Benchmarks end lower for fourth straight session on political uncertainty

Indian equity benchmarks, extending their losses for the fourth straight session, snapped the day’s trade with a cut of over half a percent amid political instability, on concerns that the pace of economic reforms would slowdown after regional party DMK withdrew support from the UPA. Five ministers - MK Alagiri, S S Palanimanickam, D Napoloean, S Jagatrakshakan and S Gandhiselvan have submitted their resignations to the Prime Minister Manmohan Singh on alleged Sri Lanka genocide.

The markets, after a cautious start, never looked confident and both the gauges ended the session below their crucial 5,700 (Nifty) and 18,900 (Sensex) levels amid political uncertainty. Though, Finance Minister P Chidambaram tried to soothe market sentiment, stating the government’s reforms agenda was not under threat following the DMK's decision, which could be apparently sensed with the passage of Food Security Bill. Additionally, Reserve Bank of India’s (RBI’s) hawkish guidance in Mid-quarterly policy review that the headroom for further monetary easing remains quite limited continued to weigh on the bourses for the second day in a row.

Global markets’ uncertainty also weighed on the sentiment after a bailout plan for Cyprus fell into disarray, although hopes of a last-minute deal kept losses in Asian shares limited. Meanwhile, European shares rose after three days of losses on Wednesday with investors optimistic that European policymakers would make sure the crisis in Cyprus did not spread to other countries.

Back home, hefty selling in realty counter dampened the sentiments as stocks like IVRCL, HDIL, Indiabulls Real Estate, DLF and Prestige Estates hit rock bottom on concerns that despite repo rate cut, the financial institutions will not be able to lower interest rates. Selling in telecom stocks, led by Bharti Airtel also weighed on the sentiments. Shares of telecom major, Bharti Airtel dropped after the company’s Chairman and Managing Director Sunil Bharti Mittal was ordered on Tuesday to appear before an Indian court in a case over alleged corruption in allocating mobile phone bandwidth more than a decade ago.

Additionally, stocks of sugar companies went through the floor for the second consecutive session after the Cabinet Committee on Economic Affairs (CCEA) deferred the sugar decontrol proposal yesterday in absence of Finance Minister P Chidambaram, Defence Minister AK Antony and Health Minister Ghulam Nabi Azad.

The NSE’s 50-share broadly followed index Nifty lost fifty points to end below its psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex declined by one hundred and twenty points, ending below its psychological 18,900 mark. Moreover, the broader markets butchered badly during the trade and snapped the session with a cut of over 1-2 percent.

The markets rose on overall volumes of over Rs 2.20 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 890 shares on the gaining side against 1,968 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex lost 123.91 points or 0.65% to settle at 18,884.19, while the CNX Nifty declined by 51.55 points or 0.90% to end at 5,694.40.

The BSE Sensex touched a high and a low of 19,028.09 and 18,836.77, respectively. The BSE Mid cap index down by 1.90% and Small cap index was down by 2.32%.

The top gainers on the Sensex were, Hindustan Unilever up by 3.37%, Tata Motors up 1.51%, Cipla up 1.47%, TCS up 0.78% and Tata Power up 0.66%, while Bharti Airtel down by 4.18%, SBI down by 3.87%, NTPC down by 3.43%, ICICI Bank down 2.85% and Hindalco down by 2.80% were the top losers on the index.

The top gainers on the BSE sectoral front were, FMCG up 0.67%, IT up 0.12%, Auto up 0.07% and Consumer Durables up 0.01%, while Realty down by 4.67%, Power down 2.65%, PSU down 2.37%, Bankex down 2.10% and Capital Goods down 2.04% were the top losers on the sectoral space.

Meanwhile, to recover the major portion of the non performing assets (NPAs), the finance ministry has suggested the state-runs banks to review their top 300 non-performing accounts by their board's management committee and also implement a strict recovery policy, especially in cases where defaulting companies have affluent promoters. Pursuant to which, the bank’s board will suggest measures accordingly and if there is a case for recovery, steps will be taken. Almost all state-run banks have senior finance ministry officials on their boards.

The finance ministry has also asked the banks to take the support from Lok Adalats and recovery camps to check fresh slippages and devise a strategy for their minimization. It has already directed banks to disclose their top 50 NPAs along with the details of loan sanctioning officer, the collateral furnished by the borrower, terms of the loan and how the bank covers the risk.

As of December 2012, gross nonperforming assets of public sector banks have risen from Rs 71,080 crore in March 2011 to Rs 1.55 lakh crore. Further, as many as 215 projects with investments of Rs 7 lakh crore are currently stalled, and banks have disbursed about Rs 54,000-crore loans towards these projects. Moreover, stalled projects, mainly due to coal linkage, environment clearances and land acquisition problems in sectors like power, coal, iron, steel and road transport have further added to the problem of bad loans.

The CNX Nifty touched a high and a low of 5,745.30 and 5,682.30 respectively. 

The top gainers on the Nifty were, HUL up by 3.58%, Asian Paint up 2.19%, Cipla up 1.86%, Tata Motors up 1.65% and Grasim up by 1.26%.

On the flip side, the top losers of the index were, Reliance Infra down by 8.91%, DLF down by 3.88%, JP Associates down by 3.85%, SBI down by 3.85% and IDFC down by 3.73%.

The European markets were trading in mixed, France’s CAC 40 up by 0.43%, Germany’s DAX up by 0.38% and the United Kingdom’s FTSE 100 down by 0.02%.

Asian markets ended mixed on Wednesday following Cypriot lawmakers comprehensively rejecting the plan of tax savings as part of a crucial bailout deal. However, investors were cautious amid worries over the euro-zone financial system. Mainland China’s Shanghai Composite went home with green mark on strong performance of banks and developers.

Japanese markets were shut for a public holiday on Wednesday.