Markets falter on concerns about near term economic outlook

Indian equity markets fell sharply to trade near day’s low in the late morning session after Reserve Bank of India (RBI) left the policy interest rates unchanged in the monetary policy as its priority has switched from reviving an economy growing at its slowest in a decade to supporting a currency that plunged to a record low. The central bank also said that cash tightening steps taken recently will be rolled back in a calibrated manner as rupee gets stabilized. Reacting to the news, the markets added some gains but subsequently retreated all the gains considering lower GDP growth projection for the current fiscal by the central bank to 5.5% from 5.7%. The benchmark 10-year bond yields and overnight index swap (OIS) rates fell after the policy review. The rupee weakened despite central bank’s policy review amid increased month end demand for US currency from importers. On sectoral front, bank stocks, which rallied a bit ahead of monetary policy, have retreated to lower levels, with a few of them even slipping into the negative zone. Realty stocks are trading notably lower. Automobile stocks too have declined on selling pressure. Meanwhile, Jet Aiways rallied nearly 8% after the airliner won conditional nod to sell 24% stake to Etihad Airways for Rs 2,058 crore after the Abu Dhabi-based carrier made significant concessions diluting its control.

On the global front, most Asian stocks were up as a weaker yen has boosted the income of Japanese carmakers and electronics manufacturers, offsetting a bigger-than-estimated decline in Japanese factory output. Back home, the market breadth was favoring the negative trend; there were 1113 shares on the losing side against 645 shares on the gaining side, while 112 shares remained unchanged.

The BSE Sensex is currently trading at 19,492.93 down by 100.35 points or 0.51% after trading in a range of 19,672.72 and 19,471.12. There were 9 stocks advancing against 21 declines on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.86% and Small cap index lost 0.88%.

The top gaining sectoral indices on the BSE were, IT up by 0.95%, Teck up by 0.25% and Capital Goods up by 0.05%, while Realty down by 1.93%, PSU down by 1.58%, Power and FMCG both down by 1.48% and Metal down by 1.39%were the top losers on the BSE.

The top gainers on the Sensex were Jindal Steel up by 2.61%, L&T up by 1.41% and Wipro up by 1.35%, Infosys up by 1.17% and TCS up by 0.70%. On the flip side, Gail India was down by 3.41%, Hindalco Industries was down by 3.26%, Bajaj Auto was down by 2.53%, Bharti Airtel was down by 2.47% and ONGC was down by 2.42% were the top losers on the Sensex.

Meanwhile, the Foreign Investment Promotion Board (FIPB) has cleared six proposals envisaging investments of Rs 855 crore in the pharmaceutical sector. The main proposal approved by FIPB, chaired by Department of Economic Affairs Secretary Arvind Mayaram include Singapore based healthcare firm Fresenius Kabi Oncology to bring in FDI worth Rs 349 crore and Calyx Chemicals & Pharmaceuticals to bring in foreign investment of Rs 200 crore.

India is one of the world's biggest markets for generic drugs and allows 100 percent FDI through automatic route in pharma for new projects and as for existing firms it must be approved by the FIPB. Last year, the government had decided that all foreign investments in existing domestic pharma firms should be allowed only after clearance by the FIPB, keeping in view the availability of affordable essential drugs in the wake of multinationals acquiring local companies.

Further, the government was of the view that pharma is a growing industry and there is a need to protect the domestic players from multinationals particularly generics so that Indian pharmaceutical industry continue to grow. There are too many pharma proposals pending with the FIPB as several global pharma companies are looking to buy stake in Indian firms. Meanwhile, the government is likely to soon revise the FDI policy with regard to existing pharma companies.

The CNX Nifty is currently trading at 5,804.60 down by 27.05 points or 0.46% after trading in a range of 5,861.30 and 5,795.95. There were 12 stocks advancing against 38 declines on the index.

The top gainers of the Nifty were Jindal Steel up by 2.38%, L&T up by 1.53%, IDFC up by 1.36%, Axis Bank up by 1.33%, and Infosys up by 1.23%. On the flip side, DLF down by 4.08%, JP Associate down by 4.03%, BPCL down by 3.88%, Gail down by 3.68% and Ranbaxy down by 3.57% were the major losers on the index.

The Asian equity indices were trading in green; Shanghai Composite up by 0.77%, Hang Seng up by 0.18%, Jakarta Composite up by 1.08%, Nikkei 225 up by 1.53%, Straits Times up by 0.11% to 3,240.54, Seoul Composite up by 17.16 points or 0.90% to 1,917.05 and Taiwan Weighted was up by 0.98%, while, KLSE Composite slipped 0.25%.