Benchmarks depose another 1%; Nifty tumbles below psychological 5,700 level

Indian equity indices snapped a highly choppy session of trade on a depressing note on Thursday with both the frontline gauges ending the session below their crucial 5,700 (Nifty) and 18,900 (Sensex) levels with a cut of over a percentage point as leads remained weak not only locally but globally as well. Key benchmarks opened the session with a huge gap on the down side, weighed down by profit taking in blue chip stocks by foreign institutional investors in the wake of falling rupee. Sentiments also remain dampened after the Finance Minister P Chidambaram at a press conference today did not announce any concrete measures to prevent decline in the Indian currency. However, the finance minister said that the government will soon take a call on further reforms in foreign direct investment (FDI), a move which on implementation could bring back some cheers into equity markets.

Slight recovery was seen in early noon deals after government today revised the industrial output growth rate to 2.2 percent in April from 2 percent released yesterday after a correction in recording of production data for electricity, nevertheless, the second revision of IIP to 2.3 percent in the late trade was largely ignored by the investors. The IIP for the electricity sector for the month of April 2013 is corrected to 159.10 from 153.80 as shown in the press release dated June 12, 2013. But, traders continued to offload their holdings in index heavyweights, amid weak Indian rupee, which once again depreciated to 58.50 per dollar level during the trade. Market-men also remained on the sidelines ahead of wholesale price inflation (WPI) data which is expected to remain in the central bank’s comfort level of 5 percent.

Sentiments also got clobbered as European markets made a sluggish start with banks and commodity stocks, sectors most exposed to the broader economic fortunes, tumbling in early deals on concerns about stimulus unwinding and Greek political turbulence. Moreover, brutal selling in Asian markets too dampened the sentiments with Japanese Nikkei tumbling over six percent as the yen rebounded, sending shares of exporters tumbling.

Back home, selling in rate sensitive counters like auto, banking and realty also dampened the sentiments after high consumer price inflation dashed hopes of a rate cut by the central bank in its policy meet on June 17. However, losses remain capped up to certain extent as some encouragement came in with Fitch Ratings’ revision of India’s outlook to Stable from Negative and affirmation of ‘BBB-‘ rating. Fitch further said it expects the economy to recover modestly to 5.7% and 6.5% in FY14 and FY15, respectively.

The NSE’s 50-share broadly followed index Nifty dropped by over sixty points to end tad below its psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex tumbled by over two hundred and ten points to finish above its psychological 18,850 mark.

The broader markets too were butchered badly during the trade and snapped the session with a cut of over a percentage point. The market breadth remained in favor of declines as there were 747 shares on the gaining side against 1,571 shares on the losing side while 138 shares remain unchanged.

Finally, the BSE Sensex shaved off 213.97 points or 1.12% to settle at 18,827.16, while the CNX Nifty plunged by 61.10 points or 1.06% to end at 5,699.10.

The BSE Sensex touched a high and a low of 18,914.13 and 18,765.53, respectively. The BSE Mid cap index down by 1.37% and Small cap index was down by 1.06%.

The top gainers on the Sensex were, Hindalco up by 4.82%, Bharti Airtel up by 3.47%, Jindal Steel up 0.55%, SBI up 0.49% and Hindustan Unilever up by 0.19%, while Tata Motors down by 3.50%, M&M down 3.25%, Sun Pharma down 3.22%, Tata Steel down 2.92% and GAIL down by 2.70% were the top losers on the index. 

The only gainer on the BSE sectoral space was Consumer Durables up 1.55%, while Auto down 2.33%, Realty down 2.30%, Power down 1.81%, Health Care down 1.81% and PSU down 1.71% were the top losers on the sectoral space.

Meanwhile, attributing the rupee's decline to the surge in dollar demand in international markets, Planning Commission Deputy Chairman Montek Singh Ahluwalia said that the government has been taking steps to deal with the economic situation and hoped that forex market will stabilize in coming days. Ahluwalia said that rupee is falling in tandem with all emerging market economies because of their high current account deficit. The rupee had touched an all-time intra-day low of 58.98 recently on account of strong dollar demand in international market. Presently dollar is appreciating against all the currencies across the world and the rupee has not weakened as much as some of its peers with South African currency depreciating by around 11 per cent.

Currently, to check the rupee depreciation, the RBI intervened which suggests that it is feeling that market pressures were pushing the currency to an unnecessarily low point. It was learnt that the central bank asked some state owned banks to sell US dollars when the local unit was trading at 58.95/$. Accordingly, banks include Union Bank of India, Canara Bank, SBI, Syndicate Bank and others have sold the greenback to tune of $4-5 billion.   

The rupee is depreciating mainly due to the high CAD, which widened on account of 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. The CAD widened to a record high of 6.7% in the third quarter of FY13. 

The CNX Nifty touched a high and low of 5,729.85 and 5,683.10 respectively. 

The top gainers on the Nifty were Hindalco up by 4.71%, Bharti Airtel up 3.31%, Jindal Steel up 0.62%, SBI up 0.55% and Ambuja Cement up by 0.46%.

On the flip side, the top losers of the index were, PNB down 4.73%, Bank of Baroda down 4.20%, GAIL down 3.92%, Tata Motors down 3.90% and NMDC down by 3.69%.

The European markets were trading in red, France’s CAC 40 down by 0.79%, Germany’s DAX down by 1.46% and the United Kingdom’s FTSE 100 down by 1.02%.

Asian stocks closed shop on a weak note, with Japanese shares leading the losses as dollar hits a two-month low against the yen, on expectations that central bank’s easing measures will soon come to an end. Shanghai markets ended lower in its first session of trade this week, as investment data at the weekend reinforced fears about a slowdown in the world's number two economy. Hong Kong market went home with red mark after touching lowest level since September.