Benchmarks snap four sessions gaining streak; Nifty ends below 5,700 mark

Snapping their four sessions northward journey, key domestic benchmarks showcased a terrible day of trade with both the frontline indices shaving off about one and a half percent, tumbled below psychological 5,700 (Nifty) and 18,850 (Sensex) levels. Sentiments in the session got undermined not only by the dismal cues from global markets but also from disappointing domestic economic indicators. Investors’ mood got dampened after growth in services sector, which make up nearly 60% of country’s economic output, eased in March to its slowest pace in 17 months as order books filled at a slower pace. The HSBC services Purchasing Managers’ Index (PMI), based on a survey of around 400 companies, fell to a 17-month low of 51.4 in March from 54.2 in February. Similarly, reflecting the weakest improvement in operating conditions, the HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, declined to 51.4 in March from 54.8 in February. Selling got intensified and benchmarks plunged deep into the red in last hour of trade on political uncertainty that Lok Sabha elections could be held earlier than scheduled, even this year.

Sentiments also remained jittery after European counters traded choppy in the early deals as investors remained cautious ahead of key events later in the week, such as central bank meetings and the US employment data. Meanwhile, Asian markets ended the session mixed on Wednesday. Though, most of the Asian counters recouped their losses at the time of closing as Cyprus have been given two more years, until 2018, to meet the conditions of a 10 billion-euro bailout under a final agreement with euro-zone lenders, giving the island nation a bit more breathing room.

Back home, selling in auto stocks too dampened the sentiments after reporting disappointing March sales numbers as demand weakened on the back of economic slowdown and consequently weak consumer and business sentiments. Markets continued their downward movement despite Prime Minister Manmohan Singh’s statement that downturn was passing and urged the business leaders to keep faith in his government's efforts. 

Sentiments also got hurt after sugar stocks like Balrampur Chini, Shree Renuka Sugar, Bajaj Hindusthan, and Triveni Engineering gave up their previous session’s gains as the Cabinet Committee on Economic Affairs (CCEA) on April 02 did not take up the proposal to decontrol the sugar sector, as Finance Minister P Chidambaram is away on a foreign tour. However, some power sector stocks were able to buck the trend after the power regulator CERC allowed the power utility, Adani Power to raise tariffs for electricity on a temporary basis. The order boosted other power companies, raising hopes for a similar reprieve for them too.

The NSE’s 50-share broadly followed index Nifty declined by over seventy five points to end below the psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by one hundred and forty points, but managed to hold its crucial 18,800 mark. However, broader markets too butchered badly and snapped the session with a cut of 1-2 percent.

The market breadth remained in favor of declines as there were 1,313 shares on the gaining side against 1,449 shares on the losing side while 131 shares remain unchanged.

Finally, the BSE Sensex lost 239.31 points or 1.26% to settle at 18,801.64, while the CNX Nifty declined by 75.20 points or 1.31% to end at 5,672.90.

The BSE Sensex touched a high and a low of 19,035.20 and 18,721.72, respectively. The BSE Mid cap index down by 0.81% and Small cap index was down by 0.41%.

The only gainers on the Sensex were, Sun Pharma up by 1.54%, NTPC up by 0.94% and Tata Power up by 0.73%, while Bharti Airtel down by 3.95%, Bajaj Auto down by 3.68%, Tata Motors down by 3.45%, L&T down 3.01% and Sterlite Industries down by 2.79% were the top losers on the index.

The only gainers on the BSE Sectoral space were, Health Care up by 0.17% and Power up by 0.06%, while Realty down by 2.68%, Capital Goods down 2.29%, Auto down 2.08%, Metal down 2.08% and Oil & Gas down 1.82% were top losers on the sectoral space.

Meanwhile, the government is unlikely to raise the import tax on gold further to avoid gold smuggling, but would introduce inflation-indexed instruments to help curb a record current account deficit, Finance Minister P Chidambaram said. In January, the government raised the import duty on gold to 6 per cent from 4 percent to curb gold import.

By adding further, Chidambaram said ‘we did raise tariffs from four percent to six percent as there are limits to which tariffs can be raised on gold, because if you raise tariffs prohibitively, gold smuggling will increase'. Creating inflation-hedged financial instruments seems to be a way for reducing dependence on imports of gold and the Reserve Bank of India (RBI) and the government are working on inflation-proof, inflation-indexed instruments.   

Steep rise in gold import, which is considered by many as a hedge against high inflation has mainly led to the widening of current account deficit (CAD), which reached an all-time high of 6.7 percent of gross domestic product in the third quarter of FY13.  India is the world’s largest consumer of gold accounting for around 20 percent of the world’s demand, the country's purchase is a major factor in determining the global gold prices.

The CNX Nifty touched a high and a low of 5,744.95 and 5,650.10 respectively. 

The top gainers on the Nifty were Sun Pharmaceuticals up by 1.40%, NTPC up 1.18%, Ranbaxy up 1.01%, Tata Power up 0.31% and Dr. Reddy's Laboratories up by 0.04%.

On the flip side, the top losers of the index were, NMDC down by 4.26%, DLF down by 4.22%, Bharti Airtel down by 3.87%, Bajaj-Auto down by 3.85% and Bank of Baroda down by 3.65%.

Most of the European markets were trading in red, France’s CAC 40 down by 0.71%, the United Kingdom’s FTSE 100 down by 0.61% and Germany’s DAX down by 0.19%.

Asian markets ended the session mixed as investors remained sideways ahead of outcome of a two-day policy meeting of the Bank of Japan (BoJ) starting April 03 to see if fresh easing measures aimed at boosting the world's third biggest economy meet market expectations. Though, after a choppy start, most of the Asian counters recovered at the time of closing as Cyprus have been given two more years, until 2018, to meet the conditions of a 10 billion-euro bailout under a final agreement with euro-zone lenders, giving the island nation a bit more breathing room.