Benchmarks witness massacre amid weakening rupee

Tuesday’s session turned out to be a day of rigorous pounding for Indian stock markets which seldom showed any instances of gaining impetus. The benchmark equity indices suffered a nasty two and half a percent laceration and drifted even below the psychological 18,750 (Sensex) and 5,550 (Nifty) tracking slump in the Indian rupee which hit record low against the dollar today. A gap-down start of markets never turned into recovery mood and continued sliding till end, closing not only to the lowest point of the day but also near their lowest level in almost eight weeks. Selling was both brutal and wide-based as none of the sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include Consumer Durables, Banking and Metal.

Sentiments remained dampened 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 anxiety came in from its forecast that India’s growth will be sub-6% for three straight years. Selling got intensified tracking selling in banking counter on concerns that the Reserve Bank of India (RBI) would announce fresh measures to cap liquidity in an effort to prevent further weakness in the rupee. Though, the government has taken many steps to contain the free fall of rupee in the past few days but has met with utter disappointment.

Meanwhile, sentiments across the globe remained down-beat on speculation that the Federal Reserve may soon reduce economic stimulus after US economy showed signs of recovery. Overnight, the US markets ended mostly lower, though there was a report that activity in the US service sector grew at a faster rate in the month of July. Asian markets too ended mostly in the red with Hang Seng shedding over a percent on the back of disappointing first-half earnings from HSBC. However, European markets traded mixed in early deals.

Back home, sentiments also got clobbered out of shape as selling was witnessed in NBFC related stocks on reports that the granting of new banking licences may take a bit long as the central bank is deeply examining the corporate groups. Sentiments also got hurt after textile related stocks like, Alok Industries, Grasim Industries and Arvind edged lower as the India’s export of textiles and clothing remained almost the same year-on-year, in the first three months of the fiscal to $7.79 billion compared to $7.76 billion in last fiscal. Additionally, sentiments also got impacted after Financial Technologies stock once again tumbled around 20% after trading in e-series product contracts were halted at National Spot Exchange (NSEL), the only contracts available on the exchange platform, as a precautionary measure.

The NSE’s 50-share broadly followed index Nifty declined by over one hundred and forty points to end below the psychological 5,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped around four hundred and fifty points to end below the psychological 18,750 mark.

Moreover, broader markets too were butchered badly and snapped the session with a cut of around two percent. The market breadth remained in favour of decliners, as there were 655 shares on the gaining side against 1,599 shares on the losing side, while 124 shares remained unchanged.

Finally, the BSE Sensex shaved off 449.22 points or 2.34% to settle at 18,733.04, while the CNX Nifty plunged by 143.15 points or 2.52% to end at 5,542.25.

The BSE Sensex touched a high and a low of 19,131.92 and 18,667.30, respectively. The BSE Mid cap index was down by 2.60% and Small cap index was down by 1.78%.

The top gainers on the Sensex were, Tata Motors up by 0.97%, Wipro up by 0.37% and TCS up by 0.21%, while, Tata Power down by 14.76%, BHEL down by 6.58%, HDFC down by 5.90%, Sterlite Industries down by 5.18% and Tata Steel down by 4.47% were the top losers in the index.

There was no gainer on the BSE Sectoral space, while Consumer Durables down by 5.55%, Realty down by 4.45%, Bankex down by 3.90%, Metal down by 3.24% and Power down by 3.21% were the top losers on the sectoral space.

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.

The CNX Nifty touched a high and low of 5,664.90 and 5,521.80 respectively. 

The top gainers on the Nifty were Ambuja Cement 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 14.35%, Asian Paints down by 7.34%, IndusInd Bank down by 7.14%, BHEL down by 7.08% and BPCL down by 6.69% were the top losers.

The European markets were trading mixed; Germany’s DAX down by 0.04% and the United Kingdom’s FTSE 100 down by 0.20%, while France’s CAC 40 up by 0.04%.

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’.