Indian markets get slaughtered amid rate hike worries; deposes about 2%

Monday turned out to be another murky trading session for the Indian equity indices which got pounded by around two percentage points on first day of F&O expiry week. Indian barometer gauges, prolonging their southward journey for second consecutive session, witnessed blood bath and closed near their intraday lows, breaching major crucial support levels of 20,000 (Sensex) and 5,900 (Nifty) amid looming fear of another hike in repo rate by the Reserve Bank of India (RBI) to contain inflation and support rupee. After a gap-down opening, the domestic bourses never showed any strength and continued sliding till end. Selling was both brutal and wide-based as, barring few counters viz. consumer durables, software and technology, none of sectoral indices managed even a green close. Counters, which featured in the list of worst performers, were banking, realty and capital goods.

Sentiments remained somber after Fitch Ratings cut its growth forecast for India in 2013-14 to 4.8%, from its earlier estimate of 5.7% made in June and 7% in September. Further, the agency also slashed India's growth rate projection for FY’15 to 5.8% from the June’s forecast of 6.5%, against its projection of 7.5% in September, 2012. Sentiments also got dampened on report that foreign direct investment (FDI) inflows into the services sector, which contribute over 60 percent to India’s GDP, declined by 36.5% year-on-year to $1.02 billion during the April-July period.

Selling got intensified as European markets made a poor start, as investors remained on sidelines ahead of monetary policy developments in the US. Meanwhile, financial markets absorbed the news of Chancellor Angela Merkel’s victory in Germany's elections with few signs of disquiet over what may be a long process to build a ruling coalition for Europe’s largest economy. Moreover, most of the Asian equity benchmarks shut shop in the red as investors remained wary ahead of readings on manufacturing across Europe. Though, investors shrugged off better than expected Chinese Purchasing Managers’ Index (PMI) data.

Back home, the rupee remained weak through the day due to month-end dollar demand from importers. The domestic currency was trading at Rs 62.63 at the time of equity markets closing as compared with Friday’s close of Rs 62.28 per dollar. Selling in PSU oil marketing companies viz BPCL, HPCL and IOC too dampened the sentiments with no diesel price hike in sight. Additionally, sugar space too remained buzzing with UP based sugar companies suffering with a cut of around 1-3.5%, lobbying for an immediate review on current cane pricing and introduction of the revenue sharing model as per the Rangarajan committee recommendations. Bucking the trend, shares of some jewellery makers came in limelight and traded higher on hopes of strong demand ahead of festival season.

The NSE’s 50-share broadly followed index Nifty declined by over one hundred and twenty two points to decline below its psychological 5,900 support level, moreover Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over three hundred and sixty points to end below its psychological 20,000 mark.

Broader markets also struggled to get traction and ended the session with a cut of around a percentage point. The market breadth remained in favour of decliners, as there were 937 shares on the gaining side against 1,399 shares on the losing side, while 166 shares remained unchanged.

Finally, the BSE Sensex plunged by 362.75 points or 1.79%, to settle at 19900.96, while the CNX Nifty declined by 122.35 points or 2.04% to settle at 5,889.75.

The BSE Sensex touched a high and a low of 20199.81 and 19826.30, respectively. The BSE Mid cap index lost 1.27% and Small cap index was down by 0.58%.

The top gainers on the Sensex were Sesa Goa up 3.14%, Hindalco Industries up 1.84%, Wipro up 1.75%, Coal India up 1.20% and Dr Reddys Lab up 1.06%, on the flip side, SBI down 5.39%, ONGC down 4.86%, ICICI Bank down by 4.39%, Maruti Suzuki down by 4.37%, and L&T down by 4.20%, were the top losers on the index. 

On the BSE Sectoral front, Consumer Durables up by 2.36%, IT up by 0.91%, and Teck up by 0.43%, were the only gainers, while Bankex down by 4.41%, Realty down by 4.33%, Capital Goods down by 3.28%, PSU down by 2.56%, and Power down by 2.26%, were the top losers on the sectoral front.

Meanwhile, in a move to help gas-starved power plants, power ministry has moved a draft note to Cabinet to seek approval for pooling imported liquefied natural gas (LNG) with the fuel available from the KG-D6 block after meeting the requirements of fertiliser units. At present, 7,800 MW of gas-based power generation is stuck due to scarcity of natural gas. Under the gas-pooling mechanism, around 3,000 MW capacity power plants will get gas in the financial year 2014-15 and the electricity produced from these plants will be sold at a tariff of Rs 7 per unit. Meanwhile, the remaining 4,800 MW capacity plants will be able to get natural gas in FY 2015-16.

The proposed electricity tariff by power ministry was derived after pooling the prices of imported and domestic gas and deducting government subsidy. 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. Meanwhile, the ministry had already stated that consumers cannot absorb such a high cost of electricity and so the government should subsidise any cost over and above Rs 7 per unit. The power ministry proposal will be finalised once the government agrees to provide the subsidy.

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. The Gas production at the Reliance KG-D6 field fell 53 percent to 49.2 billion cubic feet in the April-June quarter from a year earlier mainly due to geological complexity, natural decline in the fields and higher than envisaged water ingress.

The CNX Nifty touched a high and low of 5,989.40 and 5,871.40 respectively.

The top gainers on the Nifty were Sesa Goa up by 2.92%, HCL Technologies up by 2.85%, Hindalco Industries up by 1.80%, Hero MotoCorp up by 1.28% and Dr. Reddy's Laboratories up by 1.26%. On the other hand, Bank of Baroda down by 7.33%, DLF down by 7.03%, Axis Bank down by 6.56%, IndusInd Bank down by 6.44%, and JP Associates down by 6.12%, were the top losers.

Most of the European markets were trading in red, France’s CAC 40 was up by 0.06%, while Germany’s DAX was down by 0.04%, and United Kingdom’s FTSE 100 was down by 0.24%.

Most of the Asian markets concluded Monday’s trade in red with Shanghai moving higher on further signs of an improving Chinese economy, while Southeast Asian markets gave up some of the gains they made. This early indicator is the latest in a string of economic data in recent weeks that points to a recovery in Asia’s largest economy, picking itself from weakness earlier in the summer. Japanese market was closed today on occasion of ‘Autumn Equinox Day’. Preliminary results from HSBC’s closely watched gauge of China’s manufacturing activity, released showed a jump to a six-month high in September, beating expectations and boosting local stocks. The flash version of the China manufacturing Purchasing Managers’ Index, published by HSBC and Markit, rose to 51.2, compared to August final result of 50.1. A reading above 50 indicates expansion, while anything below that signals contraction.

In Hong Kong, overall consumer prices rose 4.5% year-on-year in August, less than July’s corresponding 6.9% increase, the Census & Statistics Department reported. Netting out the effects of all one-off Government relief measures, the year-on-year rate of increase in the Composite Consumer Price Index in August was 4.3%, slightly higher than July's 4.2% increase, mainly due to the increases in private housing rentals, as well as the prices of salt-water fish and package tours.