Post Session: Quick Review

Prolonging last session’s somber run, Indian equity markets snapped yet another session on a weak note on account of underlying caution ahead of FOMC meeting, which is scheduled next week and considered by many to provide an indication on the timing and size of the Fed cuts in its bond-purchase program. In the highly volatile session of trade, bulls took control in absence of fresh buying activity after the sharp rally in frontline stocks. The sentiments took a hit after Prime Minister's Economic Advisory Council (PMEAC) sharply trimmed India's GDP growth forecast to 5.3% for the year ending 31 March 2014 (FY 2014) from earlier estimate of 6.4% and said that the current stance of monetary policy has to continue until stability in the rupee is achieved. Also, the Prime Minister's economic panel suggested it would be a challenge for the government to meet its fiscal deficit target of 4.8% of GDP in the current year. Although, key benchmark indices regained positive zone in early afternoon trade, but again capitulated to selling pressure by the end of the trade. At the close, Sensex and Nifty, ended in red, but held above psychological 19,700 and 5850 levels respectively. Meanwhile, broader indices following a different trajectory all together, ended with gains of over half a percent.

On the global front, in line with Asian counterparts, European stocks edged lower on Friday as investors took a breather after two weeks of solid gains in anticipation of a tightening in US monetary policy starting from next week.  Meanwhile, shares across the globe also capitulated to selling pressure on uncertainties whether U.S. would launch an attack on Syria, where the fatal use of chemical weapons is suspected.

Closer home, traders lightened positions ahead of the wholesale price inflation data and RBI policy review in the coming week. Further, depreciation of rupee tailing weakness in offshore non-deliverable forwards also weighed on the sentiment. On the BSE sectoral front, while stocks from Realty, Power and Capital Goods counters were the top gainers, stocks from Consumer Durables, Information Technology and Fast Moving Consumer Goods counters were the weak links of the trade. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1349: 1048, while 159 scrips remained unchanged. (Provisional)

The BSE Sensex lost 71.06 points or 0.36% to settle at 19710.82.The index touched a high and a low of 19899.37 and 19675.68 respectively.  Among the 30-share Sensex pack, 16 stocks gained, while 14 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 0.54% and 0.58% respectively. (Provisional)

On the BSE Sectoral front, Realty up by 2.71%, Capital Goods up by 2.41%, Power up by 2.38%, PSU up by 1.92% and Auto up by 0.80% were the top gainers, while Consumer Durables down by 1.78%, IT down by 1.34%, FMCG down by 1.19% and Teck down by 1.06%, were the top losers in the space. (Provisional)

The top gainers on the Sensex were BHEL up by 5.64%, Coal India up by 3.19%, L&T up by 2.65%, Mahindra & Mahindra up by 2.18% and Tata Power up by 1.89%, while,  Wipro down by 4.02%, Tata Steel down by 1.90%, ITC down by 1.79%, ICICI Bank down by 1.78% and Infosys down by 1.21% were the only losers in the index. (Provisional)

Meanwhile, finally coming in line with projections of the central bank and many private agencies, who expect Asia's third-largest economy to grow at around 5%, Prime Minister's Economic Advisory Council (PMEAC) too has sharply lowered its growth forecast for the current fiscal to 5.3% from 6.4% projected earlier. However, what came as a concern was the PMEAC chairman Rangarajan, highlighting that containing the fiscal deficit within the budgeted target of 4.8% of GDP could be a ‘challenge’ for the government.

Further, C. Rangarajan expects inflation to likely end at 5.5% in 2013-14 against 7.4% in 2012-13 and hoped that the current account deficit be lower than $70 billion as projected earlier, which turns out to be at 3.8% of GDP in 2013-14 from 4.8% a year ago.

Regarding rupee, he underscored that the Rupee at the current level was well corrected and said that “Stability is returning to the foreign exchange market and as capital flows return and as CAD begins to fall, this tendency will strengthen”. However, he added the current stance of monetary policy should continue until stability in rupee is achieved.

Meanwhile, in order to promote growth, Rangarajan suggested that the government should liberalise FDI investment norms, resolve tax concerns of the industry, fast track public sector investment and initiate measures to contain fiscal deficit.

Nevertheless, C Rangarajan expects the situation in 2013-14 to be better than 2012-13 due to number of reasons, including good growth in agriculture, full impact of structural reforms in the second half, strong emphasis on key infrastructure sector, removal of hurdles in projects clearance by the Cabinet Committee on Investment and signs of improvement in export sector.

India VIX, a gauge for markets short term expectation of volatility lost 4.77% at 28.29 from its previous close of 29.71 on Tuesday. (Provisional)

The CNX Nifty lost 0.10 points to settle at 5,850.60. The index touched high and low of 5,884.30 and 5,822.90 respectively. Out of the 50 stocks on the Nifty, 34 ended in the green, while 16 ended in the red and one stock remains unchanged.

The major gainers of the Nifty were BHEL up 5.67%, DLF up by 5.13%, Axis Bank up by 4.21%, PNB up by 3.98% and Reliance Infrastructure up by 3.77%. The key losers were HCL Tech down by 2.64%, UltraTech Cement down by 2.32%, ITC down by 1.87%, Tata Steel down by 1.72% and ICICI Bank down by 1.65%. (Provisional)

Most of the European markets were trading in red with, France’s CAC 40 down by 0.15%, the United Kingdom’s FTSE 100 down by 0.27% and Germany’s DAX up by 0.12%.

Most of the Asian markets, barring Jakarta Composite and Nikkei 225 concluded Friday’s trade in red ahead of next week’s key Federal Reserve policy meeting. Stocks across Asia posted healthy returns since last Friday, as further signs of an economic recovery in China combined with lower expectations of US military intervention in Syria supported regional risk sentiment. Japan’s industrial output rose 3.4 percent in July revised data showed, suggesting a recovery in factory activity remains intact. The figure compared with an initial reading of a 3.2 percent increase and follows a 3.1 percent decline in June. The capacity utilization index rose 3.7 percent in July from a month earlier to 99.3.

Meanwhile, the World Bank’s private-sector investment arm aims to double its investment in Indonesia in the next fiscal year, boosting infrastructure-sector loans. The International Finance Corporation (IFC) is targeting to invest between $500 million and $1 billion in the year ending June 30, 2014. Indonesia’s borrowing costs are surging toward those of Vietnam, rated five levels lower by Moody’s Investors Service, as a plunging rupiah spurs inflation. Besides, a planned free-trade zone in Shanghai is raising hopes that China’s new leaders will revive long-stalled economic reforms as they seek to make their mark.