Late hour selloff drag benchmarks lower

Markets started the new F&O series on a weak note with the benchmark equity indices getting pummeled by around a percentage point on Friday, as investors adopted cautious stance ahead of the June-quarter current account deficit. The domestic benchmarks traded in a narrow range for most part of morning trades but a sharp wave of selling pressure, which emerged in last leg of trade, dragged the key gauges below their crucial 5,850 (Nifty) and 19,800 (Sensex) levels.

Earlier, domestic bourses, soon after a positive opening, entered into the negative terrain, as sentiments turned choppy after global credit rating agency Moody’s has said that uncomfortably high inflation coupled with supply constraints is impacting India’s growth that has slowed to 4.4 percent in the April-June quarter this year. Sentiments also remained down-beat after the RBI governor Raghuram Rajan questioned central banks across the globe, whether current ultra-low interest rates are the right way to return to growth after the financial crisis, sending jitters back home.

Selling got intensified after fresh signs of euro zone economic fragility and rising political pressure in Italy hit the European markets, adding to wider market worries about a potential US government shutdown. However, market-men shrugged off positive cues from Asian markets, which ended mostly higher after US jobless claims data pointed to an improving labor market, but the lack of progress in budget and debt negotiations in Washington kept investors on edge.

Back home, intra-day reversal of Rupee, which pared all its morning gains, also weighed on the sentiment. The rupee was trading at Rs 62.34 per dollar at the time of equity markets closing compared with previous close of Rs 62.08 per dollar. Sentiment also got hurt after Barclays lowered India’s FY14 GDP forecast for the current fiscal to 4.7 per cent, saying the growth and fiscal health of the country are likely to remain under pressure, with 2014 election dynamics adding to uncertainties.

However, losses remained capped to some extent on report that foreign institutional investors (FIIs) bought shares worth a net Rs 172.15 crore on September 26, 2013. Some support also came in after shares of three public sector oil marketing companies (PSU OMCs) viz. BPCL, HPCL and IOC gained as a strong rebound in rupee against the dollar this week has eased concerns of higher cost of crude oil imports. Additionally, Shipping companies continue their upward march and rallied up to 13 percent for the second day in a row after the Baltic Dry Index touched its highest level since December 23, 2011 on September 25, 2013.

The NSE’s 50-share broadly followed index Nifty declined by around fifty points to end below the psychological 5,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- dropped over one hundred and sixty points to end below its psychological 19,800 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 1,157 shares on the gaining side against 1,213 shares on the losing side, while 130 shares remained unchanged.

Finally, the BSE Sensex lost 166.58 points or 0.84%, to settle at 19727.27 while the CNX Nifty declined by 49.05 points or 0.83% to settle at 5,833.20.

The BSE Sensex touched a high and a low of 19981.57 and 19674.38, respectively. The BSE Mid cap index was down by 0.10% and Small cap index gained 0.31%.

The top gainers on the Sensex were Hero MotoCorp up 1.50%, Sun Pharma up 1.45%, Coal India up 1.12%, TCS up 0.31% and Jindal Steel up 0.25%, on the flip side, BHEL down 4.29%, Tata Steel down 3.89%, Bharti Airtel down by 2.84%, Hindalco Inds down by 2.73%, and ICICI Bank down by 2.31%, were the top losers on the index. 

On the BSE Sectoral front, FMCG up by 0.42%, Oil & Gas up by 0.15%, and IT up by 0.07%, were the only gainers, while Bankex down by 1.83%, Metal down by 1.61%, Realty down by 1.48%, Capital Goods down by 1.42%, and Power down by 1.15%, were the top losers on the sectoral front.

Meanwhile, in a move to empower country’s tax authority to check tax avoidance, the government notified, much-diluted General Anti Avoidance Rule (GAAR) provisions to be implemented from April 2016. As per the Central Board of Direct Taxes (CBDT) notification, the GAAR provisions would apply to business arrangements with a tax benefit exceeding Rs 3 crore.

The anti-avoidance rule would be applicable to foreign institutional investors (FIIs) that have not taken the benefit of an agreement under Section 90 or Section 90A of the Income tax Act or Double Taxation Avoidance Agreement (DTAA). CBDT also stressed that before invoking the GAAR provisions, tax officials would have to issue a notice in writing to the assessee seeking objections if any, to its applicability. Meanwhile, in order to soothe the nerves of anxious investors, benefit of grandfathering would be given to investments made before August 1, 2010, however, only up to March 31, 2015.

The government had introduced GAAR provisions in FY13 Budget and was scheduled to come into effect from April 1, 2014, but was delayed due to protest from global and domestic business leaders and investors. These GAAR provisions are based on the recommendations of the Parthasarathi Shome Committee, which was set up to frame a roadmap on the tax avoidance proposals.

The CNX Nifty touched a high and low of 5,909.20 and 5,819.30 respectively.

The top gainers on the Nifty were BPCL up by 6.03%, HCL Technologies up by 2.40%, Sun Pharmaceuticals Industries up by 1.62%, Coal India up by 1.20% and Hero MotoCorp up by 1.05%. On the other hand, BHEL down by 5.61%, Jaiprakash Associates down by 5.59%, Tata Steel down by 4.52%, DLF down by 2.99%, and Kotak Mahindra Bank down by 2.93%, were the top losers.

The European markets were trading in red, France’s CAC 40 was down by 0.29%, Germany’s DAX was down by 0.41%, and United Kingdom’s FTSE 100 was down by 0.76%.

Most of the Asian markets barring Nikkei 225 concluded Friday’s trade in green. Asian currencies fell this week, led by Indonesia’s rupiah and Malaysia’s ringgit. Indonesia’s government will announce August trade data next week, after imports exceeded exports by an unprecedented $2.3 billion in July. Japan’s core consumer inflation in August hit its highest level in nearly five years, while prices of personal electronics rose for the first time since 1992 - signs Japan may be emerging from 15 years of nagging deflation. The Core consumer prices, which include oil products but exclude volatile prices of fresh food, rose 0.8% in August from a year earlier after a 0.7% increase in July, marking the third straight month of gains. Standard & Poor’s stated that Japan could face a debt downgrade if it does not shrink its budget deficit, which is unlikely to return to primary balance by a fiscal 2020 target even if Prime Minister Shinzo Abe’s policies go well.

The values of Hong Kong’s total goods exports and imports recorded year-on-year dip of 1.3% and 0.2% in August, the Census & Statistics Department stated. The value of total goods exports fell to $307.5 billion. Within this total, the value of re-exports decreased 1.2% to $302.6 billion, while that of domestic exports dropped 10.4% to $4.9 billion. Besides, mortgage loan approvals in August fell 8.5% month-on-month to $14.5 billion. Among the mortgage loans approved, those for primary market transactions rose 44.5% to $1.6 billion and those for secondary market transactions dropped 16.9% to $9.9 billion. The mortgage loans for refinancing increased 5% to $3 billion.