Post Session: Quick Review

It was a dismal day of trade for the Indian markets, with major indices plunging to their lowest level in almost two months, logging their biggest percentage fall since June 20. Though, the global cues were the major factor behind the tepid trade of the local markets but on the domestic front the rupee hitting an all time low against the dollar became the foremost concern. The partially convertible rupee fell to 61.80 to the dollar intraday, breaking through a previous low of 61.21 hit on July 8, mainly on dollar demand from importers. Though, there was some bounce back on speculated RBI intervention to curb volatility but still the rupee traded at its all time low. In late trade there was a small recovery on report that Chief Economic Advisor Raghuram Rajan has been recommended for the next RBI governor’s post but that too was unable to give much lift to the spirit, either of market or the currency.

The mood of the market remained somber since morning after the soft closing of the US markets overnight and weak start of the Asian peers on speculation that good service industry data of US will lead the Fed to reduce its economic stimulus. The European markets too made a flat-to-soft start and weighed on the sentiments, capping any chance of recovery in the markets.

Back home, the markets made a gap-down start tailing the global peers and worried about the domestic economic conditions after the Asia-focused brokerage CLSA downgraded the growth forecast for the current fiscal year ending in March 2014 to 5.2% from 5.5% on recent RBI policy initiative. More disappointing was its forecast that India's growth will be sub-6% for three straight years. The rupee depreciation to new lows raised prospects for the RBI to take fresh steps to bolster the currency with a rate hike too being the possibility. Investors were worried that the government will struggle to implement measures to reduce a record-high current account gap. Banking stocks took the maximum hit along with the rate sensitive consumer durables. PSU oil marketing companies too were under pressure due to the rupee weakness and lost about 5% for the day. There was additional weakness in the banking aspirant NBFCs on reports that the granting of new banking licences may take a bit long as the central bank is deeply examining the corporate groups. Overall, the market mood remained subdued throughout the session with slide aggravating in the final hours. All the sectoral indices suffered sharp cuts, IT that had resisted in early deals, too fell in line, losing over half a percent. The broader markets were equally battered and lost 2-3 percent for the day.

The market breadth on the BSE remained negative; advances and declining stocks were in a ratio of 644: 1613, while 121 scrips remained unchanged. (Provisional)

The BSE Sensex lost 438.14 points or 2.28% to settle at 18744.12.The index touched a high and a low of 19131.92 and 18667.30 respectively. Among the 30-share Sensex pack, 3 stocks gained, while 27 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended lower by 2.53% and 1.72% respectively. (Provisional)

On the BSE Sectoral front, Consumer Durables down by 5.49%, Realty down by 4.49%, Bankex down by 4.01%, Metal down by 3.22% and Power down by 3.06%, were the top losers, while there were no gainers in the space. (Provisional)

The top gainers on the Sensex were Tata Motors up by 0.98%, Wipro up by 0.52% and TCS up by 0.29%, while, Tata Power down by 14.34%, BHEL down by 6.95%, Sterlite Industries down by 5.31%, HDFC down by 5.09% and Tata Steel down by 4.91% were the top losers in the index. (Provisional)

Meanwhile, Ruling out relaxation in new bank licences norms, the Reserve Bank of India (RBI) deputy governor Anand Sinha said that the central bank has started the scrutiny of applications; while, the process will take some time because we are deeply examine the corporate groups. The central bank has received 26 applications from various large corporates including Tata Group, Reliance Capital and L&T Finance among others. 

By adding further, Anand Sinha said that banking licence applicants have been given a transition period and we expect all applicants to comply with RBI’s requirements. The RBI will set up an external scrutiny panel after the internal scrutiny is over, he added.

Earlier in February, the RBI issued final guidelines that would govern the new set of proposed banks. As per the RBI guidelines, new banks should have a minimum equity capital of around Rs 5 billion and will not have foreign ownership of more than 49% for the first five years of operation. The rules also require that one out of every four branches opened by the new banks should be located in the rural areas.

India VIX, a gauge for markets short term expectation of volatility gained 9.27 % at 22.73 from its previous close of 20.80 on Monday. (Provisional)

The CNX Nifty lost 140.90 points or 2.48% to settle at 5,544.50. The index touched high and low of 5,664.90 and 5,521.80 respectively. 4 stocks advanced against 46 declining on the index. (Provisional)

The top gainers on the Nifty were Ambuja Cements up by 1.13%, Tata Motors up by 0.79%, Power Grid up by 0.48% and TCS up by 0.20%.

On the other hand, Tata Power down by 1435%, Asian Paints down by 7.34%, IndusInd Bank down by 7.14%, BHEL down by 7.08% and BPCL down by 6.69%.

The European markets were trading in green; France’s CAC 40 up by 0.15% and Germany’s DAX up by 0.27%, while the United Kingdom’s FTSE 100 down by 0.05%.

All the Asian markets barring Shanghai Composite and Nikkei 225 concluded Tuesday’s trade in red. China’s Shanghai rose for a fifth straight day as concern over economic slowdown dwindled after data which was released over the weekend pointed to a recovering service sector in July. China’s households were less confident about the country’s economy due to slower growth in both business activity and people’s income, a survey showed. The component indices showed that people’s confidence in the economy lost 12 points to 118, and willingness to invest retreated 4 points to 110. Besides, new home transactions fell below 200,000 square meters again in Shanghai last week while robust sales registered in the mid-to-low end segment dragged the city’s seven-day average price to a 10-week low. The purchases of new residential properties, excluding government-funded affordable housing, withdrew 12.7% from a week earlier to 191,200 square meters. Average cost of a new home, meanwhile, shed 2.3% week on week to 23,355 yuan ($3,810) per square meter.

Japan’s Nikkei concluded the trade in green. The International Monetary Fund (IMF) stated that Japan’s economy is recovering from years of stagnation, but that far-reaching reforms and a credible plan are needed to reduce its debt mountain and sustain growth in the long run. It forecasts that Japan’s economy will grow 2% in 2013, helped by stronger demand at home and overseas, but will expand only 1.2% in 2014 as consumers tighten their belts following an expected increase in sales tax.

The central bank stated that Indonesia can expect a substantial narrowing of the current account deficit in the third quarter, despite the figure widening to an all-time record of $9 billion this month. Bank Indonesia stated the current account deficit for the April-to-June period was at 3.6% of the country’s gross domestic product, up from the 2.4% of GDP - $5.3 billion - deficit registered in the first quarter. Additionally, the weak rupiah might be a boon to exporters keen to get their products to foreign markets cheaply, but for some local firms it is eroding profit margins and leaving them with foreign exchange losses. Indonesia's Jakarta Composite is closed for a week till August 9 on account of Public Holiday ‘Id-ul-Fitr’.