Benchmarks resume southward journey; Rupee hit two-week low

Indian key benchmarks resumed their southbound journey on Wednesday with Nifty snapping the session below the key 5,250 mark for the first time since August 3, 2012. The bourses traded in the red throughout the day as sentiments was hammered badly by weak global cues and sharp cut in the rupee, which hit a two-week low against the dollar on Wednesday.

The undertone remained cautious as the government struggled to implement promised reforms amid stiff resistance from allies and opposition parties. In addition, the highly controversial CAG report on coal block allocations has paralyzed the Parliament during the monsoon session. The sentiments also got bashed as there is looming threat of a possible downgrade of India’s sovereign ratings in the absence of meaningful reforms.

Meanwhile, Indian private sector services business expanded at the fastest pace in six months in August, driven by the strongest growth in new business since February and increasing optimism about the future but, turned out as non event as selling got intensified after banking shares witnessed profit taking at higher levels on concerns of rising non-performing assets in the wake of sluggish economy and government’s reduced fiscal flexibility. At the same time, Fitch Ratings said, fiscal 2013 impaired assets across the banking sector may exceed its initial forecast as the economy slows. The rating agency added that absolute cumulative gross NPLs reported at India's five largest banks - accounting for over a third of the system assets - increased by around 62 percent in the first quarter of FY13.

On the global front, Asian equity indices ended lower as soft US manufacturing data and construction spending added to concerns about a global economic slowdown. Bearish bets on China-related stocks also pulled the market down as some investors were factoring in an abrupt slowdown in the Chinese economy. Concerns over China’s sluggish growth have hit commodities, with iron ore falling to its lowest level since October 2009. Moreover, European counters too traded lower in the opening deal as investors traded nervously ahead of a European Central Bank meeting and a US jobs report.

Back home, the sentiments also weighed by selling in Metal space, which lost the most by about three percent on rising concerns of demand slowdown in the wake of sluggish economy both local and global. Stocks of Tata Steel, Hindalco, Jindal Steel & Power, Sesa Goa, Sterlite Industries all corrected by 2.50-5 percent. However, some respite came from FMCG space which gained by over half a percent on hopes that the revival of monsoon rains across the country would help improve farm income aiding growth in rural spends. While, the hopes of price hike in petrol, diesel and LPG, helped PSU oil marketing companies to end higher were offset by fall in Auto stocks like Tata motors, M&M and Bajaj Auto reacted negatively on the same news.

The NSE’s 50-share broadly followed index Nifty, declined by about fifty points to end below the psychological 5,250 support level while Bombay Stock Exchange’s Sensitive Index - Sensex moved down by over one hundred and twenty points to finish below the psychological 17,350 mark. Moreover, the broader markets too struggled to get some traction and snapped the session with a cut of about half a percent.

The markets fell on overall volumes of over Rs 1.25 lakh crore which remained on the lower side as compared to that on Tuesday. Moreover, the market breadth remained in favor of declines as there were 1,235 shares on the gaining side against 1,558 shares on the losing side while 142 shares remain unchanged.

The BSE Sensex lost 127.53 points or 0.73% to settle at 17,313.34, while the S&P CNX Nifty declined by 48.30 points or 0.92% to close at 5,225.70.

The BSE Sensex touched a high and a low of 17,411.67 and 17,250.80 respectively. However, the BSE Mid cap index was down by 0.31% and Small cap index down by 0.49%.

Bharti Airtel up by 3.28%, Hindustan Unilever up by 1.84%, TCS up by 1.41%, ITC up by 0.66% and ONGC up by 0.57% were top gainers on the Sensex, while BHEL down by 4.98%, Jindal Steel down by 4.78%, ICICI Bank down by 3.56%, Tata Steel down by 3.42% and Sterlite Industries down by 3.17% were top losers on the index.

The major gainers on the BSE sectoral space were, FMCG up 0.72% and TECk up 0.35%, while Metal down 2.64%, Capital Goods (CG) down by 2.54%, Baankex down 1.82%, Power down 1.34% and PSU down 1.05% were major losers on the BSE sectoral space.  

Meanwhile, though India's economic growth have slipped to 5.5% during April-June of 2012-13, advisory firm KPMG opined that India is performing better than many countries. It reaffirmed that in the current environment of global economic slowdown, the most important part is that the country is still growing.

It pointed out that world’s largest economy, the US grew at 1.5% in 2011, versus 3.1% in 2010, while, Germany’s GDP grew by 3%, though in 2010 it was 3.7%. It emphasized that the focus should be on how this turbulent journey is sailed through, albeit India has touched the lowest Q1 performance in a decade, because of low performance in manufacturing, mining and quarrying.

On maintaining sustainability for the PSUs in the wake of global economic and domestic slowdown, KPMG India Chief Operating Officer Akhil Bansal, suggested that the Public sector should carry little more responsibility than the private sector, to survive during this turbulent time as it’s more significant. He also added that collaboration between the PSUs and the private sector will accelerate the development process.

The S&P CNX Nifty touched a high and low of 5,259.50 and 5,215.70 respectively.

The top gainers on the Nifty were Bharti Airtel up by 2.76%, HUL up by 2.04%, TCS up by 1.80%, ONGC up by 1.10% and ITC up by 0.54%. On the flip side, Jindal Steel down by 5.82%, BHEL down by 5.32%, Axis Bank down by 4.75%, Tata Steel down by 4.10% and Sesa Goa down by 3.80% were the major losers.

The European markets were trading mixed, France's CAC 40 up by 0.16%, Germany's DAX was up by 0.61% and United Kingdom’s FTSE 100 was down by 0.18%.

Asian markets extended losses and ended lower on Wednesday tracking losses in Europe and on Wall Street after a third straight monthly contraction in US manufacturing activity. Meanwhile, poor numbers on factory activity from Asia and Europe also pressurized the market but investors still hopeful towards a European Central Bank meeting, for new measures to fight the lingering debt crisis. However, China, a major global growth driver, saw its manufacturing activity fall to its lowest level in more than three years in August.