Benchmarks end lower ahead of RBI's policy review

Monday’s trading session turned out to be a disappointing one for the Indian equity markets, as investors booked profit in last leg of trade ahead of Reserve Bank of India’s (RBI’s) policy announcement. Some cautiousness also crept in after report showed that Foreign Direct Investment (FDI) into India declined to 8-month low of $1.4 billion in August, down 38 percent year-on-year. Though, domestic benchmarks started the day in the green as some strength came in from report that foreign institutional investors (FIIs) bought shares worth a net Rs 626.99 crore on October 25, 2013.

Global cues too were supportive with all the Asian equity benchmarks ending the session in the green terrain on Monday after weaker than forecasted US consumer confidence raised hopes that the Federal Reserve will maintain stimulus. Meanwhile, Japanese markets remained the top gainers amongst other regional peers, garnering over one and a half percent gain on weaker yen. Moreover, European markets too traded mostly in the green in early deals.

Back home, some support came in after the rupee recovered from the day’s low. Sentiments also got some support after Government said it has cleared 13 FDI proposals totaling Rs 1,258 crore and referred Axis Bank's proposal for increasing foreign equity amounting to about Rs 6,266 crore for consideration of the Cabinet. Meanwhile, shares of gold finance companies surged on the buzz that the Reserve Bank of India (RBI) may allow them to lend 75% of the value of jewellery compared with 60% at present. However, investors turned cautious in the last leg of trade and booked their gains awaiting RBI’s monetary policy review on October 29, amidst the expectation that India’s apex bank would hike key interest rates by 25 basis points.

Selling in fast moving consumer goods counter too dampened the sentiments with ITC and Colgate Palmolive declining post weak second quarter numbers. The cigarette-to-hotels major’s net sales were disappointing at 8.8% year on year (yoy) to Rs 7,776 crore, which was below estimate, while Colgate Palmolive reported a fall of 24.51% in its net profit at Rs 109.52 crore for the quarter as compared to Rs 145.08 crore for the same quarter in the previous year. Additionally, textile stocks viz. Arvind, Alok Industries and Grasim Industries edged lower as a study by industry body Assocham has found that about 30 percent of total textile factories across India were non-operational as of 2010-11 which led to massive job losses in the sector.

The NSE’s 50-share broadly followed index Nifty declined by over forty points, but managed to hold its psychological 6,100 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over one hundred and ten points to end below the psychological 20,600 mark.

Broader markets too struggled to get traction and ended the session with a cut of around half a percent. The market breadth remained in favour of decliners, as there were 1,005 shares on the gaining side against 1,408 shares on the losing side, while 160 shares remained unchanged.

Finally, the BSE Sensex lost 113.24 points or 0.55%, to settle at 20570.28, while the CNX Nifty declined by 43.80 points or 0.71% to settle at 6,101.10.

The BSE Sensex touched a high and a low of 20771.36 and 20550.64, respectively. The BSE Mid cap index plunged by 0.76% and Small cap index was down by 0.49%.

The top gainers on the Sensex were Larsen & Toubro up 1.89%, HDFC up 1.35%, ONGC up 1.02%, RIL up 0.49% and Wipro up 0.42%, on the flip side ITC down 3.63%, SSLT down 3.26%, Tata Steel down 2.94%, SBI down 2.41%, and Hindalco Inds down 1.97%, were the top losers on the index. 

On the BSE Sectoral front, Consumer Durables up by 1.29%, Capital Goods up by 0.98%, and Oil & Gas up by 0.31%, were the only gainers, while FMCG down by 2.56%, Realty down by 2.10%, Metal down by 1.63%, Bankex down by 1.20%, and Power down by 1.16%, were top losers on the sectoral front.

Meanwhile, with an aim to provide houses at affordable prices to the people and to attract more foreign investment into country’s construction development sector, the Department of Industrial Policy & Promotion (DIPP) has finalised the Cabinet note on relaxing norms for Foreign Direct Investment (FDI) in the construction sector including townships, housing and built-up infrastructure. The views received from various departments and ministries such as the finance and home affairs ministries, ministry of housing and poverty alleviation and planning commission have been assimilated in the final draft note. The DIPP will soon circulate the draft note to Cabinet for approval.

The draft note proposed easing the three-year lock-in period for FDI in housing and townships, and also sought reduction in the minimum capitalization to $5 million from the present $10 million for wholly-owned subsidiaries. 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.

India has received FDI worth $22.24 billion during the period from April 2000 to June 2013, in construction development sector, accounting for 11 per cent of the total FDI that came into India. However, foreign investments in the sector has started drying up since 2012 as the government has also imposed several conditions on it despite allowing 100 percent FDI in construction development sector. FDI in Indian construction sector declined by 52 percent to Rs 7,248 crore in FY13 from Rs 15,236 crore recorded in the FY12. During the April-July, 2013 FDI in construction sector stood at Rs 2,092 crore

The CNX Nifty touched a high and low of 6,168.75 and 6,094.10 respectively.

The top gainers on the Nifty were Larsen & Toubro up by 1.89%, ONGC up by 1.51%, Housing Development Finance Corporation up by 1.49%, Wipro up by 0.56% and Kotak Mahindra Bank up by 0.51%. On the other hand, Jaiprakash Associates down by 5.36%, Bank of Baroda down by 4.42%, ITC down by 3.93%, PNB down by 3.74%, and Sesa Sterlite down by 3.63%, were the top losers.

Most of the European markets were trading in green, France’s CAC 40 was down by 0.44%, while Germany’s DAX was up by 0.12%, and United Kingdom’s FTSE 100 was up by 0.07%.

All the Asian markets concluded Monday’s trade in green as investors spurred bets that Federal Reserve will maintain stimulus. A pickup in interbank lending rates in China also spooked investors and regional markets started the week in recovery mode, following a series of declines last week that hit Japan and China especially hard. Indonesia’s finance minister stated that inflation rate in October is estimated to be up less than 0.4 percent from the previous month. The statistics bureau is scheduled to release October inflation data on November 1. Shanghai’s gross domestic product expanded 7.8 percent from a year earlier in the third quarter, up from the 7.6 percent increase in the second quarter and securing a stable economic performance. The Shanghai Statistics Bureau stated that in the first three quarters, Shanghai’s economy rose 7.7 percent with the output reaching 1.55 trillion yuan ($252 billion).

Thai factory output fell 2.9 per cent in September from a year earlier, more than expected and adding to concerns about the country’s ability to get out of recession. September was the sixth straight month in which output has fallen. The output data comes in the wake of surprisingly poor September exports, which fell 7.1 per cent from a year earlier, and the central bank cutting its forecast for growth this year to 3.7 per cent from 4.2 per cent.