Markets slump in early deals on weak Asian cues; Rupee breaches 61/$ mark

Indian equity benchmarks have made a negative start with both the frontline gauges tumbling below their crucial 5,800 (Nifty) and 19,250 (Sensex) levels, tracking weakness in other Asian markets, while depreciating rupee too weighed on the market sentiments. Indian rupee has weakened further and breached 61/$ mark. Sentiments also remained dampened after a CII survey has stated that unless the government tackles issues like dwindling FDI flow and high current account deficit, the rupee will continue to remain volatile and may depreciate further. Bucking the trend, software and technology stocks edged higher as rupee hit record low against the dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

Globally, sentiments got clobbered, as better-than-expected US jobs growth increased the possibility that the Federal Reserve will roll back its stimulus in coming months, sending the dollar to a three-year high against a basket of major currencies. All the Asian equity indices, barring Japanese Nikkei, were trading in the red at this point of time with Chinese market tumbling by over one and a half percent on Beijing’s plan to choke off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy's reliance on investment funded by cheap debt.

Back home, on the sectoral front, software and technology remained the only gainers, while realty, metal, public sector undertaking, oil and gas and auto remained the top losers. The broader indices too were struggling to get some traction, while the market breadth on the BSE was positive; there were 426 shares on the gaining side against 823 shares on the losing side while 49 shares remain unchanged.

The BSE Sensex opened at 19418.98; about 76 points lower compared to its previous closing of 19495.82, and has touched a high and a low of 19422.69 and 19185.92 respectively. The index is currently trading at 19214.70, down by 281.12 points or 1.44%. There were 5 stocks advancing against 25 declines on the index.

The overall market breadth has made a weak start with 33.10% stocks advancing against 63.83% declines. The broader indices too were trading in red; the BSE Mid cap and Small cap indices were down by 0.98% and 0.64% respectively. 

The top gaining sectoral indices on the BSE were, IT up by 0.54% and Teck up by 0.25%, while Realty down by 2.70%, Metal down by 2.26%, PSU down by 2.15%, Oil & Gas down by 1.99% and Auto down by 1.95% were the top losers on the sectoral index.

The top gainers on the Sensex were Infosys up by 1.09%, Wipro up by 0.57%, Cipla up by 0.48%, Dr Reddys Lab up by 0.40% and Hero MotoCorp up by 0.34%.

On the flip side, Tata Motors was down by 3.81%, HDFC was down by 3.54%, Jindal Steel was down by 2.90%, Coal India was down by 2.64% and ICICI Bank was down by 2.44% were the top losers on the Sensex.

Meanwhile, Finance Minister P Chidambaram has said that concerns of power and fertiliser sector will be addressed before the implementation of decision of natural gas price hike in April 2014. Chidambaram has already stated that only the price payable to producers has been fixed now and input rates for power and fertiliser have not been decided. He further stated that gas-based power plants represented a very small fraction of the total power capacity and oil ministry has asked power and fertilizer ministries to indicate the affordable gas price.

These two sectors have expressed their concern over the recent, government decision of doubling natural gas prices from the present $4.2 per million British thermal unit (mbtu) to $8.4 per mbtu from April 1, 2014. While, the Power Ministry wanted price to be maintained at the existing $4.2 per mBtu, the Fertiliser Ministry was ready to accept $6.7 per mBtu mooted by the Ministry of Petroleum and Natural Gas (MPNG). The new price which will be applicable to all public and private sector producers alike, will likely result in rise in power tariffs and fertilizer cost.

Hike in gas price is likely to increase production cost of urea by around Rs 6,300 per ton, the Government controls MRP of urea at a low level and has been absorbing the increase in form of subsidy. Fertiliser subsidy has surged to Rs 1,02,207 crore in 2012-13. Similarly, the impact on power sector too would be incredible with state electricity boards already having a cumulative loss of over Rs 200,000 crore.

However, the move to raise gas prices is expected to benefit the government by around $2.2 billion incremental revenue by way of higher taxes. Further, the government can use high profit share to subsidize gas supply to the core sector. Oil minister M V Moily has said that the move will help bring gas production over 3 Trillion cubic feet of gas reserves that had been declared economically unviable at current rates of $ 4.2 per mbtu. 

The CNX Nifty opened at 5,833.15; about 34 points lower as compared to its previous closing of 5,867.90, and has touched a high and a low of 5,833.85 and 5,775.65 respectively.

The index is currently trading at 5,777.95, down by 89.95 points or 1.53%. There were 6 stocks advancing against 44 declines on the index.

The top gainers of the Nifty were HCL Techup by 1.75%, Cairn up by 1.65%, Infosys up by 0.99%, Cipla up by 0.44% and Dr Reddys Lab up by 0.32%.

On the flip side, JP Associate down by 4.22%, Tata Motors down by 3.97%, BPCL down by 3.93%, HDFC down by 3.65% and DLF down by 3.07% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite declined 32.38 points or 1.61% to 1,974.82, Hang Seng dropped 390.87 points or 1.87% to 20,463.80, Jakarta Composite slumped 104.39 points or 2.27% to 4,498.41, KLSE Composite decreased 5.45 points or 0.31% to 1,766.82, Straits Times contracted 18.08 points or 0.57% to 3,151.65, KOSPI Composite dropped 20.18 points or 1.10% to 1,813.13 and Taiwan Weighted was down by 92.77 points or 1.16% to 7,909.05.

On the flip side, Nikkei 225 rose 30.79 points or 0.22% to 14,340.76.