Benchmarks snap five days gaining streak ahead of IIP and CPI data

Snapping five days gaining streak, Indian equity benchmarks ended Thursday’s session in the red with a cut of over a percentage point and frontline indices tumbling below their crucial 5,900 (Nifty) and 19,800 (Sensex) levels, as investors opted to stay away from taking positions in risky assets ahead of IIP data for the month of July to be announced after the market hours, which despite being in contraction mood is likely to come better than last month’s figure of -2.2 percent. Traders also awaited consumer price inflation numbers, which too may come marginally lower in August, as compared to 9.64 per cent registered in the month of July. Sentiments remained down-beat since morning and markets soon after opening in green, slipped into red extending southward journey, as rating agency Crisil cut India’s economic growth estimate to 4.8 percent for the current fiscal and said agriculture is the only hope for higher rate of expansion in this period of downturn.

Selling got intensified after European markets made a sluggish opening ahead of a crucial meet between the US and Russia over the Syrian government’s chemical weapons stock pile. While, most of the Asian equity indices ended in the green on expectation that the US Federal Reserve’s impending stimulus reduction might be smaller than some had believed. However, Japanese Nikkei remained the lone loser among regional indices as the nation’s core machinery orders stayed flat in July from the previous month.

Back home, markets continued reeling under pressure throughout the session as profit booking in the blue-chip stocks continued for the second day in a row. Sentiments also got weighed down after Indian rupee weakened due to dollar demand from oil importers and defense related payments. The rupee was trading at Rs 63.70 at the time of equity markets closing as compared to its  previous close of Rs 63.37 per dollar. Reserve Bank of India’ Governor Raghuram Rajan’s statement that India’s slowing economy and its massive current account and fiscal deficits are not structural problems and can be fixed with modest reforms, too was unable of soothing the sentiments.

Selling in public sector oil marketing companies too dampened the sentiments. Stocks like BPCL, HPCL and IOC all edged lower as international crude oil prices inched higher EIA weekly report showed US crude stockpiles to have declined and with diminishing likelihood of a US attack on Syria after the beleaguered country agreed to a Russian proposal to hand over its chemical weapons for destruction. Additionally, most of the software stocks too declined.

The NSE’s 50-share broadly followed index Nifty declined by over sixty points to end below the psychological 5,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex crumbled over two hundred and ten points to close below the psychological 19,800 mark.

Broader markets outperformed benchmarks for most part of the day’s trade, but suffered some selling in dying hours. The market breadth remained in favour of decliners, as there were 1,166 shares on the gaining side against 1,189 shares on the losing side, while 148 shares remained unchanged.

Finally, the BSE Sensex lost 215.57 points or 1.08% to settle at 19781.88, while the CNX Nifty lost 62.45 points or 1.06% to end at 5,850.70.

The BSE Sensex touched a high and a low of 20052.05 and 19676.49, respectively. The BSE Mid cap index was down by 0.04% and Small cap index gained 0.25%.

The top gainers on the Sensex were Tata Power up 2.75%, ITC up 1.91 %, Gail India up 1.60%, NTPC up 0.94% and Cipla up 0.66%. On the flip side, Tata Steel down 4.13%, BHEL down 3.99%, Hero MotoCorp down 3.72%, ONGC down 3.27%, and  Maruti Suzuki down 3.03% were the top losers on the index. 

On the BSE Sectoral front, Realty up by 0.54% and FMCG up by 0.32%, were the only gainers, while Metal down by 2.53 %, Bankex down by 1.86%, Consumer Durables down by 1.84%, Auto down by 1.80%, and Oil & Gas down by 1.68%, were the top losers on the Sectoral space.

Meanwhile, concerned over the scarcity of gas for power plants and rising gas prices, the power ministry has moved a draft note to Cabinet Committee on Economic Affairs (CCEA) with a proposal of about Rs 11,000 crore payout to subsidise costlier power.The proposal is for averaging the price of cheaper domestic gas with costlier imported liquid gas or LNG to have a uniform rate for all gas-based electricity generation stations and the Power ministry has urged the CCEA to consider the approved pricing formula of natural gas.

Earlier, in June, the government had approved the pricing of all domestically produced gas at an average of international hub rates and cost of imported LNG. Such averaging pricing will raise the effective gas price to $11.43 per million British thermal unit (mmBtu) from $4.2 per mmBtu, leading to cost of electricity generation of Rs 10.47 per unit. The power ministry has argued that such a high cost of electricity cannot be absorbed by consumers and so the government should subsidise any cost over and above Rs 5.50 per unit.

India’s total installed power generation capacity is 225,793 MW, of which 18,714 MW or nearly 8 percent, is gas-based. At present, power plants in the country get just 17.25 million standard cubic metres per day of gas from domestic fields as against an allocation of 71.29 mmscmd on account of declining gas supplies from Reliance Industries' eastern offshore KG-D6 fields. However, in August, the Empowered Group of Ministers (EGoM) decided that any surplus natural gas left after meeting the needs of urea plants would be supplied to fuel-starved electricity generating stations.

The CNX Nifty touched a high and low of 5,932.00 and 5,815.80 respectively. 

The top gainers on the Nifty were Tata Power up by 3.80%, IDFC up by 2.66%, ITC up by 2.32%, Gail up by 2.03% and Ranbaxy up by 1.18%. On the other hand, JP Associate down by 11.98%, Induslnd Bank by 5.65%, Tata Steel down 4.48%, BHEL down 4.12% and ONGC down by 3.98% were the top losers.

The European markets were trading in red, France’s CAC 40 was down by 0.31%, Germany’s DAX was down by 0.17%, and United Kingdom’s FTSE 100 was down by 0.14%.

Most of the Asian markets barring Nikkei 225 concluded Thursday’s trade in green. China’s stocks rose for a fifth day, the longest stretch of gains in a month, as banks and brokerages rallied on Premier Li Keqiang’s financial reform plans. Dismissing concerns of hard landing of China’s economy due to slowdown, Chinese Premier Li Keqiang reassured the world about the health of China’s economy saying the world’s second largest economy will reach the official target of 7.5% growth this year. Japan’s prime minister has decided to hike the nation’s sales tax next year, but will soften the blow with a $50-billion stimulus package aimed at protecting a budding economic recovery. Shinzo Abe, who has spearheaded a drive to turn around years of tepid growth, will press on with a plan to lift taxes to 8% from the current 5% in April.

Bank Indonesia raised interest rates by 25 basis points, defying market expectations and continuing a swift phase of hikes that has seen the central cost of borrowing increased four times in as many months. The rate now stands at 7.25%. South Korea’s central bank chief stated that the bank’s decision to keep the policy interest rate unchanged at 2.50% for a fourth straight month was made in a unanimous vote. The central bank last cut the benchmark rate by 25 basis points in May, and has left it unchanged since.