Markets continue to reel under pressure in early noon deals

Indian equity indices continue to witness bloodbath in early noon trade with frontline gauges trading below their crucial 18,900 (Sensex) and 5,600 (Nifty) levels on the back of fear that the roll-back of US stimulus could spark selling pressure by the overseas investors in the equity space. Sentiments further dampened after banking shares clobbered out of the shape after the Reserve Bank of India (RBI) on August 14, 2013 announced additional measures to support the Indian rupee by stemming foreign exchange outflows by Indian residents. Overseas direct investment (ODI) by Indian companies have been cut three-fourths, 100% from 400%, making it more difficult for local corporates to buy overseas assets. Meanwhile, RBI reduced the limit for remittances made by Resident Individuals, under the Liberalised Remittance Scheme (LRS Scheme), to $75,000 from $200,000 per financial year. Despite these measures, Indian rupee continued its depreciating trend and was trading at 61.68 as gainst Wednesday’s close of 61.44 for a dollar at the Interbank Foreign Exchange market.

Weakness in global markets too was playing spoilsport for domestic markets, with most of the Asian equity indices trading in the red. Japanese Nikkei shedding three fourth of a percentage as US stock futures traded near five-week low after Wall Street shares had their biggest one-day drop since late June. European counterparts too were exhibiting mixed trend in initial trade. Back home, selling was both brutal and wide based as none of sectoral indices on BSE were spared. Consumer Durables and Banking remained the top loser on the BSE sectoral front, while capital goods, realty and metal too hammered badly by over three percent. The broader indices too were struggling to get some traction, while the overall market breadth on BSE is in the favour of declines, which have thumped advances in the ratio of 1415: 585; while 99 shares remained unchanged.

The BSE Sensex is currently trading at 18,888.90, down by 478.69 points or 2.47% after trading in a range of 19,310.95 and 18,817.25. There were 3 stocks advancing against 27 declines on the index.

The broader indices were trading in red; the BSE Mid cap and Small cap indices were trading down by 1.98% and 1.53% respectively.

There were no sectoral indices gaining on the BSE, while Consumer Durables down by 8.16%, Bankex down by 4.51%, Capital Goods down by 3.81%, Realty down by 3.68% and Metal down by 3.35%were the top losers on the sectoral index.

The top gainers on the Sensex were Hero MotoCorp up by 1.69%, Wipro up by 0.98% and Tata Motors up by 0.06%. On the flip side, BHEL was down by 7.63% , Maruti Suzuki was down by 4.82%, HDFC was down by 4.73%, HDFC Bank  was down by 4.16%, and L&T was down by 4.14% were the top losers on the Sensex.

Meanwhile, amid concerns over rising prices of vegetables and other essential commodities, Finance Minister P Chidambaram said that unless supply side constraints are addressed, consumer price inflation is not likely to fall. Indian annual inflation rate based on general Consumer Price Indices (CPI) combined stood at 9.64% in July on YoY basis. Among all the constituents that make the CPI, vegetables recorded the highest inflation of 16.40% in July.

By adding further, Chidambaram said that although the wholesale price-based inflation has come down to below five percent in five months till June, efforts would have to be made to address the supply side problems to bring down the retail inflation. However, India's wholesale Price Index (WPI) inflation shot higher to 5.79% for the month of July as against 4.86% for the previous month of June. The July inflation also came above the Reserve Bank of India’s (RBI) perceived comfort level of 5%.

At present, the central bank is concerned over the widening gap between the wholesale price index (WPI) inflation and consumer price index (CPI). Over the past few months, the CPI (rural and urban) inflation remained close to double digits, compared with WPI inflation, which fell below five per cent. The RBI had pointed out that the difference between wholesale and retail price levels can largely be attributed to trade and transport margins and taxes across states.The CNX Nifty is currently trading at 5,585.30, down by 157.00 points or 2.73% after trading in a range of 5,716.60 and 5,558.60. There were 4 stocks advancing against 46 declines on the index.

The top gainers of the Nifty were Hero MotoCorp up by 1.76%, HCL Technologie up by 0.42%, Power Grid up by 0.31% and Tata Motors up by 0.09%. On the flip side, BHEL down by 7.80%, Axis Bank down by 7.76%, Bank of Baroda down by 7.46%, JP Associate down by 7.05% and Rel Infra down by 5.86% were the major losers on the index.

The most of Asian equity indices were trading in red; Straits Times down by 0.70%, Jakarta Composite down by 1.70%, Nikkei 225 was down by 0.75%, KLSE Composite down by 0.18%, Shanghai Composite down by 0.19% and Hang Seng down by 0.43%. While, Taiwan Weighted up by 0.48%.

European markets have got off to a choppy start; with CAC 40 rose 0.17%, while DAX slides by 0.32% and FTSE 100 dipped 0.08%.