Benchmarks snap five days winning streak; rate sensitive weigh

Indian equity benchmarks ended the volatile day of trade in red on Tuesday, snapping five sessions winning streak, as sentiments were weighed down by selling in banking stocks amid higher retail inflation data. Earlier markets made a positive opening supported by better-than-expected Reliance Industries’ Q2 numbers. RIL reported a 14% growth in revenues to Rs 106,523 crore in the July-September quarter and posted a marginal 1.5% increase in net profit to Rs 5,490 crore. Most importantly, it became the first private sector firm to report revenues exceeding Rs 1 lakh crore in a quarter. Some support also came in from the Planning Commission Deputy Chairman, Montek Singh Ahluwalia’s statement that inflation will soften in coming months, as the steps taken by government to destock the excess food stocks would result in cooling-off of prices in few weeks ahead.

However, markets took a U-turn and entered into negative terrain as investors remained concerned about the macro numbers, as retail inflation gauged by CPI, reversed its declining trend to hit a near-double-digit mark to 9.84% on-year in September. Sentiments also got dampened after Confederation of Indian Industry (CII) survey showed that Indian economic growth is likely to remain below 5 percent in the current fiscal. Meanwhile, depreciation in rupee too hurt investors’ confidence. The partially convertible rupee was trading at 61.88 per dollar at the time of equity markets closing, against the yesterday’s close of 61.55 on the Interbank Foreign Exchange due to dollar demand from oil importers.

Afterwards, benchmarks witnessed decent recovery paring all their losses supported by firm opening in European counters buoyed by hopes that US politicians were close to resolving the ongoing fiscal deadlock. Moreover, cues from Asian counters too supported the sentiments with most of the regional peers ending higher, as investors opted to pile-up positions in risky assets on expectations of an imminent deal to reopen the US government and avert a possible debt default, the investors though will remain wary until they see the final outcome.

Back home, the recovery proved short-lived and markets once again entered into the red terrain, dragged by selling in rate sensitive counters after higher-than-expected inflation data dented hopes for a rate cut. Meanwhile, banking space shed over two and half a percent led by selling in HDFC Bank after country’s third-biggest lender posted quarterly profit growth of 27 percent, lower than street estimate, due to losses in its investment portfolio, higher operating expenses and worsening asset quality. It was the first time in a decade that HDFC Bank's net profit has fallen below 30 percent.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below its psychological 6,100 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex shed around sixty points to end below the psychological 20,600 mark.

Broader markets too struggled to get traction during the trade and ended the session with a cut of around a percent. The market breadth remained in favour of decliners, as there were 984 shares on the gaining side against 1,435 shares on the losing side, while 143 shares remained unchanged.

Finally, the BSE Sensex lost 59.92 points or 0.29%, to settle at 20547.62, while the CNX Nifty declined by 23.65 points or 0.39% to settle at 6,089.05.

The BSE Sensex touched a high and a low of 20759.58 and 20446.73, respectively. The BSE Mid cap index lost 1.30% and Small cap index declined by 0.95%.

The top gainers on the Sensex were Tata Steel up 2.82%, Bharti Airtel up 1.92%, Wipro up 1.90%, Hindalco Inds up 1.45% and Hindustan Unilever up 0.83%, on the flip side, Hero MotoCorp down 2.44%, HDFC Bank down 2.37%, SBI down 2.09%, Tata Power down 2.04%, and ICICI Bank down 1.98%, were the top losers on the index. 

On the BSE Sectoral front, Metal up by 0.91%, IT up by 0.61%, TECK up by 0.59%, and FMCG up by 0.17%, were the gainers, while Bankex down by 2.59%, Realty down by 1.60%, Consumer Durables down by 1.20%, PSU down by 0.95%, and Capital Goods down by 0.75%, were the top losers on the sectoral front.

Meanwhile, with an aim to attract more foreign investments into the housing sector and to provide houses at affordable prices to the people, the government is likely to decide soon on relaxing foreign direct investment (FDI) guidelines for the sector. In September, the Department of Industrial Policy & Promotion (DIPP), after taking views on this proposal from various ministries, including the finance, home affairs ministries and the planning commission, has circulated a draft note to cabinet for approval.

The draft note proposes easing the three-year lock-in period for FDI in housing and townships, and also seeks reduction in the minimum capitalization to $5 million from the present $10 million for wholly-owned subsidiaries. According to the present FDI policy, the lock-in period of three years applies to every tranche of investment brought in by a foreign player from the date of receipt or from the date of completion of minimum capitalization whichever is later. Further, the note has suggested a cut in the minimum built-up area of 50,000 sq mts to 20,000 sq mts of carpet area in case of construction development projects. Meanwhile, despite allowing 100 percent FDI in townships, housing and built-up infrastructure and construction developments, the government has also imposed conditions on it.

India has received FDI worth $22.24 billion during the period from April 2000 to June 2013, in construction development sector including townships, housing and built-up infrastructure. Meanwhile, in April-June period of this fiscal, overall FDI in the country stood at $5.39 billion.   The CNX Nifty touched a high and low of 6,156.30 and 6,056.55 respectively.

The top gainers on the Nifty were Jaiprakash Associates up by 4.78%, Tata Steel up by 3.05%, Wipro up by 1.77%, Hindalco Industries up by 1.72% and Asian Paints up by 1.66%. On the other hand, IndusInd Bank down by 4.91%, Punjab National Bank down by 3.93%, IDFC down by 3.84%, Bank of Baroda down by 3.80%, and HDFC Bank down by 2.91%, were the top losers.

The European markets were trading in green, France’s CAC 40 was up by 0.63%, Germany’s DAX was up by 0.69%, and United Kingdom’s FTSE 100 was up by 0.78%.

The Asian markets barring Shanghai Composite concluded Tuesday’s trade in green to their highest level in nearly five months on heightened hopes for a deal in Washington to reopen the US government and avert a possible debt default. Markets in Indonesia, Malaysia and Singapore remained closed for the trade today on account of holiday. Chinese banking stocks moved higher following central-bank data showing financial institutions issued 787 billion yuan ($128.8 billion) in new loans in September, more than the 674.5 billion yuan in loans expected.

Japan’s industrial output in August fell a seasonally adjusted 0.9% compared with July, downgraded 0.2% point from the initial 0.7% fall. The Indonesian government hopes the nation’s consumers can spend their way out of the worst of the economic slowdown currently affecting emerging market. The President’s office stated that government is now optimistic that the nation will book at least 5.7% growth by the end of 2013.