanwhile, a shortfall in India’s monsoon rains has widened to nearly 50 percent of average, and a deficient monsoon could prolong the current impasse in economic reforms.

Thereafter, markets traded in narrow-range with negative bias till end, weighed down by financial shares. HDFC was down over 1.5% ahead of its results this week on concerns that profit growth could be lower on the back of sluggish demand for home loans during the first quarter. Bharti Airtel also witnessed profit taking and was down nearly 2% and telecom shares surged last week after the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) gave a split verdict on a challenge by mobile phone operators seeking to overturn a government order requiring them to stop offering 3G services beyond their licensed zones through mutual roaming pacts. Other Sensex losers include, index heavyweight Reliance Industries and capital goods major Larsen & Toubro. However, the indices recovered marginally in the last leg of trade tracking a little pull-back in rupee but, ended the session with a cut of over half a percent.

The broader indices were hammered badly with BSE Mid cap and Small cap indices down by 1.20% and 1.06% respectively moreover, the market breadth remained in favor of declines as there were 1,770 shares on the losing side against 1,097 shares on the gaining side while 104 shares remained unchanged.

The BSE Sensex lost 129.14 points or 0.74% to settle at 17,391.98, while the S&P CNX Nifty fell by 41.80 points or 0.79% to close at 5,275.15.

The BSE Sensex touched a high and a low of 17,485.79 and 17,343.55 respectively. The BSE Mid cap index was down by 1.20% and Small cap index down by 1.06%.

TCS up 0.95%, Dr Reddys Lab up 0.82% and Hindalco Industries up 0.12% were the major gainers on the Sensex, while Hero MotoCorp down 2.62%, Jindal Steel down 2.56%, Tata Steel down 2.32%, Bajaj Auto down 2.30% and Maruti Suzuki down 2.28% were top losers on the index.

There was no gainer on the BSE sectoral space, while Metal down 1.55%, Power down 1.54%, Consumer Goods down 1.25%, Auto down 1.12% and Realty down 1.05% were top losers on the BSE sectoral space. 

Meanwhile, in a bid to achieve the disinvestment target of Rs 30,000 crore in FY13, the Finance Ministry is planning to set up exchange traded fund (ETF) for selling shares of public sectors undertakings (PSUs). The ETF will be launched in the format of Hong Kong Tracker Fund, in this regard, Disinvestment Department has floated a concept note for implementing it.

The government will make a bunch of shares of the state-owned companies in which it wants to divest stake and create a fund (ETF), which would be listed on stock exchanges. The ETF, which is an investment fund traded on stock exchanges much like stocks, would have an underlying benchmark which could be an index on the stock exchange. The government has already planned to divest stake in companies like Hindustan Copper, Oil India, SAIL, BHEL, HAL and RINL this fiscal.

Meanwhile, the government has started the process of divesting stake in PSUs in this fiscal and likely to come out with a public offer of RINL and Hindustan Copper by the end of this quarter. In last fiscal, the government had managed to mop-up only about Rs 14,000 crore through disinvestment as against a target of Rs 40,000 crore.

Earlier in January this year, the government had introduced offer for sale (OFS) and Institutional Placement Programme (IPP) model to attain Rs 30,000 crore target. IPP and OFS are two new share sale tools launched by the regulator Securities and Exchange Board of India (SEBI) to assist corporates in hiking their public shareholding. These two models will also help companies achieving the minimum 25 percent public holding guideline by June, 2013.

There are about 13 PSUs which have to meet the minimum public holding guidelines by August, 2013 while, all the listed companies are required to have at least 25 percent public holding by June, 2013.

The S&P CNX Nifty touched a high and low 5,300.60 and 5,257.75 respectively.

The top gainers on the Nifty were DLF up 1.09%, TCS up 1.09%, Dr Reddys up 0.29% and Hindalco up 0.04%. On the flipside, Reliance Infra down 3.56%, Jindal Steel down 3.12%, JP Associates down 2.98%, Ranbaxy down 2.96% and Tata Power down 2.80% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 0.12%, Germany's DAX eased 0.01% and United Kingdom’s FTSE 100 down 0.25%.

The Asian markets suffered sharp cut on the first trading day of the week, the market mood in the region that started on a subdued note turned grave by the end of the day and all the major indices lost over a percent on concern of fretting global economic growth. Chinese markets were the most hit after country’s consumer-price inflation eased to a 29-month low in June, drop in producer prices fueled concern that deflation may spread to other parts of the economy and Premier Wen Jiabao said the economy faces 'relatively large' downward pressure. The Japanese market too suffered a cut of around one and half a percent after machinery orders plunged the most in a decade. The nation’s machinery orders, an indicator of capital spending, fell by 14.8 percent in May from the previous month, biggest decline since 2001.