Feeble global cues coupled with RBI's measures drag markets lower

Pressurized by weak global cues coupled with RBI’s latest measures, Indian equity markets ended the Wednesday’s session with a cut of over a percentage point with frontline gauges tumbling below their psychological 20,100 (Sensex) and 6,000 (Nifty) levels. Sentiments remained down-beat with banking stocks bearing most of the brunt. After a negative opening, the domestic bourses never showed any sign of strength and continued sliding till end though, marginal recovery was seen in last leg of trade on rupee strength, but it was not enough to pull back markets into the green terrain. Selling was both brutal and wide based, barring software and technology, none of sectoral indices on BSE ended in green. Moreover, investors remained cautious as it was the penultimate day of July series F&O expiry.

The BSE Bankex counter edged lower as sentiments got dampened after the RBI reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrow funds from the central bank. The limit will come into force with immediate effect and continue till further notice, the RBI in another measure to suck out liquidity from the system, has asked banks to maintain higher average CRR (cash reserve ratio) of 99 per cent of the requirement on daily basis as against earlier 70 per cent. CRR is portion of deposits that banks are required to keep with RBI.

On global front, the US markets closed mostly lower overnight after a decline in a regional manufacturing gauge prompted concern, but the Dow industrial climbed to a record close. Asian markets ended mixed after a choppy trade with Chinese benchmark ending with a cut of over half a percent after China’s vast manufacturing sector slowed to an 11-month low in July as new orders faltered and the job market darkened, suggesting the world’s second-largest economy is still losing momentum. However, European markets opened in the green ahead of manufacturing activity data from the euro-zone.

Back home, sentiments also got clobbered as metal stocks like JSW Steel, Sesa Goa, Sterlite Industries, SAIL, Nalco and Tata Steel edged lower after a private survey showed manufacturing weakened further in July in China. Additionally, selling witnessed in retail related stocks on the buzz that government may not change the FDI policy to suit any particular company. Bucking the trend, telecom stocks viz. Bharti Airtel, Idea Cellular and Reliance Communication edged higher on hopes that the government may reduce spectrum price for the upcoming third round of auctions.

The NSE’s 50-share broadly followed index Nifty slipped by about ninety points to close below its psychological 6,000 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and ten points to finish below the psychological 20,100 mark. Moreover, broader markets too struggled to get traction and ended the session in red with a cut off over one and a half percent.

The market breadth remained in favour of declines as there were 773 shares on the gaining side against 1524 shares on the losing side while 123 shares remain unchanged. The overall volumes stood at over Rs 4.00 lakh crore, which remained on the higher side as compared to that on Tuesday.

Finally, the BSE Sensex shaved off 211.45 points or 1.04% to settle at 20,090.68, while the CNX Nifty plunged by 87.30 points or 1.44% to end at 5,990.50.

The BSE Sensex touched a high and a low of 20,252.70 and 19,994.25, respectively. The BSE Mid cap index was down by 1.82% and Small cap index was down by 1.42%.

The top gainers on the Sensex were, Bharti Airtel up by 2.18%, Wipro up 2.02%, TCS up 1.87%, Sun Pharma up 1.85% and Cipla up by 1.68%, while Jindal Steel down by 3.99%, L&T down 3.93%, ICICI Bank down 3.73%, HDFC Bank down 3.40% and SBI down by 3.13% were the top losers on the index. 

The top gainers on the BSE Sectoral space were, IT up 1.03% and TECk up 0.99%, while Bankex down 4.61%, Consumer Durables down 3.13%, Capital Goods down 2.98%, Metal down 2.09% and PSU down 1.76% were the top losers on the sectoral space.

Meanwhile, Petroleum and Natural Gas Minister Veerappa Moily has ruled out reconsidering gas pricing policy, saying that the Cabinet Committee on Economic Affairs has taken the decision and there was no proposal before the government to reconsider the new gas pricing policy. Moily said that, the government doesn’t want to change it as the enhancement of gas price is in the favour of nation’s development, although, the decision of gas price hike has attracted criticism, particularly from the Left parties.

