Indian markets trade under pressure as crude rises, rupee falls

Key benchmarks seem to be in no mood to consolidate as they opened on a sluggish note and extended their slide to fresh intraday lows in late morning trade on back of negative cues from global markets. Moreover, investors sold into the markets after losing confidence as the rupee resumed its slide past the 60 mark against the dollar. Higher crude oil prices and a weak rupee are likely to widen the current account deficit. Oil prices were close to $102 per barrel for the first time after over a year as Egypt's political crisis intensified and as demand increased following upbeat US economic data. The rupee weakened and slipped below 60 per dollar mark as institutional investors continued to exit Indian equities. The partially convertible rupee was at 60.02, down 36 paise, against its previous close in early trade. Sentiments got dampened on sustained selling by funds amid a weakening rupee and subdued trend in the Asian region.

On the global front, most of the Asian equity indices were trading lower as sentiment remained dampened after activity in China’s services sector stayed lacklustre in June as new orders grew at their weakest pace in more than four years, adding to signs of a slowdown in the world’s second-largest economy.

Back home, the traders were seen piling up positions in IT and FMCG while selling was seen in Metal, Realty and PSU sector. In scrip specific developments, IT stocks rose as the rupee weakened against the dollar on heavy dollar demand tracking strengthening of the US currency overseas. Stocks related to power sector was trading under pressure on report that government may stop accepting fresh applications from power plants seeking coal supply for the next two years in view of acute coal shortage. Additionally, selling were also visible in public sector oil marketing companies viz. BPCL, HPCL and IOC after crude oil rallied above $100 a barrel for the first time in nine months on brewing political concerns in Egypt. Banks sector fall after RBI issued draft guidelines that would require banks to make higher provisions and increase risk weights on exposure to companies that have unhedged foreign-currency exposure.

In scrip specific actions, ONGC dropped after the company has lost the giant Kashagan oilfield to the Chinese. ONGC Videsh, the overseas investment arm of state-owned ONGC, had in November last year struck a deal to buy ConocoPhillips' 8.4 per cent stake in Kazakhstan's biggest oilfield, Kashagan for $5 billion. However, Kazakhstan blocked its $5 billion deal to buy US energy major ConocoPhillips' stake in the Caspian Sea oilfield.

Meanwhile, the NSE Nifty and BSE Sensex were trading just below their psychological 5,800 and 19,300 levels respectively. The market breadth on BSE was showing negative trend with advances to declines in ratio of 647:1047. The BSE Sensex is currently trading at 19227.18, down by 236.64 points or 1.22% after trading in a range of 19347.11 and 19210.41. There were 7 stocks advancing against 23 declines on the index. The broader indices were trading on red; the BSE Mid cap index was down by 1.36% and Small cap index was down by 0.74%.

The top gaining sectoral indices on the BSE were, IT up by 0.30% and FMCG up by 0.19%, while Metal down by 3.45%, Realty down by 3.15%, PSU down by 2.12%, Bankex down by 2.04% and Capital Goods down by 1.94% were the top losers on the BSE.

The top gainers on the Sensex were Gail India up by 0.83%, Sun Pharma up by 0.63% , Infosys up by 0.59%, Hindustan Unilever up by 0.30% and ITC up by 0.25%. On the flip side, Hindalco Industries was down by 4.05%, Tata Steel was down by 4.04%, Sterlite Inds was down by 3.45%, Tata Power was down by 3.17% and SBI was down by 2.81% were the top losers on the Sensex.

Meanwhile, In a further sign that Asia's third-largest economy is still struggling to come out of a quagmire of low growth and high inflation, the HSBC services Purchasing Managers’ Index (PMI), based on a survey of around 400 companies, fell from May’s three-month high 53.6 to 51.7 in June. 

With services companies registering weaker output growth and manufacturers posting a second consecutive monthly decline, the HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, also fell from 52.0 in May to 50.9 in June. This was consistent with a marginal rate of expansion, which was the second-weakest in over a year-and-a-half.

Weaker gains in new work and subdued economic conditions mainly led the deceleration in output growth, as per the survey report.  Although, new orders placed at private sector firms in India increased during June, the overall rate of expansion was slight and the weakest in the current 50- month period of growth. While, services companies registered weaker gains in new work, production at manufacturers fell for the first time since March 2009. A sub-index for the Indian PMI that measures new business fell to a 20-month low of 51.9 in June from 53.2 in May, and consequently firms were less optimistic about the future.

Nevertheless, employment increased at faster rates across both the manufacturing and service sectors. Job creation for the private sector overall was moderate, but the quickest in nine months.

On the inflation front, faster rates of inflation were signaled in the Indian private sector during June as Input prices rose at the quickest pace in three months, amid evidence of higher raw material, labour and fuel costs.  The report highlighted that notwithstanding the slowdown, inflation readings firmed on the back of higher labour and raw material prices, with the depreciation of the rupee also cited as a factor.

The CNX Nifty is currently trading at 5,789.55 down by 68.00 points or 1.16% after trading in a range of 5,815.00 and 5,781.70. There were 9 stocks advancing against 41 declines on the index.

The top gainers of the Nifty were Lupin up by 1.97%, Ranbaxy up by 1.03%, GAIL up by 0.74%, HCL Technologies up by 0.72% and Sun Pharma up by 0.60%. On the flip side, JP Associate down by 6.70%, Bank of Baroda down by 6.47%, IDFC down by 4.70%, Tata Steel down by 4.03% and Hindalco down by 3.86% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite declined 26.58 points or 1.32% to 1,979.98, Hang Seng contracted 400.22 points or 1.94% to 20,258.43, Jakarta Composite decreased 84.17 points or 1.78% to 4,644.54, Straits Times dropped 25.35 points or 0.80% to 3,147.97, KOSPI Composite shed 25.46 points or 1.39% to 1,829.17, Taiwan Weighted was down by 115.24 points or 1.44% to 7,905.62 and Nikkei 225 was down by 41.38 points or 0.29% to 14,057.36

On the flip side, KLSE Composite rose 2.47 points or 0.14% to 1,774.36.