Benchmarks witness massacre on feeble global cues, depreciating rupee

Indian equity markets witnessed butchery on Thursday with both the major indices losing nearly three percentage points and recorded their steepest fall since February 2012, breaching major crucial support levels 18,750 (Sensex) and 5,700 (Nifty) on feeble global cues and depreciating rupee. A gap-down start of markets never looked in recovery mood and continued sliding till end, closing near the lowest point of the day. Selling was both brutal and wide-based as none of the sectoral indices on BSE were spared. However, counters which featured in the list of worst performers included realty, metal, banking, power and oil and gas. Sluggish global cues remained the major reason behind the sell-off in domestic markets. The sell-off began after Fed chairman Ben Bernanke confirmed that US economic growth was strong enough to begin tapering back on its $85 billion in monthly asset purchases later this year.

Selling got intensified after European counters made a droopy start with all the indices tumbling over two percent in early deals. Sentiments also remain dampened after all the Asian counterparts shut shop in red with China shares slumping to their lowest levels since December after a preliminary survey showed manufacturing activity in the mainland hit a nine-month low. The ‘flash’ HSBC China Purchasing Managers’ Index contracted further to 48.3 in June from May’s final reading of 49.2.

Back home, sentiments also got dented after Indian rupee slumped to an all-time low of Rs 59.97 as it would force the Reserve Bank of India (RBI) to defer easing of key policy rates. Cautiousness also crept in on report that the foreign direct investment (FDI) in India has declined by six percent to $5.47 billion during January-March quarter of the current calendar year despite government’s various efforts to promote the country as an investment destination.

Some pressure also came in after shares of real estate and infrastructure companies plunged up to 10 per cent after the rupee slumped to a record low today raising concerns that the rising rupee would force the RBI to defer reduction in key policy rate going forward. Selling in Metal counter too dampened the sentiments as stocks like Hindalco, Jindal Steel & Power, Tata Steel, NMDC, Sesa Goa, Nalco, SAIL and Sterlite Industries edged lower on concerns about the health of the Chinese economy after a survey showed further slowdown in China’s manufacturing sector in June 2013. Additionally, banking shares remained under pressure falling up to 8 percent after the Fed said that it would start curtailing its monetary stimulus measures if the economy continues to recover.

The NSE’s 50-share broadly followed index Nifty collapsed by over one hundred and sixty points to end below the psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over five hundred and twenty points to finish below the psychological 18,750 mark.

Moreover, broader markets too witnessed blood-bath and ended the session with a cut of about two percent. The market breadth remained in favor of declines as there were 654 shares on the gaining side against 1,647 shares on the losing side while 111 shares remain unchanged.

Finally, the BSE Sensex shaved off 526.41 points or 2.74% to settle at 18,719.29, while the CNX Nifty plunged by 166.35 points or 2.86% to end at 5,655.90.

The BSE Sensex touched a high and a low of 19,069.20 and 18,687.19, respectively. The BSE Mid cap index down by 1.93% and Small cap index was down by 1.72%.

The only gainers on the Sensex were, Wipro up by 1.28% and Sun Pharma up by 0.69%, while Jindal Steel down by 9.62%, Tata Steel down 6.25%, Hindalco down 6.24%, BHEL down 4.99% and Sterlite down by 4.52% were the top losers on the index. 

The top losers on the BSE Sectoral space were, Realty down 5.18%, Metal down 4.63%, Bankex down 3.98%, Power down 3.29% and Oil & Gas down 3.06%, while there was no gainer on the sectoral space.

Meanwhile, to address funding challenges of the telecom sector, the government will set-up the Telecom Finance Corporation (TFC) and infuses Rs 1,000 crore of the proposed authorised capital of Rs 10,000 crore in it. Further, the TFC is proposed to be set-up on the lines of sectoral finance bodies such as the Tourism Finance Corporation of India and Power Finance Corporation and will be registered as non-banking financial corporation and non deposit infrastructure finance company. The Cabinet has already approved for the creation of TFC under the National Telecom Policy 2012.  

Initially, the government of India will have 100 percent shareholding in TFC and initial equity capital is proposed to be sought through budgetary support. Banks and other financial institutions could be offered equity participation later in order to spread the financial burden and encourage broader participation of the financial community. The fund infusion for telecom finance body is proposed to be done through taxable as well as tax-free bonds, term loans from banks and other financial instruments, off-shore borrowings from multilateral agencies such as International Monetary Fund, World Bank and Asian Development Bank.

As per the government estimate, telecom sector debt market under the 12th Five Year Plan (2012-17) should be around Rs 7.55 lakh crore and TFC, which will initially target 5 percent of this debt market, will translate into a loan portfolio of Rs 38,000 crore in 5 years, approximately Rs 7,000 crore annually. Further, TFC will target to maintain debt equity ratio of 5 for first five year of its establishment and will operate in the interest margin of 200 to 250 basis points.

The CNX Nifty touched a high and low of 5,755.00 and 5,645.65 respectively. 

The only gainers on the Nifty were Sun Pharma up 0.60% and Ambuja Cement up by 0.05%.

On the flip side, the top losers of the index were, Jindal Steel down 10.82%, JP Associates down 7.34%, DLF down 7.22%, Tata Steel down 6.97% and Reliance Infra down by 6.77%.

The European markets were trading in red, France’s CAC 40 down by 2.55%, the United Kingdom’s FTSE 100 down by 2.49% and Germany’s DAX down by 2.55%.

Asian markets tumbled badly and ended lower on Thursday, as investor sentiments were hurt by Fed Chairman Bernanke's comments signaling the end of bond buying by the middle of next year. Mainland Chinese shares closed lower after reporting contraction in manufacturing activity at a faster pace in June, reducing the prospects of a promising economic recovery. The flash manufacturing purchasing managers' index fell to a nine-month low of 48.3 in June from 49.2 in May. Japan’s Nikkei stocks fell sharply, on the back of a weaker yen which fell against both the dollar and euro. Hang Seng market went home with huge losses, as Hang Seng China Enterprises Index, which tracks Chinese companies’ Hong Kong-listed shares, tumbled to a nine-month low after the disappointing data.