Bear run lingers to fifth straight session; Nifty closes below 6,100

Indian markets remained in the somber mood starting the data heavy week on Monday and making it a five day losing streak. Though, there were bouts of volatility after the trade data for the month of October took the markets and the local currency higher but were equally countered by selling at higher levels that took the markets back to their pre-data levels. There was sluggishness since beginning after data showed that US employers added more jobs than expected, boosting speculation the Federal Reserve will begin scaling back stimulus.

The global markets remained mixed, with some of the Asian markets recouping their losses by the end after the good US jobs data fuelled concern that Fed will go for tapering sooner than expected. The European markets though made a flat-to-positive start taking cues from the unexpected growth in China’s industrial output, but were unable to make much impact on the domestic markets.

Back home, markets after making a soft start, once momentarily entered the green but were dragged down on profit booking. Rupee too remained weak since morning weighing further, though the Finance Minister P Chidambaram tried to allay worries over the weakness in rupee, saying the domestic currency will settle down soon. The finance minister attributed the rupee's recent weakness to the partial return of India's state-run oil marketing companies (OMCs) to the currency market. There was some recovery in the markets towards noon when the trade deficit data were announced, though the deficit increased month-on-month, but were much in line to the expectations and fell sharply to $10.56 billion in October, from $20.21 billion a year ago. The rupee too stabilized and helped the markets to almost enter the green. The recovery was mainly led by PSU banks that showed a greater turnaround after the trade data. However, profit booking soon emerged at the higher levels and prohibited markets to remain in green for long. The final moments of trade turned catastrophic when suddenly selling intensified, dragging the markets lower on getting some weak earnings announcement.PSU lender Central Bank of India reported net loss of Rs 1508.74 crore for the second quarter as compared to a net profit of Rs 329.92 crore for the Q2FY13. Tata Chemical’s net too declined by 48%. Volume remained on higher side of over 1.3 lakh crore, while the broader markets were inflicted with similar magnitude of fall as to the benchmarks.Sectorally Healthcare was the top gainer followed by IT and Tech which got the advantage of rupee weakness, while Realty, Capital Goods and PSU dragged the markets lower

Finally, the BSE Sensex lost 175.19 points or 0.85%, to settle at 20490.96, while the CNX Nifty plunged by 61.95 points or 1.01% to settle at 6,078.80.

The BSE Sensex touched a high and a low of 20672.53 and 20453.15, respectively. The BSE Mid cap index was down by 0.80%, while the Small cap index lost 0.61%.

The top gainers on the Sensex were Dr Reddys Lab up 2.91%, Tata Steel up 1.25%, Maruti Suzuki up 0.49%, TCS up 0.25% and Infosys up 0.17%, on the flip side Hindalco Inds down 4.29%, L&T down 3.08%, ONGC down 2.42%, SBI down 2.25%, and Tata Motors down 2.04%, were the top losers on the index. 

On the BSE Sectoral front, Healthcare up by 0.40%, IT up by 0.16%, and Teck up by 0.08%, were the only gainers, while Realty down by 2.81%, Capital Goods down by 2.43%, PSU down by 1.78%, Power down by 1.51%, and Bankex down by 1.42%, were the top losers on the sectoral front.

Meanwhile, concerned over the prevailing high interest rates scenario in the economy impacting the infrastructure development of the country, the finance ministry has written to the Reserve Bank of India (RBI) governor Reghuram Rajan seeking a change in the rules for infrastructure financing and the treatment of non-performing loans to the sector.

Mentioning infrastructure development a most critical prerequisite to revive the economic growth, finance ministry has suggested that the RBI could ease rules for infrastructure projects that are delayed and can also adopt separate implementation of corporate debt restructuring for infrastructure advances. It urged the central bank that refinancing of such projects should be allowed without treating them as restructured loans that require higher provisioning. Refinancing particularly for infrastructure projects is a globally accepted practice due to their long gestation period, however, the refinancing in the country is still on hold owing to the stringent RBI norms. At present, there are around 378 stalled projects worth around Rs 17.23 lakh crore stuck due to delays in various clearances.

The finance ministry has also pitched for a clear distinction between restructuring and rescheduling of loans. It wants that loans to projects delayed due to factors such as land acquisition or environmental clearance to be treated as rescheduling, while, restructuring should be considered for loans in case of total extended repayment programme due to circumstances that may or may not be beyond the developer's control. Moreover, banks should upgrade the risk management system to reduce the number of projects becoming non-performing assets, it recommended.

Infrastructure lending exerts a lot of pressure on the banks as large infrastructure and industrial projects usually have a moratorium period in their loans in which the borrower does not make interest or principal payment. Further, restructuring of infrastructure loans through extension enforces a higher cost on banks as the lenders have to make provision for such assets.The CNX Nifty touched a high and low of 6,141.65 and 6,067.75 respectively.

The top gainers on the Nifty were Ranbaxy Laboratories up by 2.82%, Cairn India up by 2.23%, Tata Steel up by 1.41%, Maruti Suzuki India up by 0.50% and HDFC Bank up by 0.48%. On the other hand, Hindalco Industries down by 4.72%, Axis Bank down by 3.91%, ACC down by 3.75%, IndusInd Bank down by 3.64%, and NMDC down by 3.54%, were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.26%, Germany's DAX was up by 0.07%, and United Kingdom's FTSE 100 was up by 0.09%.

The Asian markets concluded Monday’s trade on mixed note as the strong US labor report strengthened concerns that the Federal Reserve could start to roll back its stimulus measures sooner than expected. Also in China, a major political meeting was underway in Beijing. The so-called Third Plenum will finish on Tuesday, and is expected to result in a road map for the new government’s policies over the next decade. China posted signs of steady economic growth coupled with modest inflation in October, providing encouraging news on the economy as a key policy meeting of the Communist Party got under way. Industrial production rose 10.3% year over year in October, beating expectations and September’s 10.2% rate. Inflation ticked up slightly, to 3.2% from 3.1%, staying within the government’s stated comfort range.

Japan’s current account balance logged a surplus for the eighth consecutive month in September. The surplus in the balance, one of the widest gauges of international trade, stood at 587.3 billion yen in the reporting month. The surplus amounted to 161.5 billion yen in August. Among key components, the balance of goods trade came to a deficit of 874.8 billion yen. Indonesia’s house prices accelerated in the third quarter as demand remained strong despite the rising cost of building materials and labor. Bank Indonesia’s residential property price index advanced by 13.5% over the July to September period compared to the same period last year.