Bears comeback on Dalal Street; Sensex falls over 400 points

Bears made a comeback on Dalal Street on Monday, amid escalating tensions concerning Jammu & Kashmir spooked investors. Markets made a negative start of the day, as Foreign investors withdrawn a net amount of Rs 2,881 crore from the Indian capital markets in the first two sessions of August on account of domestic as well as global headwinds. According to latest depositories data, FPIs pulled out a net sum of Rs 2,632.58 crore from equities and Rs 248.52 crore from the debt segment during August 1-2, taking the cumulative net outflow to Rs 2,881.10 crore. Investors paid no heed towards report that India’s services sector activity bounced back in the month of July, aided by rising new work intakes. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index jumped to 53.8 in July from 49.6 in June.

Key indices remained under pressure throughout the session, also because of weak cues from global markets. Traders remained pessimistic as the Federation of Automobile Dealers Associations (FADA) feared that the job cuts may continue across automobile dealerships with more showrooms being shut in the near future and sought immediate government intervention such as reduction of GST to provide relief to the auto industry. It said that around two lakh jobs have been cut across automobile dealerships in India in the last three months as vehicle retailers take the last resort of cutting manpower to tide over the impact of the unprecedented sales slump. Market participants failed to take any sense of relief with former RBI Governor Bimal Jalan’s statement that the current slowdown in the Indian economy is cyclical and growth will pick up in one or two years.

On the global front, European markets were trading in red, as Euro area investor confidence deteriorated sharply in August to its lowest level in nearly five years, amid a steep drop in the current situation assessment and expectations. The survey data from the behavioral research institute Sentix showed that the investor confidence index of the survey tumbled to -13.7 from -5.8 in July, marking its lowest level since October 2014. Asian markets ended in red, after Hong Kong's private sector contracted in July with a fall in new order and output. The survey data from IHS Markit showed that the Purchasing Manager's Index declined to 43.8 in July from 47.9 in June. Any reading below 50 indicates contraction in the sector. The ongoing US-China trade dispute and recent large-scale political demonstrations significantly reduced demand for county's goods and services.

Back home, stocks related to the metal industry ended lower, despite reports that the government may impose an anti-dumping duty on imports of a certain type of steel from Brazil, China, and Germany for a period of five years. This steel is used for making high-speed steel-cutting tools. The recommended duty ranges between $1,902.34 and $3,263.68 per tonne. Housing sector stocks remained in focus, after a report stated that the National Housing Bank (NHB) is infusing an additional Rs 10,000 crore into Non-Banking Financial Companies (NBFCs), with a view to further ease flow of funds to the housing sector. This facility will be over and above the existing finance schemes of the housing sector regulator NHB.

Finally, the BSE Sensex declined 418.38 points or 1.13% to 36,699.84, while the CNX Nifty was down by 134.75 points or 1.23% to 10,862.60.

The BSE Sensex touched a high and a low of 36,844.05 and 36,416.79, respectively and there were 09 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.26%, while Small cap index was down by 1.69%.

The only gaining sectoral indices on the BSE were Telecom up by 1.56%, TECK up by 0.72% and IT up by 0.69%, while Utilities down by 2.73%, Energy down by 2.65%, Power down by 2.56%, Consumer Durables down by 2.16% and PSU down by 2.07% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 3.96%, Tech Mahindra up by 2.15%, TCS up by 1.93%, Bajaj Auto up by 1.50% and HDFC up by 1.37%. On the flip side, Yes Bank down by 8.15%, Tata Motors - DVR down by 5.62%, Tata Motors down by 5.25%, Power Grid down by 4.54% and Reliance Industries down by 3.48% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has clarified that non-banking finance companies (NBFCs) shall not impose foreclosure charges/pre-payment penalties on any floating rate term loans sanctioned for purposes other than business to individual borrowers, with or without co-obligants.

Foreclosure charges are part of the fee income for any lender and adds to its bottom-line. It further stated that the relevant rules governing the same have been updated to reflect the change.

These direction covers both deposit-taking and non-deposit-taking NBFCs which are considered systemically important ones. The RBI, in May 2014, had barred commercial banks from charging such fees or penalties from individual borrowers with mortgage loans. But banks are free to charge same on non-secured loans like personal loans.

The CNX Nifty traded in a range of 10,895.80 and 10,782.60. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 4.53%, Tech Mahindra up by 2.15%, Bajaj-Auto up by 1.59%, TCS up by 1.57% and Coal India up by 1.57%. On the flip side, Yes Bank down by 8.21%, UPL down by 5.86%, Tata Motors down by 5.13%, Power Grid down by 4.70% and Grasim down by 3.98% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 130.31 points or 1.76% to 7,276.75, France’s CAC fell 93.55 points or 1.75% to 5,265.45 and Germany’s DAX was down by 155.38 points or 1.31% to 11,717.06.

Asian markets ended lower on Monday due to heavy selling pressure after the yuan's depreciation sparked fears of a currency war. China's central bank allowed its yuan to fall below the politically sensitive level of seven to the US dollar, fueling speculation that Beijing was allowing currency depreciation to counter US President Donald Trump's latest tariff threat. Chinese shares ended lower ahead of July trade and inflation data due this week. Further, Japanese shares closed sharply lower to hit a two-month low as investors grew nervous about a prolonged US-China trade war, with a rapidly strengthening yen dragging down exporters like Sony, Nissan, Panasonic and Daikin Industries.