Markets end in red for third straight day as rupee hits new record low

Extending southward journey for the third straight day, Indian equity indices once again ended in the red terrain as sentiments remained hawkish on concerns over depreciating rupee that hit a fresh life-time low on Tuesday. Though, after a gap down opening markets soon started recovering, showing great resilience as traders opted to buy battered down but fundamentally stocks. Recovery in Indian rupee too supported the sentiments, but profit booking at higher levels dragged the gauges lower. Sentiments also remained dampened after the government imposed new restrictions on foreign exchange outflows and gold imports in an attempt to prop up the rupee. Investors’ sentiments also remained pessimistic after the leading financial services firm JP Morgan downgraded Indian markets to ‘neutral’ from ‘overweight’ on account of weak rupee, faltering economic growth and reversal of flows.

Weak opening in European counterparts too dampened the sentiments with CAC, DAX and FTSE all trading with cut of around a percentage point in early deals amid speculation that the Federal Reserve will curb its bond-buying program as soon as next month. Asian markets shut shop in the red as investors remained concerned that the Fed’s stimulus concern after last week’s flurry of data. Meanwhile, Indonesia’s stock market remained the top loser in the region, shedding 5.50 percent as investors worried about the looming balance of payments crisis following Friday’s data which showed a wider-than-anticipated current account deficit.

Back home, sentiments also got clobbered out of shape on report that foreign institutional investors (FIIs) sold shares worth a net Rs 680.08 crore on August 19, 2013. The sentiments remained down-beat as the rupee, plunging lower breached its historic low level of 64 a dollar, though some speculated RBI intervention held the rupee within the limits, restricting its further fall. Meanwhile, the consumer durables remained the laggard since morning and could not recover despite the government banning duty-free import of high-end flat screen plasma TVs. Moreover, capital goods stocks like L&T, Bhel and ABB hit 52-week low on worries the ongoing slowdown in the economy could restrict new orders.

However, the losses remained capped as investors opted to take positions in metal and realty counters. Banking stocks too recovered after initial drop as rupee and bond witnessed recovery. Moreover, some solace also came in after the Moody’s Investors Service reiterated its stable outlook on India’s Baa3 sovereign-credit rating, the lowest investment grade, saying the nation has adequate currency reserves for balance of payments needs in the near term. Meanwhile, Vedanta group metal stocks rallied on reports that the legal hurdle has been cleared for government’s stake sale in Hindustan Zinc and BALCO.

The NSE’s 50-share broadly followed index Nifty declined by over ten points but managed to hold its psychological 5,400 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex crumbled by around sixty points to end below the psychological 18,300 mark.

Broader markets, after struggling through the session, ended mixed during the day. The market breadth remained in favour of advances, as there were 1174 shares on the gaining side against 1,100 shares on the losing side, while 126 shares remained unchanged.

Finally, the BSE Sensex lost 61.48 points or 0.34% to settle at 18,246.04, while the CNX Nifty declined by 13.30 points or 0.25% to end at 5,401.45.

The BSE Sensex touched a high and a low of 18,306.46 and 17,970.98, respectively. The BSE Mid cap index was down by 0.42% and Small cap index was up by 0.22%.

The top gainers on the Sensex were, Sterlite Industries up by 9.91%, Tata Steel up by 4.09%, Coal India up 2.08%, ICICI Bank up 1.77% and SBI up 1.51%. On the flip side, Tata Motors down by 4.66%, Sun Pharma down by 2.42%, TCS was down by 2.39%, Mahindra & Mahindra was down by 2.38% and ONGC was down by 1.95% were the top losers on the index. 

The top gainers on the BSE sectoral space were, Metal up 4.84%, Realty up 2.49%, Bankex up 0.75%, PSU up 0.52% and Oil & Gas up 0.25%, while Consumer Durables down by 3.54%, Auto down by 2.26%, Health Care down by 1.59%, IT down 1.40% and TECk down by 1.13% were the top losers on the sectoral space.

