Pull-back in second half help benchmarks to end near pre-close level

Stock markets in India showcased a remarkable pull back in second half of trade as the frontline equity indices, after hitting the lowest point of day in late morning trades, took a turn for the better. Bourses trimmed losses of around a percentage point from day’s low and settled with a marginal cut. Though, the bourses traded in the red throughout the day’s trade. The benchmark equity indices not only went on to accumulate weekly gains of over two percent but also managed to regain their psychological 17,150 (Sensex) and 5,200 (Nifty) levels.

After the weak opening and reeling under severe selling pressure for most part of the day, not many had hoped that Indian bourses would manage to recover like that especially on a day when stock markets across the globe wilted after European Central Bank President Mario Draghi failed to deliver immediate action to stem the region’s debt crisis. While, the selling got intensified with IMD stating that monsoon rains will not be enough to save the country from its first drought in three years, monsoon rains crucial for the agriculture has been termed deficient by 19 percent and may add up to the inflationary pressure.

However, the downside in markets remained capped after news that Spain passed a key test on Thursday by easily selling 3.1 billion euro of debt despite investors’ doubts that the European Central Bank will be in a position to help struggling euro-zone economies when it holds its monthly meeting later in the day. The cues from European markets too remained strong as investors shifted their focus temporarily from central bank policy to the outlook for growth, with July US non-farm payrolls data due.

Back home, the domestic markets ricocheted around a percent from the lowest point in session in the second half of trade as investors relentlessly bought blue-chip stocks from the Oil and Gas, defensive healthcare and technology spaces. Meanwhile, the upside in markets was limited as drought-like situation looms large, especially towards September when the El Nino conditions are likely to have an adverse impact on the rainfall over the country.

Sentiments also got undermined after money market woes resurfaced as Indian rupee weakened further and breached its crucial 56 per dollar mark. Besides, shares of telecom related companies fell ahead of the likely Cabinet meet today to discuss the reserve price and usage charges of spectrum, deferred payment options by operators and rollout obligations. Moreover, shares of public sector oil marketing companies extended two-day fall triggered on rising under-recoveries on diesel and PDS kerosene.

On the global front, the Asian markets made a mixed closing on the last trading day of week, while the Chinese market after making a green start strengthened further but some of the other indices made last hour recovery to close in green. Though, European stocks inched higher in the early trade as investors await US jobs data that could potentially fuel expectations of further stimulus from the Federal Reserve. Meanwhile, Euro-zone private sector activity contracted for the 10th time in 11 months in July, with data now consistently showing the downturn becoming ‘entrenched’ in Germany.

Closer home, the NSE’s 50-share broadly followed index Nifty, dipped by just 12 points but, settled well above its psychological 5,200 support level moreover, Bombay Stock Exchange’s Sensitive Index -Sensex- dropped over twenty five points and settled tad below the psychological 17,200 mark. Moreover, broader markets too performed in line with their larger peers and settled a tad in the red.

The overall volumes stood at over Rs 1.40 lakh crore, while the turnover for NSE F&O segment remained on the lower side as compared to that on Thursday at over Rs 1.00 lakh crore. However, the market breadth was remained in the favour of declines, as there were 1,263 shares on the gaining side against 1,514 shares on the losing side while 126 shares remained unchanged.

The BSE Sensex lost 26.43 points or 0.15% to settle at 17,197.93, while the S&P CNX Nifty declined by 12.05 points or 0.23% to close at 5,215.70.

The BSE Sensex touched a high and a low of 17,208.36 and 17,026.97 respectively. However, the BSE Mid cap and Small cap index ended up by 0.18% and 0.08% respectively.

Wipro up by 2.04%, NTPC up by 1.84%, Dr Reddy’s Lab up by 1.62%, ONGC up by 1.34%, Gail up by 1.29% were the top gainers on the Sensex, while Sterlite Inds down by 2.62%, Tata Steel down by 2.20%, Hindalco Inds down by 2.06%, ICICI Bank down by 1.98%, Jindal Steel down by 1.91% were the major losers on the index.

The top gainers on the BSE sectoral space were, Oil & Gas up by 0.68%, HC up by 0.58%, IT up by 0.54%, TECk 0.21%, while Metal down by 1.64%, Auto down by 0.83%, Bankex down by 0.62%, Realty down by 0.56%, FMCG down by 0.37% were top losers on the BSE sectoral space. 

Meanwhile, as a note of breather for the ailing companies, the Department of Industrial Policy & Promotion (DIPP) has notified new foreign direct investment (FDI) rules, where investments by India's private banks, such as ICICI Bank and HDFC Bank that are owned and controlled by non-residents, into other companies under corporate restructuring will not be considered as indirect overseas investment.

With this move, the government hopes to bring more clarity in recasting debt of firms in vulnerable sectors such as aviation, telecom and media. The centre in its notification clarified that any corporate debt restructuring (CDR), or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment. At present, 74 per cent FDI is permitted in private banks.

The new rule will help such banks to restructure loans of companies which are facing problems on account of economic slowdown and are unable to service their debts. However, strategic downstream investment made by these banks in subsidiaries, joint ventures and associates will continue to count towards indirect foreign investment.

The S&P CNX Nifty touched a high and low of 5,220.20 and 5,164.65 respectively.

The top gainers on the Nifty were Asian Paints up by 2.92%, Wipro up by 1.97%, NTPC up by 1.77%, ONGC up by 1.50%, Gail up by 1.46%. On the flip side, Sterlite Inds down by 2.82%, Jindal Steel down by 2.51%, Tata Steel down by 2.48%, IDFC down by 2.47%, JP Associates down by 2.33% were the major losers.

The European markets were trading in green, France's CAC 40 was up 0.22%, Germany's DAX was up 2.04% and United Kingdom’s FTSE 100 was up 1.34%.

The Asian markets made a mixed closing on the last trading day of week, while the Chinese market after making a green start strengthened further but some of the other indices made last hour recovery to close in green. There was a sense of disappointments among the regional shares after inaction by the European Central Bank and Federal Reserve. The Japanese market was worst impacted with yen strengthening against all other major currencies and weak earnings from some of the major corporate. Hong Kong shares too weakened below a key technical support level. Chinese market was the top performer for the day, gaining over a percent as country’s regulators, seeking to arrest a 14 percent slide in the nation’s stock market since this year’s high, reduced transaction fees on equities trading by huge 20 percent. However in a separate development People’s Bank of China said in a quarterly monetary-policy report said that China will conduct policy fine-tuning at an appropriate time and consumer inflation may rebound after August.