Benchmarks extend southward journey for third day in a row

Extending southward journey for the third consecutive day, Indian equity markets ended the Friday’s trade in red with both frontline gauges tumbling below their crucial 5,900 (Nifty) and 19,800 (Sensex) levels. Though, markets opened on the positive note with sentiments remaining upbeat after the Prime Minister’s Office (PMO), with an aim of fast-tracking infrastructure development, set deadlines for steps to implement key projects covering sectors like railways, highways and power. But, indices started paring gains as investors turned cautious on report that Crisil revised downwards its GDP growth forecast for India to 5.5 percent this fiscal from its earlier estimate of 6 percent, citing reduced likelihood of monetary easing going forward due to falling rupee. Meanwhile, investors opted to remain on sidelines ahead of Reserve Bank of India’s (RBI) monetary policy review on July 30, 2013, which would decide the markets trends in near term.

Selling got intensified as European markets, after a positive start, took U-turn to enter into red terrain in early deals, as investors remained on sidelines ahead of Fed and the European Central Bank meeting next week, along with some significant political events in Europe. Asian markets too shut shop mostly in the red with Japanese Nikkei declining to its two-week low, down by about three percent, as selling accelerated on the back of a firmer yen and disappointing quarterly earnings from the likes of Canon Inc and Advantest Corp. Meanwhile, strengthening Yen also weighed on exporter shares.

Back home, investors continued to offload metal and mining shares for third consecutive day after China ordered companies in 19 industries to cut excess production capacity, raising fear that the demand is set to slow in the biggest consumer of the metal. Moreover, retail related stocks traded under pressure, as the MSME Ministry said that global multi-brand retailers must have to comply with the mandatory 30 per cent sourcing norm from small industries.

Disappointing earnings from Punjab National Bank and Bank of India added to the pressure of banking pivotal. While, Bank of India lost over 4.50% on reporting 9% growth in Q1FY14 net profit, Punjab National bank shares hit 4 years low due to rise in bad loans. Lower than estimated Q1 numbers from HUL too dampened the sentiments. The company reported 23.43% fall in its net profit after tax at Rs 1019.25 crore for the quarter as compared to Rs 1331.19 crore for the same quarter in the previous year.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below the psychological 5,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over fifty points to finish below the psychological 19,800 mark.

Moreover, broader markets witnessed blood-bath and ended the session with a cut of about a percentage point. The market breadth remained in favor of decliners, as there were 856 shares on the gaining side against 1,410 shares on the losing side, while 160 shares remained unchanged.

Finally, the BSE Sensex lost 56.57 points or 0.29% to settle at 19,748.19, while the CNX Nifty declined by 21.30 points or 0.36% to end at 5,886.20.

The BSE Sensex touched a high and a low of 19,907.45 and 19,699.76, respectively. The BSE Mid cap index was down by 0.99% and Small cap index was down by 0.82%.

The top gainers on the Sensex were, ITC up by 2.70%, Sun Pharma up 2.18%, Hero MotoCorp up 1.97%, Wipro up 1.74% and Mahindra & Mahindra up by 1.53%, while Hindalco down by 7.59%, Sterlite Industries down 4.61%, Coal India down 4.08%, Jindal Steel down 3.41% and Hindustan Unilever down by 3.38% were the top losers on the index. 

The top gainers on the BSE Sectoral space were, Health Care up 0.23%, Consumer Durables down 0.14% and FMCG up 0.12%, while Metal down 3.52%, Realty down 1.59%, PSU down 1.50%, Bankex down 1.43% and Capital Goods down 0.93% were the top losers on the sectoral space.

Meanwhile, Chief Economic Adviser Raghuram Rajan has said that all options to fund the country's record-high current account deficit are being considered. India's Current Account Deficit (CAD) stood at $18.1 billion, or 3.6% of the GDP in the March quarter, sharply lower from the historically high level of 6.7% seen in the December quarter. However, the current account gap for the full fiscal year ending in March 2013 widened $87.8 billion, which was 4.8% of GDP, compared with $78.2 billion or 4.2% of GDP, a year earlier.

Further, finance ministry's chief economic adviser defending Reserve Bank of India's move to manage volatility in the rupee, said that policy measures were geared in such a way that they would stabilise the weak rupee but do only 'minimal damage' to growth.

Notably, Raghuram’s comments came a day after State Bank of India chairman Pratip Chaudhuri opined that RBI to consider more transparent measures such as hiking interest rates in order to stabilise the domestic currency instead of simply tightening liquidity.

The RBI, in its latest attempt to shore-up the Indian currency, reduced the liquidity adjustment facility for each bank from 1% of total deposits to 0.5% and also asked banks to maintain higher average CRR (cash reserve ratio) of 99% of the requirement on daily basis as against earlier 70%.

The CNX Nifty touched a high and low of 5,944.50 and 5,869.50 respectively. 

The top gainers on the Nifty were Ambuja Cement up 5.23%, ITC up 2.76%, Sun Pharma up 2.35%, Hero MotoCorp up 2.22% and M&M up by 1.88%.

On the flip side, the top losers of the index were, Hindalco down 7.68%, PNB down 5.58%, Sesa Goa down 4.82%, Coal India down 4.20% and Hindustan Unilever down by 3.77%.

The European markets were trading mixed, France’s CAC 40 up by 0.55%, the United Kingdom’s FTSE 100 down by 0.11% and Germany’s DAX down by 0.45%.

The Asian markets concluded Friday’s trade mostly in red. Japanese stocks tumbled to snap a five-week winning streak, as exporters skidded on the yen’s strength. Japan’s consumer prices managed to register mild inflation in June compared with a year earlier, data from the Finance Ministry showed. The core consumer price index, which excludes volatile fresh-food costs, rose 0.4% from June 2012, though it was unchanged compared to May’s levels. Meanwhile, July’s core CPI for metropolitan Tokyo -- seen as a leading indicator for the nation as a whole -- also scored a price gain, rising 0.3% on an annual basis, though it too was unchanged from the previous month.

China’s Shanghai Composite shares fell with the key index heading for a three-day losing streak, after the government ordered companies in 19 industries to cut outdated production capacity. The country’s business sentiment dropped for the second consecutive month in July to the lowest level since October due to the recent liquidity squeeze. The monthly MNI China Business Indicator declined to 53.4 in July from 54.9 in June. According to the report, firms’ ability to obtain credit worsened to the lowest since October 2011, while the interest rates they faced rose to a one-year high.

Indonesia’s Jakarta Composite concluded the trade in red. The country’s central bank stated that current account deficit in the second quarter widened to 3.5% of gross domestic product, from 2.4% in the first quarter, due to seasonal factors. But the deficit will narrow to 2.5% in the July-September period. Concerns over Indonesia’s current account deficit, and rising inflation, helped trigger a heavy sell-off in its bonds, stocks and currency recently. The central bank is scheduled to announce Q2 balance of payment data on August 16, a day after it holds its monthly interest rate meeting. Indonesia’s rupiah fell by the most since September 2011 this week as the central bank allows a more rapid slide toward levels quoted in the offshore market.

Singapore’s resale price index for public housing flats, which are built and sold by the government to local resident households, rose slightly by 0.5% in the second quarter after several rounds of cooling measures, the country’s Housing Development Board (HDB) reported. The Q2 index is lower than the 1.3% growth in the previous quarter and the lowest quarterly growth since the first quarter in 2009.