Post Session: Quick Review

Snapping three sessions’ winning streak, bulls tottered under intense selling pressure on Tuesday, resulting into loss of around a percent for major indices. Benchmarks after getting a gap-down opening collapsed in early trade, reacting to Reserve Bank of India’s (RBI) measures, which in an attempt to curb Rupee’s volatility, announced slew of measures, including lifting short term interest rates and tightening liquidity. Both retail and intuitional investors turning nervous about India’s growth prospects post the RBI move, winded up their long position, despite finance minister’s exuding confidence of 6% growth. However, the session turned out to be less nasty, as benchmarks recouped some portion of early losses in the second half of trade.  Availability of select blue chip stocks at lower levels, which drove bargain buyers to the markets, mainly aiding markets in some recovery. Benchmark indexes, Sensex and Nifty, manage to end past the crucial 19,850 and 5,950 marks respectively, which emerged as strong support levels.

Some positive global cues too failed to render any support to the ailing equity markets. Asian pacific shares ended mixed as news out of Beijing pointed to a further weakening in the economy offseting the gains seen on account of inline expectation China’s GDP growth in the April-June quarter. Meanwhile, European shares traded in narrow ranges early on Tuesday as investors shied away from major moves ahead of inflation and German confidence data and awaited further clues on US monetary stimulus.

Closer home, Q1 earnings of Ashok Leyland also disappointed Dalal Street. The stock tanked over 9% after the company missed the street estimates by a wide margin, reporting a first quarter net loss of Rs 142 crore, compared with a profit of Rs 67 crore in the year ago quarter. Amidst across the board selling, few stocks from Fast Moving Consumer Goods, Oil & Gas and Technology counters managed gain. On the flip side, stocks from Realty, Banking and Capital Goods counters were the major culprits behind the market plummet. Banking stocks slumped after RBI measures made it costlier for banks to access funds from the central bank. However, telecom stocks rallied on hopes that the government may approve 100 percent foreign direct investment (FDI) in telecom services. According to few media reports, the Department of Telecom (DoT) is moving for a 100 percent FDI, as the sector requires Rs 5-6 lakh crore in next few years.  The market breadth on the BSE remained negative; advances and declining stocks were in a ratio of 881: 1415, while 136 scrips remained unchanged. (Provisional)

The BSE Sensex lost 183.25 points or 0.91% to settle at 19851.23.The index touched a high and a low of 19890.63 and 19649.58 respectively. Among the 30-share Sensex pack, 13 stocks gained, while 17 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended lower by 1.45% and 0.79% respectively. (Provisional)

On the BSE Sectoral front, FMCG up by 1.81%, Oil & Gas up by 0.74% and Teck up by 0.05% were the only gainers, while Realty down by 5.84%, Bankex down by 4.83%, Capital Goods down by 2.23%, Metal down by 1.90% and Consumer Durables down by 1.13% were the top losers. (Provisional)

The top gainers on the Sensex were ITC up by 2.74%, Bharti Airtel up by 1.84%, Hindustan Unilever up by 1.81%, Tata Power up by 1.58% and Tata Motors up by 1.28%, while, ICICI Bank down by 5.82%, SBI down by 4.60%, HDFC down by 3.64%, Jindal Steel down by 3.62% and L&T down by 3.27% were the top losers in the index. (Provisional)

Meanwhile, in its further effort to salvage the depreciating local currency, the Reserve Bank of India (RBI) has unveiled measures to address exchange rate volatility, including lifting two interest rates by 200 basis points each, tightening liquidity and a planned sale of Rs 12000 crore of government bonds on July 18, after host of its other recent measures proved futile.

The measures were announced after the RBI governor flew to Delhi on a day when the Prime Minister and finance minister held meetings, ostensibly to address the exchange rate amid dwindling foreign exchange reserves.

The RBI raised the Marginal Standing Facility (MSF) rate (rate at which banks can borrow from the RBI at an elevated rate against government securities during times of tight cash) and Bank Rate each by 200 basis points to 10.25% as against 8.25% each earlier and limited its lending of overnight funds to banks to Rs 75,000 crore, which means that if banks need more they will have to pay a higher interest rate of 10.25%. The MSF rate has been recalibrated with immediate effect to be 300 basis points above the policy repo rate under the LAF.

The market perception of likely tapering of US Quantitative Easing, which has triggered outflows of portfolio investment, particularly from the debt segment has resulted into marked deprecation of rupee in the last six weeks. However, countries with large current account deficits, such as ours, have been particularly affected despite their relatively promising economic fundamentals.

Previously to arrest the currency’s fall, RBI has urged oil firm to source all of their 8-8.5 billion of dollar needs every month for import of oil, from a single public sector bank. It also barred banks from trading in currency futures and exchange-traded currency options market on their own.India VIX, a gauge for markets short term expectation of marginally gained 1.06% at 18.99 from its previous close of 18.79 on Monday. (Provisional)

The CNX Nifty lost 67.80 points or 1.12% to settle at 5,963.00. The index touched high and low of 5,966.05 and 5,910.95 respectively. 21 stocks advanced against 29 declining on the index. (Provisional)

The top gainers on the Nifty were ITC up by 2.60%, BPCL up by 2.11%, Ambuja Cements up by 2.11%, Bharti Airtel up by 1.89% and Hindustan Unilever up by 1.76%

On the other hand, DLF down by 7.74%, IndusInd Bank down by 7.56%, JP Associate down by 7.42%, IDFC down by 7.18% and Axis Bank down by 6.26%.

Most of the European markets were trading in red; France’s CAC 40 down by 0.37% and Germany’s DAX down by 0.22%, while the United Kingdom’s FTSE 100 up by 0.12%.

Asian markets concluded the Tuesday’s trade mostly in green despite Asian Development Bank (ADB) lowering its growth forecasts for developing Asia this year and the next, as a softer outlook for the world’s second-biggest economy China meant subdued economic activity elsewhere in the region. The bank lowered its growth forecast for developing Asia by 0.3% points to 6.3% in 2013 and 6.4% in 2014. It cut its growth estimates for China by 0.5% points to 7.7% and 7.5% this year and the next. The ADB expects Japan’s recovery to pick up speed as the effects of ‘Abenomics’ take root and improving corporate profits bolster household income and business environment. It forecast growth in Japan this year of 1.8%, against an April estimate of 1.2%. Japan’s Nikkei and Hang Seng concluded the trade on positive note.

China’s Shanghai Composite Index concluded the trade in green as investors remained focused on the action policy makers might take to prevent a further economic slowdown. China’s central bank Governor Zhou Xiaochuan stated that the country’s economic growth is facing relatively big downward pressures and that the country will increase financial incentives to support small firms. On the economy front, China’s job market remained generally stable in the first half of the year despite the economic downturn. China added 7.25 million jobs in the first half, an increase of 310,000 from the number seen during the same period last year, the minister of human resources and social security reported.

Jakarta Composite ended in green. Fitch Ratings stated that Bank Indonesia’s decision to raise its benchmark interest rate by 50 basis points to 6.5% last week will help maintain the country’s banking stability and slow lending amid weak economic growth this year. Singapore’s Straits Times ended the day on negative note, International rating agency, Moody’s, has revised its outlook on Singapore’s banking system from stable to negative, expressing concern with the debt level rising in the city state. Other agencies such as Fitch still have a rating of stable on the outlook for the banking system in Singapore.