Late hour sell-off drag benchmarks lower; rupee breaches 57/$ mark

Friday’s trading session turned out to be a disappointing session of trade for the Indian equity markets, as market participants booked their intraday gains in absence of any major positive trigger. The frontline gauges, after a choppy start, gained strength as some support to the markets came in from Financial Services Secretary’s statement that domestic economy is likely to kick-start towards revival in the next 3 to 6 months as a large number of the 215 stalled projects are expected to start rolling. Rally in software and technology counters too provided the much needed support. But, market slipped into the negative terrain in late trade as investors lacked the conviction of staying long in risky equities. The psychological 19,700 (Sensex) and 5,950 (Nifty) levels proved as stern resistances as the key indices could not claw much beyond those levels, instead drifted lower.

Global cues too remained choppy with all the Asian peers, barring KLSE Composite, shut shop in red as investors remained wary ahead of the key US jobs report due later today that may clarify whether the Federal Reserve could start tapering its stimulus programme in coming weeks. Though, European markets exhibited mixed trend in early deals as investors remained sidelines ahead of US jobs data as the report could prove key in ascertaining when the US Federal Reserve might begin to unwind its monetary stimulus.

Back home, sentiments remain dampened after partially convertible rupee broke the 57 per dollar level and fell to 57.04 against previous close of 56.85. Sentiments took a hit for the worst after selling intensified in banking counter after CBDT reportedly issued notices to four more banks on Cobrapost allegations. The four banks to which notice were issued are Allahabad Bank, Canara Bank, ING Vysya Bank and Bank of Baroda, which clobbered out of shape and ended with loss in the range of 1.25-3.75%. Meanwhile, Finance Minister asked banks to lower interest rates in an effort to drive growth and pass on rate-cut benefits to retail and corporate borrowers. Additionally, telecom stocks like, Reliance Communication, Bharti Airtel and Idea Cellular edged lower on reports that there will be another round of spectrum auction in August. Bucking the trend, software and technology counters remained the only gainers on the BSE sectoral front as the rupee hit near one-year low below 57 a dollar on caution ahead of the US monthly jobs data.

The NSE’s 50-share broadly followed index Nifty declined by over forty points to end below its psychological 5,900 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by about ninety points to finish below its psychological 19,450 mark. Moreover, the broader markets too traded in-line with benchmarks and snapped the session in red terrain. The market breadth remained in favor of declines as there were 1,029 shares on the gaining side against 1,328 shares on the losing side while 169 shares remain unchanged.

Finally, the BSE Sensex lost 90.26 points or 0.46% to settle at 19,429.23, while the CNX Nifty declined by 40.40 points or 0.68% to end at 5,881.00.

The BSE Sensex touched a high and a low of 19,711.55 and 19,397.51, respectively. The BSE Mid cap index down by 0.56% and Small cap index was down by 0.10%.

The top gainers on the Sensex were, TCS up by 3.48%, Dr Reddys Lab up by 2.82%, Wipro up 1.67%, Infosys up 0.80% and Tata Power up by 0.57%, while Bharti Airtel down by 2.40%, Mahindra & Mahindra down 2.27%, NTPC down 2.12%, Maruti Suzuki down 2.04% and Jindal Steel down by 1.91% were the top losers on the index. 

The only gainers on the BSE Sectoral space were, IT up 1.59% and TECk up 0.72%, while Auto down 1.39%, Realty down 1.36%, Bankex down 1.34%, Power down 1.32% and PSU down 1.26% were the top losers on the sectoral space.

Meanwhile, attributing high depreciation in rupee value to rising current account deficit (CAD), the RBI Deputy Governor K C Chakrabarty said that the central bank will take necessary steps to check currency volatility. Chakrabarty said that in a high CAD and fiscal deficit scenario, rupee has to depreciate orderly and can’t expect the domestic currency to strengthen. Meanwhile, the central bank will do everything to turn down the volatility, but will not disclose its strategy. The RBI has forex reserves of over USD 290 billion to deal with the situation on the external sector. 

Recently, the rupee hit 57-level lows after 11 months on account of the high CAD, which widened due to rising gold import and high crude oil prices. Further, persistent dollar demand from importers and banks also added to the fall in rupee value. In May, India’s gold imports touched 162 tonnes, while in April, it was around 100-120 tonnes, higher than the average monthly import level of 70-80 tonnes. While, the CAD widened to a record high of 6.7% in the third quarter of FY13.

Further, in a big disappointment to Indian policymakers, the recently released World Gold Council (WGC) report highlighted that India’s gold imports in April-June quarter of 2013 may increase by 200 percent y-o-y to around 300-400 tonnes, which would be almost half the imports of whole of 2012.

The CNX Nifty touched a high and low of 5,972.70 and 5,871.30 respectively. 

The top gainers on the Nifty were TCS up by 3.53%, Dr Reddy’s up 2.68%, BPCL up 1.45%, Lupin up 1.02% and Infosys up by 0.86%.

On the flip side, the top losers of the index were, JP Associates down 3.30%, Axis Bank down 3.25%, Bharti Airtel down 2.69%, Bank of Baroda down 2.61% and Maruti Suzuki down by 2.36%.

The European markets were trading in red, France’s CAC 40 down by 0.13%, Germany’s DAX down by 0.70% and the United Kingdom’s FTSE 100 down by 0.32%.

Asian markets ended lower on Friday, once again dragged down by the Japan’s Nikkei, which went home with red mark dropping three days in a row, partly because of a stronger yen that pulled down exporters' stocks. Chinese market closed lower, because of continued profit-taking amid weakness in regional stock markets and as investors cashed out ahead of the Dragon Boat Festival Holiday. South Korea's Kospi ended with red mark, as Samsung Electronics shares slumped 6.2% amid concerns over slowing growth in its mobile business.