Meanwhile, India's services exports declined by 3.5% to $12.35 billion in June from $12.80 billion recorded in the previous month. Conversely, Imports of services also moved down to $6.22 billion in June from $6.98 billion in the previous month. During April-June period of financial year 2013-14, the cumulative services receipt or exports grew by an annual rate of 10.2% to $37.99 billion, while, total services outgo or imports stood at$ 20.58 billion during the first three months of the current fiscal.

Services are critical to India’s economic well being and constitute more than half the country’s GDP. The share of services in the GDP has risen from 33.3% in 1950-51 to 64.8% in 2012-13. Service sector includes key service exporter industries like Health Care, Tourism, Education, Engineering and Information Technology among others. India’s services export growth has been faster than that of merchandise exports, with the export of services growing at a compounded annual growth rate (CAGR) of 23.6% between 2001-02 and 2011-12, while merchandise exports grew at a CAGR of 21.4% during the same period. However, growth in services exports became erratic after the global financial crisis in 2008.

As per the World Trade Organization (WTO), India was ranked sixth in exports of commercial services, with a 3.6% global share, and in services imports, it ranked seventh with a 3.4% share. In contrast, the country was ranked 19th in merchandise exports with a paltry 1.6% market share and was in 13th position with a 2.5% share in imports.

The CNX Nifty touched a high and low of 5,417.80 and 5,306.35 respectively. 

The top gainers on the Nifty were Sesa Goa up 14.75%, JP Associates up by 4.05%, BPCL up 4.02%, Tata Steel up 3.73% and Cairn up by 3.44%. On the flip side, the top losers of the index were, Tata Motors down by 5.04%, ACC down by 4.38%, HCL Tech down by 4.02%, BHEL down by 2.76% and Sun Pharma down by 2.52%.

The European markets were trading in red, France’s CAC 40 down by 1.32%, Germany’s DAX down by 1.09% and the United Kingdom’s FTSE 100 down by 0.62%.

All the Asian markets concluded Tuesday’s trade in red amid worries that a reduction in the Federal Reserve’s bond purchases would hurt demand for emerging market assets. Several regional currencies were also weighed down amid worries of foreign investors withdrawing funds from the region. The Malaysian ringgit slid to its lowest in more than three years, while the Thai baht touched a one-year low. Chinese shares edged lower in choppy trade, with gains in industrial and railway-related sectors offset by weakness in properties and securities, while Nikkei tumbled touching 7-week low on Fed uncertainty. Besides, new lending to housing developers and homebuyers both surged in Shanghai last month on an annual basis, signaling a pickup in momentum in the Chinese property market. New housing development loans in Shanghai amounted to 4.7 billion yuan ($764 million) in July, a significant rebound of 5.6 billion yuan from a year earlier when the figure was negative, the Shanghai Head Office of the People’s Bank of China stated. The city’s housing loans rose for the sixth consecutive month in July on an annual basis due to rising market sentiment and growing individual demand.

Hong Kong’s inflation accelerated in July from June, mostly due to a low comparison base caused by the government’s one-off property relief measures last year, the Census and Statistics Department stated. The composite consumer price index rose 6.9% on year in July, picking up from June’s 4.1% rise, and was above the median forecast for a 6.2% rise. The sharp year-on-year rise was primarily due to public-housing rental waivers, which were carried out in July last year, distorting the on-year comparison with a lower base. The Hong Kong government stated in its most recent forecast in August that it expects the CPI to rise 4.3% this year, up from the 4.1% increase in 2012. Malaysia’s trade surplus fell to its lowest level in April since the 1997 Asian financial crisis, raising the prospect of its first trade deficit in 16 years. Exports slumped further in May and June, although the trade balance moved higher.

Meanwhile, two leading American business groups stated that US firms operating in ASEAN countries are skeptical that regional bloc can meet a 2015 deadline to establish a single market. Despite their skepticism, the survey showed that US companies are optimistic about overall business prospects in the region. Indonesia was named the most attractive country for new business expansion, followed by Vietnam, Thailand and Myanmar. Meanwhile the Philippines showed the biggest improvement in its business environment between 2008 and 2013, the survey added.