Benchmarks pare most of the losses to make a flat closing

Key domestic benchmarks once again ended the volatile day of trade in the red terrain extending their losing streak for the sixth consecutive session on Wednesday. Though, recovery in last leg of trade helped the bourses to pare most of their losses. The benchmark got off to a negative start on the back of feeble global cues and extended their downfall to touch intraday lows. The indices even went on to test important psychological 19,100 (Sensex) and 5,650 (Nifty) levels, but the key gauges got solid support around those intraday low levels as they convalesced from thereon after Finance Minister P. Chidambaram exuded confidence that economy would record a growth rate of 5.5 to 6 per cent in the current fiscal, up from 5 per cent a year ago. The indices tried hard to move back into the positive territory and even got there but only for a brief period as investors took the opportunity to cash in on the bounce back.

Firm opening in European counters too supported the recovery in domestic markets. DAX and FTSE traded higher in early deals on Wednesday as investors weighed corporate earnings from Electricite de France SA to Barclays Plc and the Federal Reserve began a two-day policy meeting. However, mostly lower closure in Asian markets dampened the sentiments. Japanese benchmark declined around one and a half percent as yen strengthened and most of the investors adopted a wait-and-see stance ahead of another batch of key domestic earnings. Meanwhile, Singapore’s jobless rate edged up 2.1% in June, up from 1.9% in March and 1.8% in December, respectively.

Back home, weakness in rupee too dampened the sentiments as it continued depreciating on doubts that whether the central bank can defend the currency with its existing cash-draining measures unless policy makers take additional steps. Sentiments also got dampened on report that overseas investors have pulled out around Rs 18,400 crore across both the equities and debt markets. The outflow of foreign money from the debt market was higher compared to the equities markets during the month. FIIs moved out close to Rs 12,000 crore in debt, while equities saw outflows of about Rs 6,000 crore in July.

However, some revival seen in the late hour of trade where the frontline counters pared most of their intraday losses after Finance Minister said government will further liberalise the FDI policy and encourage public sector undertakings to raise funds from overseas markets. He further added that, in a bid to deal with the Current Account Deficit (CAD), the government will relax the External Commercial Borrowing (ECB) norms, attracting investments from sovereign wealth and pension funds and NRI deposits. Moreover, Chief Economic Adviser Raghuram Rajan’s statement too aided the sentiments where he said that government will announce measures to help narrow the current account deficit in the next few weeks, including looking at ways of bringing in foreign investments.

The NSE’s 50-share broadly followed index Nifty declined by over ten points to end below the psychological 5,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped only three points, managing to hold the psychological 19,300 mark.

Moreover, broader markets too struggled through the day to end with a cut of about a per cent. The market breadth remained in favor of decliners, as there were 837 shares on the gaining side against 1393 shares on the losing side, while 140 shares remained unchanged.

Finally, the BSE Sensex lost 2.64 points or 0.01% to settle at 19345.70, while the CNX Nifty declined by 13.05 points or 0.23% to end at 5,742.00.

The BSE Sensex touched a high and a low of 19387.50 and 19126.82, respectively. The BSE Mid cap index was down by 0.87% and Small cap index was down by 0.92%.

The top gainers on the Sensex were Bharti Airtel up by 7.33%, Dr Reddys Lab up by 4.66%, Hindalco Industries up by 4.40%, Wipro up by 4.35% and BHEL up by 4.06%, while, NTPC down by 5.84%, HDFC Bank down by 2.65%, ITC down by 2.44%, ICICI Bank down by 2.06% and Cipla down by 1.87% were the top losers in the index.

The top gainers on the BSE Sectoral space were, Metal up by 2.39%, Teck up by 2.23%, Oil & Gas up by 1.88%, IT up by 1.29% and Consumer Durables up by 1.20%, while Realty down by 2.30%, FMCG down by 2.26%, Bankex down by 1.84%, Power down by 1.67% and Capital Goods down by 0.17% were the top losers on the sectoral space.

