Post Session: Quick Review

Massacre prolonged for second straight session at Indian equity markets, with benchmark equity indices getting clobbered out of shape, suffering cut of another over a percent and half. Adding to the previous session’s colossal losses, benchmarks after getting a subdued start went on losing ground, nevertheless the little recovery which emerged on bargain-buying during the dying hours of the trade, helped to escape a more disastrous close. Accentuated selling pressure was sensed on account of global jitters and domestic concerns, which kept the investors extremely pessimistic of holding risky equities. By the end of the trade, Sensex and Nifty, registering triple digit losses, ended below the crucial 18,350 and 5,450 levels respectively. Meanwhile, broader indices too ended with loss of over a percent. Sentiment took a hit for worse after Indian currency sagged to fresh lows despite policy makers’ efforts to defend it. On the currency front, unconvinced about the efficacy of steps unveiled last week to contain the current account deficit at 3.7% of gross domestic product (GDP) during the current fiscal year sharply lower than the record high 4.8% in the previous year, Indian rupee sagged to a record low of 62.80/$ on Monday and looked poised for further losses.

Additionally, negative global set-up also added to bear’s party. On the global front, Asian markets ended mostly in red following a weak lead from Wall Street as traders erred on the side of caution on expectations the US Federal Reserve will soon begin reeling in its stimulus programme. Meanwhile, European shares too borrowing cues from Asian counterparts were trading in negative territory.

Closer home, amidst across the board selling pressure, stocks from Metal and Information Technology (IT) counters were the knights  in the shining armor. Massive profit-booking was witnessed in rate sensitive-Banking and Auto, and defensive counters, viz, Fast Moving Consumer Goods and HealthCare. Shares of rate sensitive and capital intensive companies were badly beaten on concerns that the Reserve Bank of India might look at the option of a rate hike in order to contain inflation. The market breadth on the BSE remained negative; advances and declining stocks were in a ratio of 898: 1391, while 140 scrips remained unchanged. (Provisional)

The BSE Sensex lost 290.66 points or 1.56% to settle at 18307.52.The index touched a high and a low of 18587.38 and 18139.15 respectively. Among the 30-share Sensex pack, 6 stocks gained, while 24 stocks declined. (Provisional)The BSE Mid cap and Small cap indices ended lower by 1.38% and 0.97% respectively. (Provisional)

On the BSE Sectoral front, Metal up by 1.79% and IT up by 0.24% were the only gainers, while Bankex down by 3.86%, Auto down by 3.10%, Health Care down by 2.45%, Consumer Durables down by 2.34% and FMCG down by 2.27% were the top losers. (Provisional)

The top gainers on the Sensex were Tata Steel up by 5.27%, Jindal Steel up by 2.91%, Hindalco Industries up by 2.36%, Tata Power up by 1.77% and  Gail India up by 1.17%, while, ICICI Bank down by 5.25%, Bharti Airtel down by 5.14%, Sun Pharma down by 4.13%, Bajaj Auto down by 4.08% and Cipla down by 3.77% were the top losers in the index. (Provisional)

Meanwhile, as part of an all-out effort to hold back the widening current account deficit (CAD), which has sent the rupee into a free fall and further weakened the economy, the Finance Ministry is set to announce a major package next week, comprising of a combination of import compression, long-term external commercial borrowing and foreign capital flow management.

Indian rupee’s further depreciation to fresh lows against dollar on Tuesday, confirmed that emergency measures introduced by the Reserve Bank of India last month to curb volatility had failed. This further built pressure on government to introduce new measures to steam its ongoing freefall.

Given that higher CAD is a direct outcome of export earnings falling short of the import bill leading to shortage of dollars, the customs duty on non-essential commodities such as electronic goods, cars and high-end bikes is likely to go up in order to discourage their import. Meanwhile, the government also expects to contain gold imports to the last year's level of 845 million tonnes to save a considerable amount of foreign exchange, which would help contain CAD.

Further, the finance ministry is also counting on the Reserve Bank of India (RBI) easing interest rates and pumping more liquidity into the system to revive the economy once the rupee stabilises and volatility in the currency market has ebbed.

India’s currency has depreciated around 13% of its value over the past four months, prompting the RBI to introduce a series of reforms in mid-July designed to drain liquidity from the economy, including measures to raise short-term lending rates for banks.

India VIX, a gauge for markets short term expectation of volatility gained 8.24 % at 25.59 from its previous close of 23.64 on Monday. (Provisional)

The CNX Nifty lost 93.10 points or 1.69% to settle at 5,414.75. The index touched high and low of 5,499.65 and 5,360.65 respectively. 14 stocks advanced against 36 declining on the index. (Provisional)

The top gainers on the Nifty were Tata Steel up by 4.97%, JP Associate up by 4.38%, Jindal Steel up by 2.74%, Reliance Infrastructure up by 2.43% and Hindalco Industries up by 2.08%.

On the other hand, Axis Bankdown by 6.32%, IndusInd Bank down by 5.86%, IDFC down by 5.48%, Ambuja Cements down by 5.42% and ICICI Bank down by 5.31%.

The European markets were trading in red; France’s CAC 40 down by 0.54%, Germany’s DAX down by 0.20% and the United Kingdom’s FTSE 100 down by 0.21%.

All the Asian markets barring Shanghai Composite and Nikkei 225, concluded Monday’s trade in red amid worries over Federal Reserve’s policy outlook, while Indonesian and Thai stocks tumbled on local economic concerns. Seoul shares closed slightly lower as large-caps struggled, but continued foreign inflows and a rally in shipbuilding sector on bets for stronger earnings ahead capped the decline. Mainland Chinese and Japanese shares ended higher after a choppy trading session on buying after a string of recent losses. Some Chinese developers weakened despite broad market gains and data showing a further improvement in home prices last month. The prices of new homes rose in 62 of 70 large and medium-sized Chinese cities in July from their levels in June. On-month growth in median home prices in 70 Chinese cities moderated in July for the fourth- straight month, but on-year prices in major cities continue to speed ahead, indicating that the government faces considerable pressure to keep prices in check. The Philippines suspended trading in the stock, foreign currency and debt markets today due to heavy rains and flooding in some parts of Manila.

In Japan, the steel makers and some automobile firms dropped even as the yen briefly weakened after data showing the country’s trade deficit widened sharply in July from the year-ago period. Japanese exports rose 12.2% on year in July as a weaker yen lifted the value of exports, while imports jumped 19.6% amid surging demand for fossil fuels. This has left Japan’s merchandise trade balance at a deficit of Y1.024 trillion, extending the monthly shortfall to a 13th month, the longest spell since 1980 when the second oil shock caused a spike in oil prices.

Indonesia’s President Susilo Bambang Yudhoyono set out the national budget and announced that the government has projected 6.4 percent economic growth for 2014. The government set growth at 6.8 percent economic growth in the 2013 State Budget, but revised expectations down to 6.3 percent in June’s revised budget. Next year’s inflation target has been marked at 4.5 percent, while the rupiah is projected to trade at an average Rp 9,750 against the US dollar. The three-month treasury bill (SPN) was expected to stand at 5.5 percent.