Bears tighten grip on Dalal Street; Markets slump over 2%

Bears tightened their grip on Dalal Street with frontline gauges ending below their crucial 10,600 (Nifty) and 35,200 (Sensex) levels. Once again it turned out to be a horrendous day of trade for local bourses where key gauges settling with a cut of over two percentage points amid feeble global cues. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels, as traders remained on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review later this week. Traders remained cautious with Exporters’ body Federation of Indian Export Organisations’ (FIEO) statement that the growth of country’s exports is likely to slow in the coming months owing to various domestic and global factors. It said Indian exports have always been influenced by the growth in global trade and therefore, the subdued global trade forecast of 3.9% in 2018 and 3.7% in 2019 will have adverse bearing on export. Besides, the Confederation of Indian Industry (CII) has submitted a dozen suggestions to the Prime Minister’s Office, the finance minister and RBI on curbing rupee volatility and controlling the current account deficit (CAD).

Markets extended southward journey after India’s services sector activity fell for the second straight month in September 2018. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 50.9 in September from 51.5 in August, signaling the slowest growth in the current four-month sequence of rising activity. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too fell to 51.6 in September from 51.9 in August. Adding some anxiety, Nitin Gadkari said that India is facing an economic crisis due to its huge oil imports. Some concerns also came with a private report stating that new investment announcements have declined in the July-September period for the second quarter in a row. As per the report, private and public sector companies together announced new projects worth Rs 1.49 trillion in the quarter which ended in September, 41% lower than the preceding quarter. Investors failed to draw any sense of relief with Finance Ministry indicating that gross direct tax collection in the first six months of the financial year grew 16.7% to Rs 5.47 lakh crore.

Weak opening in European counters too dampened sentiments as the euro area private sector expanded at the slowest pace in four months in September on weak manufacturing activity. The survey data from IHS Markit showed that the final composite output index dropped to 54.1 in September from 54.5 in August and slightly below the flash estimate of 54.2. Asian markets ended in red terrain, as trade fears lingered and positive economic data raised the chances of another US rate hike in December.

Back home, oil companies remained under pressure after the government announced an excise duty cut of Rs 1.50 a litre for petrol and diesel. Additionally, oil companies are to be asked to absorb another Re 1 per litre. Together, these price reductions would add up to Rs 2.50 a litre. However, stocks of public sector banks edged lower with report that the government will release the second tranche of capital infusion into the public sector banks (PSBs) under its recapitalisation programme. Cement stocks edged higher with ICRA’s latest report stating that cement production is expected to grow at 6-7% in the current fiscal year, driven by pick-up in affordable and rural housing segments and infrastructure.

Finally, the BSE Sensex tumbled 806.47 points or 2.24% to 35,169.16, while the CNX Nifty was down by 259.00 points or 2.39% to 10,599.25.

The BSE Sensex touched a high and a low of 35,820.53 and 35,022.12, respectively and there were 6 stocks advancing against 25 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.93%, while Small cap index was down by 2.07%.

The top losing sectoral indices on the BSE were Energy down by 6.66%, Oil & Gas down by 6.58%, IT down by 3.28%, Healthcare down by 3.02% and TECK was down by 2.97%.
The top gainers on the Sensex were ICICI Bank up by 4.07%, Axis Bank up by 2.70%, Larsen & Toubro up by 1.18%, Yes Bank up by 1.08% and Mahindra & Mahindra up by 0.52%. On the flip side, Reliance Industries down by 7.03%, Hero MotoCorp down by 5.45%, TCS down by 4.54%, Adani Ports &Special down by 4.17% and ONGC down by 3.74% were the top losers.

Meanwhile, amid underwhelming market demand and intensified price pressures, India’s services sector activity fell for the second straight month in September 2018. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 50.9 in September from 51.5 in August, signaling the slowest growth in the current four-month sequence of rising activity. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too fell to 51.6 in September from 51.9 in August.

According to the report, a broad stagnation of new business has led to weaker growth in the service sector and market conditions were underwhelming amid a lack of demand at a time of generally higher prices. Further, increase in backlogs of work encouraged service sector companies to again add to their workforce numbers. The report further showed that Information & Communication sectors witnessed a strongest underlying growth in activity and new work, while there were falls seen in the Finance & Insurance and Business Services categories.

On the price front, Indian service providers continued to face higher input costs during the reported month, on account of higher fuel costs and consecutively, the firms raised their selling prices. Average output price inflation was the strongest recorded since April and marked a twentieth successive monthly increase in prices charged. Meanwhile, confidence amongst service providers about the year ahead remained inside positive territory.

The CNX Nifty traded in a range of 10,754.70 and 10,547.25. There were 11 stocks in green as against 39 stocks in red on the index.

The top gainers on Nifty were ICICI Bank up by 4.05%, Bharti Infratel up by 2.54%, Ultratech Cement up by 2.06%, Axis Bank up by 2.03% and Larsen & Toubro up by 0.85%. On the flip side, HPCL down by 22.44%, BPCL down by 18.88%, Indian Oil Corporation down by 18.24%, ONGC down by 9.98% and Reliance Industries down by 8.02% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 76.84 points or 1.03% to 7,433.44, France’s CAC shed 56.27 points or 1.04% to 5,435.13 and Germany’s DAX was down by 32.32 points or 0.26% to 12,255.26.

Asian markets ended lower on Thursday after upbeat US economic data drove 10-year US Treasury yields to their highest level since 2011, raising concerns the Federal Reserve may raise interest rates aggressively. A report from ADP and Moody's Analytics showed private payrolls in the US increasing by 230,000 in September - the highest in seven months. Japanese shares closed lower after rising earlier in the day on the back of a weak yen and a record close on Wall Street overnight. Meanwhile, the Chinese markets remain closed all week for the National Day holiday.