Meanwhile, the Confederation of Indian Industry (CII), although has empathized with RBI’s decision of holding key rates in First Quarter Monetary Policy Review,  but it sees the moderation of growth outlook by the RBI as a matter of great concern, enforcing their view of more actions being required on multiple fronts to revive the economy. 

Kris Gopalakrishnan, President, CII stated, “We understand the decision of the RBI on the rates and draw heart from the statement of the RBI saying that had it not been for the volatility, the rates could have been reduced, since inflation has started to moderate'. He added, “Lowering of economy’s growth projection is the number one worry because all the problems like current account deficit, in some sense, are because of the reduction in growth rates, which will impact jobs”. The central bank, in its First Quarter Review of Monetary Policy, slashed the growth projection for 2013-14 to 5.5% from an earlier estimate of 5.7%, while keeping key rates unchanged and asking the government to take urgent steps to contain the current account deficit.

However, CII is hopeful that the forthcoming session of the Parliament will be fruitful, with some of the key legislations being enacted, which would shore-up investors’ sentiment back at home and abroad. These include the Bills on Insurance, Pensions, etc.

Further, while CII has shared with the government its concerns about the high CAD which calls for financing measures, it has also expressed a dire need to establish a very competitive manufacturing sector. “Our exports need to increase exponentially and with a strong manufacturing sector we should be able to obviate the need for many imports, which could be very well manufactured within the country,' Gopalakrishan said.

The CNX Nifty touched a high and low of 5,752.10 and 5,675.75 respectively.  The top gainers on the Nifty were Bharti Airtel up by 7.51%, Dr. Reddy's Laboratories up by 4.67%, BHEL up by 4.36%, Lupin up by 4.35% and Hindalco Industries up by 4.22%. On the other hand, DLF down by 6.25%, Axis Bank down by 6.18%, Power Grid down by 5.97%, NTPC down by 5.59% and JP Associate down by 4.24%.

Most of the European markets were trading in green; Germany’s DAX up by 0.01% and the United Kingdom’s FTSE 100 up by 0.76%, while France’s CAC 40 down by 0.08%.

All the Asian markets barring Shanghai Composite and Jakarta Composite, concluded Wednesday’s trade in red. Investors awaited the Federal Reserve’s outlook on its bond purchases, with Japanese shares also pressured by a strengthened yen and some downbeat results. The Shanghai Composite Index opened higher after yesterday late evening the Political Bureau of the ruling Communist Party's Central Committee stated that China’s economy will maintain steady growth in the second half of this year. Separately, the head of the National Development and Reform Commission, China’s top economic planner, Xu Shaoshi added that China has the capability to achieve the government’s annual economic growth target of 7.5% this year. China’s economy has been stuck in a protracted slowdown, easing to 7.5% growth in the second quarter from 7.7% in the first three months. Worries are growing that the prolonged slowdown could affect the global economy.

Indonesia’s economic growth likely slowed in the second quarter as investments eased and exports remained battered by weak global commodity prices and demand. Gross domestic product expanded 5.93% in the April-June period from a year earlier, slowing from 6.02% pace in the first quarter. The Central Statistics Agency (BPS) is scheduled to release the second-quarter GDP figures later this week. Japan’s manufacturing grew at a slower pace this month, though still registered expansion. The headline index fell to 50.7 from June’s 52.3, but remained above the 50 level -- the dividing line between growth and contraction -- for the fifth straight month.

Singapore’s jobless rate edged up 2.1% in June, up from 1.9% in March and 1.8% in December, respectively, the Ministry of Manpower stated. Employment creation remained strong, increasing to 32,500 in the second quarter from 28,900 in the previous quarter. The resident unemployment rate rose to 3% in June to 2.9% in March, while the jobless rate for citizens increased to 3.1% from 2.9% in the preceding two quarters.