Post Session: Quick Review

Indian markets went through carnage on Friday after four straight sessions of rise to relinquish all their weekly gains. The Reserve Bank of India’s latest measures of imposing partial capital controls on companies and individuals to stabilise the rupee led the fall. In a knee-jerk reaction rupee slumped to its all time low breaching 62/$ mark. Foreign investors looked worried about investing in India with the measures to restrict capital outflows and markets capitulated for the worst with Sensex plunging over 800 points for the first time since 2009.

The mood of the domestic markets remained somber from the very beginning and there was a slight gap-down opening after the US markets slumped overnight, reacting to the positive macro data and on concern that Fed will soon start tapering its stimulus, with an announcement as early as September. The Asian markets too got-off to a weak start and some of the indices suffered cut of about 1-2%. Things remained the same with European markets too making a flat-to-weak start, unable to provide any support to the markets.

Back home, both the benchmarks suffered cut in triple digit with Sensex and Nifty plunging by maximum percentage points since September 22, 2011. The banking counter felt maximum brunt and the Bank Nifty plunged to its lowest touched since July 2009, reacting to the RBI’s Capital Control measure after market hours on Wednesday, which cut overseas direct investment (ODI) by Indian companies by three-fourths to 100% from 400%, making it more difficult for local corporates to buy overseas assets. However, state-run Navratna companies, including Oil India and ONGC Videsh were exempted to ensure that its moves do not cripple energy security. RBI also lowered overseas remittances by locals to $75,000 a year from $200,000, and prohibited investments in overseas property. However, those in genuine need of foreign exchange beyond $75,000 per year could apply to the central bank for permission. The day’s trade was marred by relentless selling pressure at an alarmingly high volume. When things seemed stablising around mid of the day taking cues from Finance Minister P Chidambaram statement that steps announced by RBI to curb investment by Indian companies abroad is not a “capital control” measure and the apex bank will revisit it at an appropriate time. But the things took the turn for the worst and selling intensified on concerns that the Reserve Bank's measures to curb capital outflows would prove insufficient. Though, it was across the board selling but consumer durables, banking, realty, oil & gas and metal were completely butchered, even the defensive sectors healthcare and resilient IT suffered considerable losses.

The market breadth on the BSE remained negative; advances and declining stocks were in a ratio of 728: 1582, while 140 scrips remained unchanged. (Provisional)

The BSE Sensex lost 749.39 points or 3.87% to settle at 18618.20.The index touched a high and a low of 19310.95 and 18559.65 respectively. Among the 30-share Sensex pack, 1 stock gained, while 29 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended lower by 2.76% and 2.6% respectively. (Provisional)

On the BSE Sectoral front, Consumer Durables down by 8.52%, Realty down by 6.19%, Metal down by 6.13%, Bankex down by 5.44% and Capital Goods down by 5.14%, were the top losers, while there were no gainers in the space. (Provisional)

The only gainer on the Sensex were Hero MotoCorp up by 2.25%, while, BHEL down by 10.87%, Sterlite Industries down by 7.14%, Tata Steel down by 6.73%, Jindal Steel down by 6.61% and ONGC down by 6.20% were the top losers in the index. (Provisional)

Meanwhile, Prime Minister Manmohan Singh said that prevailing slowdown in Indian economy would not last long as the government is working hard to remedy the situation. Manmohan Singh said that over the last nine years, the country had attained average economic growth rate of 7.9 percent and therefore economic growth will recover soon on the back of strong growth potential. The government expects that Indian economic growth to recover to 6 percent in the FY14 from the decade low level of 5 percent recorded in the previous fiscal. 

Expecting positive impacts of the recent government’s move of allowing several sectors to foreign direct investment (FDI) in the coming months, Manmohan Singh said that the FDI limit on telecom sector was raised 100 percent from 74 percent, while restrictions in a dozen other sectors from insurance to tea plantations were eased or abolished. These steps will increase investment into the country and will generate new employment opportunities. In order to improve the infrastructure sector, Manmohan Singh said that the government will kick-start a number of new infrastructure projects including 8 new airports and two new sea-ports in the coming months. To remove hindrances in the way of stalled projects, the government has already set up the Cabinet Committee on Investment (CCI).

The government has also hoped to bring down current account deficit (CAD) to 3.7 percent of the gross domestic product (GDP) in the current financial year by cutting imports, especially of gold, silver, oil and non-essential items. India’s CAD widened to a record high to $88.2 billion or 4.8 of GDP in the previous fiscal on account of high gold imports and crude oil prices. The recent volatility in the currency markets was largely due to the growing concerns over the high CAD and growing inflation, reflecting pressure on the domestic currency. Rupee value depreciated to a record low of over 62 per dollar on August 16.

India VIX, a gauge for markets short term expectation of volatility gained 26.41 % at 23.64 from its previous close of 18.70 on Wednesday. (Provisional)

The CNX Nifty lost 225.35 points or 3.92 % to settle at 5,516.95. The index touched high and low of 5,716.60 and 5,496.05 respectively. 3 stocks advanced against 47 declining on the index. (Provisional)

The top gainers on the Nifty were Hero MotoCorp up by 2.17%, Power Grid up by 1.13% and HCL Technologies up by 0.20%.

On the other hand, JP Associate down by 11.09%, BHEL down by 10.92%, Axis Bank down by 9.36%, Bank of Baroda down by 8.63% and Reliance Infrastructure down by 8.52%.

Most of the European markets were trading in red; Germany’s DAX down by 0.21% and the United Kingdom’s FTSE 100 down by 0.10%, while France’s CAC 40 up by 0.12%.

All the Asian markets barring Taiwan Weighted, concluded Friday’s trade in red amid worries that Federal Reserve would cut its stimulus, with mainland Chinese stocks finishing lower after witnessing a dramatic surge earlier in the day. Japan's Nikkei share average fell for a second day led by financials on speculation that the Federal Reserve may begin to trim its stimulus soon. Hong Kong shares, after tracking Friday’s roller-coaster ride for mainland Chinese markets, ended the day on a tepid note, but they still had their best week of the year. The Shanghai Composite ended the week 0.8% higher despite today’s losses, while the Hang Seng Index was among the region’s best weekly performers with a 3.3% gain. Also posting weekly gains, South Korea’s Kospi added 2.1%, and the Nikkei Stock Average edged 0.3% higher.

Shanghai’s inflation growth eased in July while industrial production expanded faster and investment remained flat, indicating strengthening economic performance in the city. The Consumer Price Index, the main gauge of inflation, rose 2% from a year earlier last month, compared with the increase of 2.5% in June, the Shanghai Statistics Bureau stated. It bucked the national trend last month as China’s inflation growth was unchanged at 2.7%. Meanwhile, the city’s industrial production grew 2.5% year on year to 261.1 billion yuan ($42.1 billion) in July, accelerating from the pace of 0.9% a month earlier.

Japanese government spokesman Yoshihide Suga and Finance Minister Taro Aso both downplayed this week’s report that the government is considering a corporate tax cut. Indonesia’s Finance Minister Chatib Basri stated that Indonesia’s budget for next year will put heavy emphasis on promoting domestic demand as the driver of growth as the country’s exports will remain weak. Basri conceded that this year’s 6.3% economic growth target would be hard to reach.