Moily further added that, in a bid to raise energy production to 800 MW from 32 MW at present, ONGC would accord priority to make available 20 lakh cubic metres of gas per day to the Puducherry Power Corporation in Karaikal and the state run company has agreed to fulfill this obligation on a priority basis and would also ensure transportation of the gas within two years. The state run PSU company would also associate itself with the state government in setting up a super speciality hospital at Karaikal.

This issue was discussed with Lt. Governor of Puducherry Veerendra Kataria and Minister of State in PMO V Narayanasamy too was keen on augmenting power generation in the state. Minister of State for Petroleum and Natural Gas, Panabaka Lakshmi too supported the same. Meanwhile, Chief Minister N Rangasamy had assured that accelerating government’s initiatives like acquiring land and other allied work will boost energy production.

Further, Veerappa Moily said that GAIL’s pipeline project would help people of Tamil Nadu, particularly, farmers and would not have negative impact on agriculture. Such project, covering around 16,000 km all over the country, has already benefited farmers, apparently referring to the objections by the Tamil Nadu government in this regard.

The CNX Nifty touched a high and low of 6,047.25 and 5,962.60 respectively. 

The top gainers on the Nifty were Bharti Airtel up 2.08%, TCS up 1.90%, Sun Pharma up 1.83%, Cipla up 1.67% and Bajaj Auto up by 1.39%.

On the flip side, the top losers of the index were, IDFC down 9.02%, IndusInd Bank down 8.41%, JP Associates down 6.48%, Axis Bank down 6.29% and Kotak Bank down by 5.82%.

The European markets were trading in green, France’s CAC 40 up by 1.08%, the United Kingdom’s FTSE 100 up by 0.88% and Germany’s DAX up by 0.90%.

The Asian markets concluded Wednesday’s trade on mixed note. The Mainland Chinese stocks fell after a gauge of the country’s manufacturing sector dropped to 11-month low. China’s manufacturing-sector activity is slowing further in July, with new factory orders deteriorating at a faster pace, according to preliminary data from HSBC and Markit. The so-called flash version of HSBC’s Chinese manufacturing Purchasing Managers’ Index dropped to 47.7, it was down from a final result of 48.2 for June, with any reading below 50 indicating a contraction in activity. A separate government version of the June PMI printed at 50.1. The flash PMI - which includes about 85%-90% of the survey responses that will be used for the final version - also showed employment in the sector sliding at a quicker pace than in June.

Nikkei too ended the trade lower due to weak Chinese manufacturing data. Japan’s exports growth slowed in June as growth in shipments to China slowed, the Finance Ministry reported, with the effects of a stronger yen leading to a less impressive performance than in May. Exports rose 7.4% in June compared to a year earlier, missing a 10.3% gain forecast, and slowing from May's 10.1% advance. Still, the results marked the fourth increase in a row for exports, and resulted in a narrowing of the trade deficit to 180.8 billion Yen ($1.82 billion), down from May's 993.9 billion Yen gap, though above a consensus estimate for a deficit of 155.7 billion Yen. Imports, meanwhile, surged 11.8% on an annual rate after rising 10% in May.

Indonesia’s Jakarta Composite too concluded the trade in red. The country’s consumers were the most confident globally, according to the research by polling group Nielsen, while Southeast Asian countries figured prominently in the top-10 rankings during the second quarter. Southeast Asia’s biggest country had an index of 124 to top the rankings, Nielsen’s Global Survey of Consumer Confidence showed, well above the world average of 94. Indonesia was followed by the Philippines with an index of 121. 

South Korean shares showed an upward trend for third straight session as continued foreign purchases of local stocks relieved profit-taking by retail investors. Despite the mixed closure of Wall Street overnight, continued stock purchases both by foreign and institutional investors led the market advance. Separately, the Central Bank of Sri Lanka has decided to keep its rates unchanged, citing increased foreign currency inflows and controlled inflation. The monetary report released by the Central Bank noted that the decision was made to maintain the Repurchase rate and the Reverse Repurchase rate of the Central Bank of Sri Lanka without change at 7% and 9%, respectively.