Post Session: Quick Review

Indian markets despite making a modestly positive start on Wednesday, failed to keep their momentum going and slipped into red terrain in the morning session only, from where they found it extremely difficult to recover. There was expectation of markets extending their recovery mood that they showed in last session, but the weakness in the global markets weighed down the sentiments. Few government announcements along with RBI’s decision to relax norms to raise funds from abroad for all companies for import of capital goods, only made sector specific actions and the markets looked unconvinced with their wider implications.

The global cues too were not supportive, as the US markets made mostly a lower closing overnight after mixed set of economic reports amid uncertainty about the outlook for the Fed’s asset purchase program. The major Asian markets too ended in red on concern of a drop in US consumer confidence that may impact the demand in the nation. The domestic market sentiments further got dented by the weak start of the European markets as US budget talks curbed risk-taking in the equity markets, while the commodities made good recovery after declining in last four days.

Back home, the gloom that started from the RBI’s policy action, extended to the penultimate expiry day of the September F&O series after a brief halt in last session. There was no support from any corner that could help the markets add strength to their last session’s recovery attempt, hence the major bourses after a green start suffered profit booking, getting dragged lower and found stiff resistance at 19750 (Sensex) and 5850 (Nifty). However, there was good bounce back in last hour of trade that led the markets pare most of their losses, as the rupee strengthened and the European markets too came into recovery mood. Few of the blue-chip stocks that have been underperforming since morning saw some lower level buying, while the broader markets recouped most of their losses as traders covered some short positions ahead of the expiry of September F&O series. Though, the co-existing volatility kept the market upmoves in check and prevented from a positive close of the markets. Power, capital goods, healthcare and metal were the top gaining gauges up by over a percent. Power sector got a boost with Union Cabinet approving the methodology for auctioning coal blocks, enabling the government to allot coal mining licences through competitive bidding for the first time.  While, the capital Goods sector surged after RBI relaxed norms to raise funds from abroad, saying that now all types of companies can avail trade credit facility from overseas for import of capital goods. The one non sectoral gauge that remained under pressure was of PSU oil marketing companies, which kept reeling in red since morning and closed lower by 1.5-3.5%, after oil minister M Veerappa Moily said that there was no proposal to hike diesel and cooking gas rates just yet.

The market breadth on the BSE ended slightly in red; advances and declining stocks were in a ratio of 1065:1242, while 151 scrips remained unchanged. (Provisional)

The BSE Sensex lost 77.67 points or 0.39% to settle at 19842.54.The index touched a high and a low of 19978.49 and 19658.74 respectively.  Among the 30-share Sensex, 15 stocks gained, while 15 stocks declined. (Provisional)

The BSE Mid cap index ended higher by 0.18% and Small cap index ended lower by 0.07%. (Provisional)

On the BSE Sectoral front, Power up by 1.86%, Capital Goods up by 1.52%, Metal up by 1.15%, Health Care up by 1.14% and PSU up by 0.91%, were the top gainers, while Oil & Gas down by 1.44%, FMCG down by 1.15%, Bankex down by 0.89%, Consumer Durables down by 0.82% and Realty down by 0.80% were the top losers in the space. (Provisional)

The top gainers on the Sensex were BHEL up by 7.73%, Sesa Goa up by 4.26%, Hindalco Industries up by 3.57%, Bharti Airtel up by 2.42% and SBI up by 2.36%, while, RIL down by 3.18%, Mahindra & Mahindra down by 3.00%, HDFC Bank down by 2.96%, Hindustan Unilever down by 1.45% and Bajaj Auto down by 1.41% were the top losers in the index. (Provisional)

Meanwhile, in its another move to ease the pressure on rupee and help the industry,  the Reserve Bank of India (RBI) has relaxed norms to raise funds from abroad, allowing all types of companies to avail trade credit facility from overseas for import of capital goods. Earlier, only companies in the infrastructure sector were allowed to raise such trade credits.

In its notification RBI has said that  “On a review, it has been decided to allow companies in all sectors to avail of trade credit not exceeding $20 million up to a maximum period of five years for import of capital goods as classified by the Director General of Foreign Trade (DGFT)”. RBI further said that the abinitio contract period of 15 months for all trade credits has been relaxed to 6 months. The amended policy has come into force with immediate effect. However, RBI said that banks are not permitted to issue letters of credit/guarantees/letter of undertaking/letter of comfort in favour of overseas supplier, bank and financial institution for the extended period beyond three years.

Earlier, as per its circular issued in September 2012, it has allowed companies in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB) to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT, where the trade credit must be abinitio contracted for a period not less than fifteen months and should not be in the nature of short-term roll overs; and AD banks were not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.

India VIX, a gauge for markets short term expectation of volatility lost 3.89% at 26.72 from its previous close of 26.72 on Tuesday. (Provisional)

The CNX Nifty lost 21.95 points or 0.37% to settle at 5,870.50. The index touched high and low of 5,910.55 and 5,811.10 respectively. Out of the 50 stocks on the Nifty, 22 ended in the green, while 28 ended in the red.

The major gainers of the Nifty were BHEL up 8.91%, Sesa Goa up by 4.34%, Hindalco up by 3.75%, SBI up by 2.86% and NTPC up by 2.51%. The key losers were BPCL down by 3.28%, Reliance Industries down by 3.21%, HDFC Bank down by 2.91%, M&M down by 2.81% and DLF down by 2.64%. (Provisional)

Most of the European markets were trading in red with, France’s CAC 40 down by 0.34%, the United Kingdom’s FTSE 100 down by 0.02% and Germany’s DAX down by 0.17%.

Most of the Asian markets, barring Hang Seng concluded Wednesday’s trade in red on concern that US lawmakers will fail to arrange a budget deal preventing a government shutdown next week which weighed on sentiment. Indonesian shares led declines and the rupiah reached a four-year low. The weakening rupiah makes the central bank more likely to increase borrowing costs. Bank Indonesia has raised its benchmark interest rate by 1.5% points to 7.25% since the middle of June and will meet next on October 8 to review policy.

Hong Kong recorded a $25.4 billion surplus in its balance of payments for the second quarter, compared with a $16.4 billion surplus in the first quarter, the Census & Statistics Department stated. The current account recorded a deficit of $2.5 billion in the second quarter, compared with a deficit of $6.8 billion for the same period last year. The decrease in the current account deficit was due to increases in the invisible trade surplus and in the net inflow of primary income, partly offset by increases in the visible trade deficit and in the net outflow of secondary income.