Sell-off in last leg of trade drag benchmarks lower; Nifty tumbles below 5,600 mark

Indian equity markets snapped the day’s trade in the negative territory with a cut of about half a percent as investors opted to stay away from risky assets on the penultimate day of June F&O series expiry. Frontline gauges, after see-sawing in negative and positive zone for most part of the Wednesday’s session, mainly turbo-drove in last leg of trade after Indian Rupee cracked to an all-time level of 60 per US dollar, raising fears over foreign investor outflows in near term. Month-end dollar demand from importers resulted in the rupee touching a new all-time low on June 26 against the dollar. The rupee touched a low of Rs 60.34 breaching previous all-time low of Rs 59.98 hit last week.

Investors, however, shrugged-off firm global cues as European markets traded firmly in the early deals with CAC, DAX and FTSE surging over a percentage point, with robust US data supporting sentiment. US durable goods orders and new home sales both rose more than expected in May, offering some assurance that the world’s biggest economy is competent enough to match-up Federal Reserve expectation. Asian counters too ended mostly in the green after the People’s Bank of China (PBOC) said late on Tuesday that it had provided cash to some institutions facing temporary shortages and would continue to do so if required.

Back home, sentiments got dented after foreign institutional investors (FII) net sold Rs 105.50 billion in 11 consecutive trading sessions on weakening hopes of rate-cut after currency depreciated nearly 12 per cent in past 2 months. Sentiments also remained dampened after shares related to telecom space declined on reports of likely meeting on the telecom sector on June 26 to decide on spectrum price for the proposed third round of auction of airwaves. Moreover, Bharti Airtel shed over five percent on reports the Department of Telecom (DoT) has decided to slap Rs 650 crore penalty on the company for violating roaming norms in 13 circles between 2003-2005.

However, the downside remained capped as buying was witnessed in software and technology counters after the rupee touched an all-time low of 60 versus the dollar on June 26. Losses also remain limited as some support came in on report that government will take a speedy decision on hiking FDI limits, as Finance minister P Chidambaram indicated that a final decision may be taken by the second or third week of July and has asserted that there was no room for pessimism as the fundamentals of the Indian economy are strong.

The NSE’s 50-share broadly followed index Nifty declined by twenty points to end below the psychological 5,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by about eighty points to finish well below the psychological 18,600 mark.

Moreover, broader markets too traded in the red for most part of the day’s trade and snapped the session with a cut of about half a percent. The market breadth remained in favor of declines as there were 952 shares on the gaining side against 1,360 shares on the losing side while 144 shares remain unchanged.

Finally, the BSE Sensex lost 77.03 points or 0.41% to settle at 18,552.12, while the CNX Nifty declined by 20.40 points or 0.36% to end at 5,588.70.

The BSE Sensex touched a high and a low of 18,690.50 and 18,514.35, respectively. The BSE Mid cap index down by 0.67% and Small cap index was down by 0.37%.

The top gainers on the Sensex were, Hero MotoCorp up by 3.89%, TCS up 2.84%, GAIL up 2.73%, NTPC up 2.13% and Wipro up by 0.97%, while Bharti Airtel down by 5.74%, Mahindra & Mahindra down 4.63%, Tata Motors down 3.02%, Jindal Steel down 2.89% and Hindalco down by 2.32% were the top losers on the index. 

The top gainers on the BSE Sectoral space were, IT up 1.69%, Power up 0.93%, FMCG up 0.66% and TECk up 0.40%, while Auto down 1.79%, Metal down 1.31%, Consumer Durables down 1.12%, Health Care down 1.12% and Bankex down 1.03% were the top losers on the sectoral space.

Meanwhile, in a move to restrain the demand of gold and to curb a record high current account gap, the Reserve Bank of India (RBI) has tightened norms for regional rural banks (RRBs) on gold lending and also extended the curbs to units of gold exchange traded funds (ETF) and gold mutual funds. The central bank said that like all other banks, the regional rural banks too cannot lend against gold ornaments, gold jewellery and gold coins weighing above 50 grams.

The RBI has suggested the regional rural banks that, while granting advance against the security of specially minted gold coins sold, they should ensure that the weight of the coin(s) does not exceed 50 grams per customer and the amount of loan to any customer against gold coins, gold ornaments and gold jewellery should be within the Board approved limit. Further, the central bank has also clarified that as per the stipulations of its circular, the restriction on grant of loan against ‘gold bullion’ will also be applicable to grant of advance against units of mutual funds and gold ETFs. 

Recently, the RBI had extended restrictions to all co-operative banks on loans against security of gold coins weighting up to 50 grams per customer. While, in May the RBI imposed restrictions on banks and NBFCs for providing loans against gold coins as well as units of mutual funds and gold ETFs.

Gold import, which is mainly responsible for ballooning CAD, rose sharply after the fall in prices in the international market. India’s gold imports touched 162 tonnes in May, while in April, it was around 100-120 tonnes, higher than the average monthly import level of 70-80 tonnes. Strong demand of gold has become a worrying factor for the Indian policymakers, as the country is facing a record current account deficit (CAD), which widened to 6.7% in the third quarter of FY13.

The CNX Nifty touched a high and low of 5,635.25 and 5,579.35 respectively. 

The top gainers on the Nifty were TCS up 3.86%, Hero MotoCorp up 3.84%, Asian Paints up 3.82%, PowerGrid up 2.81% and HCL Tech up by 2.69%.

On the flip side, the top losers of the index were, Bharti Airtel down 5.91%, M&M down 5.10%, Kotak Bank down 4.50%, IndusInd Bank down 4.17% and Ranbaxy down by 3.66%.

The European markets were trading in green, France’s CAC 40 up by 1.92%, the United Kingdom’s FTSE 100 up by 1.05% and Germany’s DAX up by 1.58%.

Mainland Chinese market ended slightly lower on Wednesday, while majority of the other Asian markets closed on positive note. There was some value buying, while investors sentiment perked up after a positive move by China’s central bank late Tuesday to reduce worries about a lingering credit squeeze in the country’s financial system. However, Japan’s Nikkei 225 continued its volatile run and went home with red mark, falling more than 1 percent after gained some ground earlier in the day. The Hang Seng Index ended with strong gains following a rally in index stocks.