Benchmarks resume southward journey after a day of break

Indian equity indices, despite late hour recovery on Wednesday, ended the volatile session of trade in red as the investors opted to remain on sidelines on the penultimate day of September F&O series expiry. Benchmarks resumed their southward journey after a day of pause and snapped the session with a cut of around one third of a percent, as sentiments remained down-beat with banking counters continuing to trade under pressure on fourth day in a row on expectation of further hike in repo rate by Reserve Bank of India. Sentiments got dampened on report that foreign institutional investors (FIIs) sold shares worth Rs 21 crore on September 24, 2013, adding to September 23 sales of Rs 25.90 crore.

Selling got intensified after European markets made a sluggish opening, with all the gauges viz. CAC, DAX and FTSE trading lower in early deals as nagging concerns over a potential US government shutdown at the end of the month and uncertainty about the outlook for the Federal Reserve’s stimulus programme kept investors on edge. Moreover, most of the Asian equity benchmarks shut shop in the red with Japanese market ending with a cut of over half a percent, as investors offloaded holding at several counters, tracking a weak lead from Wall Street.

Back home, the down fall was also triggered by selling in public sector oil marketing companies (OMCs) as stocks like BPCL, HPCL and IOC edging lower after the Minister of Petoleum & Natural Gas M Veerappa Moily, ruled out any steep increase in diesel and cooking-fuel prices. Stocks related to realty sector continued their declining trend after the Reserve Bank of India, in a surprise decision, raised its key policy rate in its monetary policy review on September 20, 2013.

Though, markets after hitting intraday low started recovering in last leg of trade, supported by pull back in rupee. The partially convertible rupee was trading at 62.34 per dollar at the time of equity markets closing as against the yesterday’s close of 62.77 on the Interbank Foreign Exchange. Sentiments also got some support with Union Cabinet approved a methodology for auctioning coal blocks, enabling the government to allot coal mining licences through competitive bidding for the first time. Also, RBI in its latest initiative of relaxing norms to raise funds from abroad said that now all types of companies can 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. Shares of some power generation firms rose after the Cabinet Committee on Economic Affairs approved the methodology for auctioning coal blocks, enabling the government to allot coal mining licences through competitive bidding to private companies.

The NSE’s 50-share broadly followed index Nifty declined by around twenty points to end below the psychological 5,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- dropped over sixty points to end below its psychological 19,900 mark.

Moreover, broader markets too struggled through the day and ended the session mixed. The market breadth remained in favour of decliners, as there were 1052 shares on the gaining side against 1256 shares on the losing side, while 150 shares remained unchanged.

Finally, the BSE Sensex lost by 63.97 points or 0.32%, to settle at 19856.24, while the CNX Nifty declined by 18.60 points or 0.32% to settle at 5,873.85.

The BSE Sensex touched a high and a low of 19978.49 and 19658.74, respectively. The BSE Mid cap index gained 0.12% and Small cap index was down by 0.07%.

The top gainers on the Sensex were BHEL up 7.69%, Hindalco Inds up 4.19%, Sesa Goa up 3.74%, NTPC up 2.58% and SBI up 2.39%, on the flip side, RIL down 2.93%, HDFC Bank down 2.78%, Mahindra & Mahindra down by 2.62%, Hindustan Unilever down by 1.52%, and ITC down by 1.36%, were the top losers on the index. 

On the BSE Sectoral front, Power up by 1.84%, Capital Goods up by 1.45%, Healthcare up by 1.27%, Metal up by 1.17%, and PSU up by 0.93%, were the top gainers, while Oil & Gas down by 1.36%, FMCG down by 1.12%, Bankex down by 0.94%, Realty down by 0.56%, and Consumer Durables down by 0.35%, were the top losers on the sectoral front.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) has approved the new methodology for auctioning coal blocks in order to provide upfront and production-linked payments and benchmarking of coal sale prices. The move will ensure greater transparency in auctioning the fully explored coal blocks and will also enable the government to allot coal mining licences through competitive bidding for the first time. The government will put coal blocks for auction after the environment ministry reviews and bidders approval to a minimum work programme.

It is reported that process of bidding of coal blocks will be started soon and six explored blocks with estimated reserves of over 2,000 million tonnes will be auctioned first. Under the new methodology, bidders have to provide production-linked payment on rupee per tonne basis, plus a basic upfront payment of 10 percent of the intrinsic value of the coal block. Meanwhile, intrinsic value will be calculated based on net present value (NPV) of the block arrived at through the discounted cash flow (DCF) method.

In order to benchmark the selling price of coal, the international freight-on-board (FoB) price from the public indices like Argus/Platts will be used by adjusting it with 15 percent to provide for inland transport cost. Further, the policy stated that to reduce short-term volatility in selling price, the average sale price of the past five years will be considered. To rationalise electricity tariffs, a 90 percent discount will be provided on the intrinsic value for the regulated power sector. The policy also stated that the bidders can also relinquish their blocks without penalty if they have carried out the minimum work programme stipulated in the agreement.

The CNX Nifty touched a high and low of 5,910.55 and 5,811.10 respectively.

The top gainers on the Nifty were BHEL up by 8.91%, Sesa Goa up by 4.34%, Hindalco Industries up by 3.75%, State Bank of India up by 2.86% and NTPC up by 2.51%. On the other hand, BPCL down by 3.28%, Reliance down by 3.21%, Hdfc Bank down by 2.91%, Mahindra & Mahindra down by 2.81%, and DLF down by 2.64%, were the top losers.

The European markets were trading in red, France’s CAC 40 was down by 0.47%, Germany’s DAX was down by 0.24%, and United Kingdom’s FTSE 100 was down by 0.19%.

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.