Bloodbath continues on D-street for fourth straight day

Wednesday turned out to be a highly disappointing session of trade for the stock markets in India as the benchmark equity indices failed to hold on to the initial rally and settled the session at their lowest level since September 2012 with a cut of around two percentage points. Local bourses made a gap-up opening with Reserve Bank of India (RBI) going for a partial relaxation in its tight money policy by announcing slew of measures to ease liquidity, including Rs 8,000 crore bond buyback, to ensure adequate credit flow to the productive sectors. RBI also relaxed the SLR requirement by allowing banks to retain SLR holdings in Held to Maturity (HTM) bonds category at 24.5 per cent until further instructions. The frontline gauges even looked set to breach the psychological 18,600 (Sensex) and 5,500 (Nifty) levels in the early session on across the board buying interest.

But, sentiments turned awful in noon deals with markets paring all their early gains and entering into the negative terrain after Indian rupee hit fresh all-time low, trading around 64.43 per dollar at the time of equity markets closing as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency. Selling got intensified, on concerns over continued fund outflow. Foreign institutional investors sold Rs 14.2 billion of cash shares on August 20, while domestic institutions were net buyers of Rs 10.66 billion of shares.

Global cues too remained sluggish as European counterparts hovered near three-week lows on Wednesday, while the dollar found some support as investors braced for a US Federal Reserve report which may shed light on when it will trim its stimulus policy. Sentiments across the globe also remained dampened after emerging markets’ currencies came under pressure on expectations that the minutes from the Fed’s last policy meeting in July, due out later, will signal an early end to the supply of cheap dollars they have relied on. Moreover, Asian markets too shut shop mostly in the red.

Back home, selling was both brutal and wide based as, barring consumer durables and banking, none of sectoral indices on BSE were spared. Sentiments also got hurt after banking stocks like, Canara Bank, Union Bank of India, Bank of India and Federal Bank all erased their early gains. Meanwhile, software counter too witnessed selling despite weakness in rupee against dollar as investors booked some profit garnered in past few days.  

The NSE’s 50-share broadly followed index Nifty declined by around hundred points but managed to hold its psychological 5,300 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex crumbled by around three hundred and fifty points to end below the psychological 18,000 mark.

Broader markets too pared all their initial gains and ended the session with a cut of around a percentage points. The market breadth remained in favour of decliners, as there were 915 shares on the gaining side against 1,350 shares on the losing side, while 137 shares remained unchanged.

Finally, the BSE Sensex shaved off 340.13 points or 1.86% to settle at 17,905.91, while the CNX Nifty plunged by 98.90 points or 1.83% to end at 5,302.55.

The BSE Sensex touched a high and a low of 18,567.70 and 17,807.19, respectively. The BSE Mid cap index was down by 1.24% and Small cap index was down by 0.81%.

The top gainers on the Sensex were, BHEL up by 3.15%, HDFC up by 2.83%, HDFC Bank up 1.61%, GAIL up 0.20% and Tata Power up 0.14%. On the flip side, Bharti Airtel down by 6.31%, Sun Pharma down by 4.92%, Sterlite Industries was down by 4.81%, ITC was down by 4.80% and Reliance was down by 4.72% were the top losers on the index. 

The top gainers on the BSE sectoral space were, Consumer Durables up 0.74% and Bankex up 0.49%, while Metal down by 3.63%, Oil & Gas down by 3.52%, Realty down by 3.34%, FMCG down 3.17% and Health Care down by 2.60% were the top losers on the sectoral space.

Meanwhile, following the debacle at the NSEL and rising concerns over its inability for paying dues, the Forward Markets Commission (FMC), presently regulated by the consumer affairs ministry, has drawn much dissension. The government may consider plans to bring the FMC under the purview of the finance ministry, which already oversees the operations of several regulators, including SEBI, IRDA and PFRDA. Bringing FMC under the purview of finance ministry will ensure better co-ordination of regulators.

Earlier this month, NSEL had shut down its operation following the government direction in the wake of violation of certain rules and has given seven-month period to investors to settle their Rs 5,600 crore. However, the exchange could settle only Rs 92.12 crore out of the scheduled of Rs 174.72 crore payment it had committed to FMC.

Concerned over payment crisis at NSEL, the Forward Markets Commission on August 20 has ordered NSE to disclose the party-wise amount deposited in the escrow account maintained with Axis Bank on a daily basis. It also ordered NSE to reconcile the amount of pay-in and pay-out to be made to various members of the exchange. FMC also came down on NSEL for incorrect data and raised doubts on the seriousness of the exchange’s management to resolve the crisis. Meanwhile, the government is also planning to conduct an audit of NSEL’s physical stocks lying in warehouses by own agencies as it fears defaults in payment by buyers.

The CNX Nifty touched a high and low of 5,504.10 and 5,268.45 respectively. 

The top gainers on the Nifty were IndusInd Bank up 6.30%, BHEL up by 4.05%, HDFC up 2.64%, HDFC Bank up 1.92% and ICICI Bank up by 1.16%. On the flip side, the top losers of the index were, Ranbaxy down by 10.94%, Sesa Goa down by 9.00%, ACC down by 6.98%, JP Associates down by 5.86% and Bharti Airtel down by 5.48%.

The European markets were trading in red, France’s CAC 40 down by 0.13%, Germany’s DAX down by 0.21% and the United Kingdom’s FTSE 100 down by 0.70%.

Most of the Asian markets concluded Wednesday’s trade in red. South Korean and Hong Kong stocks dropped as investors awaited details of discussions at the Federal Reserve’s last policy meeting to gauge when the US central bank might pare its bond purchase. Chinese shares ended flat with positive bias dragged down by weakness in financials and property counters ahead of economic survey that could offer clues on how the Chinese economy is doing. Japan's Nikkei bounced back from a seven-week low on concern that capital outflows from Asia will accelerate as the Federal Reserve starts tapering its monetary stimulus. The Taiwan Stock Exchange Corporation was closed today due to Typhoon TRAMI.

Indonesian consumers have become less rosy in their view of the economy since the government raised the price of subsidized gasoline in June. The Central Bank’s consumer confidence index based on a survey of 4,600 households in 18 major cities fell by 8.7 points to 108 in July, the lowest level in 14 months. The index stood at 117 in June. A score above 100 means consumers are generally optimistic about the economy. Besides, Bank Indonesia’s recent increases in its key interest rate, which is expected to also drive up commercial lending rates, may drag down domestic direct investment. The central bank raised its benchmark interest rate by 75 basis points to 6.50% in June and July in an effort to combat soaring inflation. The bank kept the rate steady in August. The government would announce a policy package on Friday to combat growing inflation and job losses in Southeast Asia’s largest economy.

Taiwan’s export orders rose slightly in July, ending five successive monthly drops, on improving demand from major markets including the United States and the Chinese mainland. The July figure was $36.11 billion, up 0.5% year on year and up 2.9% from the previous month. Orders from the Association of Southeast Asian Nations economies rose 3.7% year on year, while those from the US and the mainland were also up 2.8% and 2%, respectively, from a year ago.