Markets to keep reeling in red with a soft start

The Indian markets remained sulking, extending their fall for the fourth consecutive day in last session. All the early enthusiasm generated with the Reserve Bank of India’s (RBI) liquidity easing measures faded on concern of Fed’s stimulus tapering. Today, the start is likely to remain somber tailing cues from the global indices. Traders will be eyeing the rupee movement, which was seen approaching 65 a dollar mark and after the Fed’s indication it may grind lower. Meanwhile, amid a continued slide in the value of rupee and stock market crash, Finance Minister P. Chidambaram for the third day in a row had held meeting with top officials and RBI Governor-designate Raghuram Rajan to take stock of the situation. There will be some solace with the report that foreign direct investment (FDI) into India increased by about 16 percent year-on-year to $1.44 billion in June, compared to $ 1.24 billion in June 2012, however the figures are lowest during the calender year. There will be some buzz in the steel sector, as the Steel Ministry has opposed the move to lower export duty on iron ore to boost exports. 

The US markets closed lower in the last trading session after the minutes of the Federal Open Market Committee meeting held in late July, seemed to confirm expectations that the Fed will begin tapering its asset purchase program at its next meeting in mid-September. The Asian markets made a soft start tailing the weakness in the US markets; however some of the indices have pared their losses led by the Chinese market after the report that the nation’s manufacturing unexpectedly expanded this month.

Back home, 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. 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. 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.