Benchmarks end on quiet note ahead of Fed, RBI policy meet

Benchmark equity indices snapped the volatile day of trade on an absolutly flat note on Monday, as investors opted to be on sidelines ahead of the Reserve Bank of India’s (RBI) monetary policy review and US Federal Reserve meeting. Though, markets made a gap-up opening in the morning with both the frontline indices surpassing their crucial 5,900 (Nifty) and 20,000 (Sensex) levels as sentiments got bolstered after Indian rupee strengthened in early deals to hit four-week high of 62.48 against the dollar at the Interbank Foreign Exchange market on increased capital inflows and dollar selling by exporters.

Moreover, supportive cues from US markets too provided support to local markets in first half and the bourses traded in fine-fettle till the August WPI inflation data was announced, which spooked traders’ sentiments dragging benchmarks into red terrain. The data showed inflation based on wholesale price index (WPI) accelerated in August 2013. The August WPI inflation has surprisingly shot back to over 6 percent mark coming at 6.10%, as compared to 5.79% (provisional) for the previous month and 8.01% during the corresponding month of the previous year. In other shock, the June WPI inflation data was revised to 5.16% from the 4.86% provisional.

Investors also shrugged off firm cues from European markets which opened higher with CAC, DAX and FTSE all trading with a significant gain of over half a percentage point in early deals. Moreover, most of the Asian equity markets shut shop in the green as Lawrence Summers withdrew from consideration to be the next Federal Reserve chairman, paving the way for Janet Yellen, who is said to be in favour of a slower reduction in US stimulus.

Back home, sentiments remained dampened on worries that the disappointing and higher WPI inflation are likely to make the central bank’s job more difficult, as it may have to go against the wishes of the industry and take measures such as raising interest rates to stifle inflation, which could undermine economic growth, already strained and running at a decade low. Selling in software and technology pack too dampened the sentiments as stocks like, Infosys, Wipro, TCS and HCL Technologies edged lower after the rupee gained strength against the dollar.

However, some support to the markets came in from buying in public sector oil marketing companies. Stocks of HPCL and BPCL edged higher after they increased petrol prices by Rs 1.63 per litre on rising oil rates and falling rupee. Additionally, stocks related to banking and FMCG counters too remained on the buyers’ radar during the trade.

The NSE’s 50-share broadly followed index Nifty declined by ten points to end below the psychological 5,850 support level, however Bombay Stock Exchange’s Sensitive Index -- Sensex rose marginally to hold its psychological 19,700 mark.

Broader markets also struggled to get some traction and ended the session in the red on Monday. The market breadth remained in favour of decliners, as there were 1,118 shares on the gaining side against 1,244 shares on the losing side, while 123 shares remained unchanged.

Finally, the BSE Sensex gained by 9.71 points or 0.05% to settle at 19742.47, while the CNX Nifty lost by 10.05 or 0.17%, points to 5,840.55.

The BSE Sensex touched a high and a low of 20086.43 and 19596.15, respectively. The BSE Mid cap index was down by 0.54%, and Small cap index lost 0.58%.

The top gainers on the Sensex were ICICI Bank up 3.11%, Bharti Airtel up 2.95%, Maruti Suzuki up 2.94%, HDFC Bank up 2.21%, and Hero MotoCorp up 2.09%, on the flip side, BHEL down 4.60%, Sesa Goa down 3.62%, Tata Power down 2.49%, TCS down 2.48%, and Cipla Bank down 2.30 %, were the top losers on the index. 

On the BSE Sectoral front, Bankex up by 1.86%, FMCG up by 0.38%, Auto up by 0.38%, and PSU up by 0.12% were the top gainers, while Health Care down by 2.47%, Realty down by 1.96%, IT down by 1.85%, Teck down by 1.24%, and Metal dowe by 1.05%, were the top losers on the Sectoral space.

Meanwhile, in order to restrict rising imports of electronic products and to boost domestic industry as well as bring down the widening current account deficit (CAD), the government is looking to raise duties on electronic items, which are not covered by the duty-free Information Technology Agreement (ITA) of the World Trade Organisation.  In the previous fiscal, Indian electronics goods exports stood at $31 billion, which was around 7 per cent of total imports. Imports of electronics items have already crossed $10 billion mark in April to July period of current fiscal, despite various measures taken by the government to promote domestic industry.

As per the commerce department, efforts are continued to identify products that are not part of the IT Agreement (ITA) but have escaped higher duties, as the government has lost track over the years of electronic items that may not be part of the pact on account of several changes in the Import-Export Classification Code for products in India after WTO’s ITA. Information Technology Agreement, signed by 29 members including India and was implemented in 1996 and all signatories of the ITA agreed to eliminate duties on identified electronic products.

Meanwhile, the government looks concerned to check imports to bring down the CAD, which widened to a record high at 4.8% in the previous fiscal. Therefore, it recently set up a sub-committee of officials from the Revenue Department, the Commerce Department and the IT Ministry to examine the present classification of electronic items, including IT products, and trace them back to the 1996 classification to arrive at what products were actually covered originally by the pact. With the completion of process, the government will decide where it can increase import duties electronic products without violating WTO rules.

The CNX Nifty touched a high and low of 5,957.25 and 5,798.15 respectively. 

The top gainers on the Nifty were BPCL up by 3.88%, IndusInd Bank up by 3.75%, Maruti up by 3.50%, ICICI Bank up by 2.98%, and Bharti Airtel up by 2.87%. On the other hand, Ranbaxy down by 30.03%, BHEL down by 5.11%, HCL Technologies down by 4.95%, UltraTech Cement down by 4.12% and Sesa Goa down by 3.94%, were the top losers.

The European markets were trading in green, France’s CAC 40 was up by 0.78 %, Germany’s DAX was up by 1.22%, and United Kingdom’s FTSE 100 was up by 0.74%.

Most of the Asian markets barring Shanghai Composite concluded Monday’s trade in green after Larry Summers withdrew his name from consideration for Chairman of the Federal Reserve, allaying investor concerns about faster withdrawal of economic stimulus in the world’s biggest economy. Indonesia’s bonds advanced, driving the 10-year yield to a one-month low, and rupiah forwards gained. Nikkei 225 remained closed today on account of ‘Respect for the Aged Day’ occasion while Malaysian market - KLSE Composite remain closed today i.e. September 16, 2013 in conjunction with the Malaysia Day holiday.

China needs to do more to develop private banks and make asset securitization a standard practice as it tries to strengthen its financial system, central bank governor Zhou Xiaochuan stated. The report comes as Beijing moves to tap private capital to head off any need to bail out its banking system for a second time in as many decades, which many already see as inevitable. Besides, faced with a chorus of warnings that China risks choking on bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades.