Benchmarks remain under pressure on growth concerns and weak rupee

Extending losses for the sixth straight session, benchmarks continue to remain under pressure in late morning trade on growth concerns and a weak rupee. The rupee approached a record low on Wednesday on doubts about whether the central bank can defend the currency with its existing cash-draining measures unless policy makers take additional steps. The rupee fell to as low as 61.12 to the dollar, not far from its record low of 61.21 hit on July 8.The Reserve Bank of India's (RBI) likely sold dollars via state-run banks on Wednesday as the rupee headed towards a record low. The rupee has come under sharp selling pressure after the RBI kept interest rates on hold yesterday and failed to announce any additional steps to defend the currency. Sentiments got dampened on steady selling by funds on growth concerns after the RBI lowered GDP estimates to 5.5% from earlier projection of 5.7% for the current fiscal, besides, weakening rupee which fell by 60 paise to 61.07 against the dollar in early trade today, was another dampening factor.

On the global front, most of the Asian equity indices were trading in the red at this point of time as investors opted away from piling up positions in risky assets ahead of the outcome of a Federal Reserve policy meeting for clarity on US economic stimulus. Back home, traders were seen piling up positions in Teck, IT and Auto, while selling was seen in Realty, Banking and PSU sector. Meanwhile, the NSE Nifty and BSE Sensex were trading near the psychological 5,700 and 19,200 levels respectively. The market breadth on BSE was showing negative trend with advances to declines in the ratio of 348:1245. The BSE Sensex is currently trading at 19220.94, down by 127.40 points or 0.66% after trading in a range of 19325.39 and 19126.82. There were 13 stocks advancing against 17 declines on the index. The broader indices were trading in red; the BSE Mid cap index was down by 2.11% and Small cap index lost 1.71%.

The few gaining sectoral indices on the BSE were, Teck up by 0.94%, IT up by 0.72%, Auto up by 0.21%, and Health Care up by 0.18%, while Realty down by 3.37%, Bankex down by 2.62%, PSU down by 2.62%, Power down by 2.37% and FMCG down by 1.85% were the top losers on the BSE.

The top gainers on the Sensex were Bharti Airtel up by 3.53%, Dr Reddys Lab up by 2.95%, TCS up by 1.74%, Coal India up by 1.60% and Mahindra & Mahindra up by 1.34%. On the flip side, NTPC was down by 5.40%, ONGC was down by 4.42%, Gail India was down by 3.03%, ICICI Bank was down by 3.00% and ITC was down by 2.38% were the top losers on the Sensex.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) will soon consider a new definition of 'control' in the foreign direct investment (FDI) policy that would prevent backdoor entry of foreign companies in the prohibited sectors. The issue of control had become contentious after the government modified the FDI policy in 2009 through Press Notes 2 and 3.

The move is aimed to provide better mechanism for calculating direct and indirect investment in a company and once approved, will replace the existing definition given in the Consolidated FDI Policy. Further, the new definition of control will include the right to appoint majority of directors and will also be expanded to include control over the management or policy decisions, instead of just the right to appoint majority of the shareholders. 

Presently, a company is said to be controlled by an Indian resident if the Indian investor holds more than 51% stake and can appoint the majority directors in the firm. As per the new guidelines, an Indian company will be considered a foreign entity if the major stake in the firm is held by foreign investors or is a foreign controlled and any investment by such a company will also be considered as foreign investment. After the Cabinet approval, the Reserve Bank of India (RBI) is expected to issue a notification to effect the required changes to Press Notes 2 and 3 of FDI policy 2009 from the date of issuance of the notice. The new definition will be applicable with prospective effect, which is the date of notification.

The CNX Nifty is currently trading at 5,708.75 down by 46.30 points or 0.80% after trading in a range of 5,742.10 and 5,675.75. There were 15 stocks advancing against 35 declines on the index.

The top gainers of the Nifty were Bharti Airtel up by 3.71%, Dr. Reddy's Laboratories up by 2.97%, HCL Technologies up by 1.94%, Coal India up by 1.66% and Tata Consultancy Services up by 1.63%. On the flip side, DLF down by 6.31%, BPCL down by 5.43%, NTPC down by 5.12%, ONGC down by 4.38% and IndusInd Bank down by 3.75% were the major losers on the index.

Most of the Asian equity indices were trading in red; Jakarta Composite declined 37.78 points or 0.82% to 4,570.71, KLSE Composite dropped 17.88 points or 1.00% to 1,777.20, Nikkei 225 shed 84.37 points or 0.61% to 13,785.45, Straits Times dipped 10.62 points or 0.33% to 3,234.83, Seoul Composite slipped 0.66 points or 0.03% to 1,916.39 and Taiwan Weighted was down by 41.15 points or 0.50% to 8,122.40.

On the flip side, Shanghai Composite surged 11.60 points or 0.58% to 2,001.66 and Hang Seng was up by 48.28 points or 0.22% to 22,002.24..