Benchmarks end slightly in the red ahead of IIP and CPI data

Key domestic benchmarks once again ended the session in the red terrain extending their losing streak for the second consecutive session on Wednesday as investors opted to remain sideline ahead of Index of Industrial Production (IIP) data for the month of October and CPI data for the month of November to be announced on December 12. Though, recovery in last leg of trade helped the bourses to pare most of their initial losses. The benchmark got off to a negative start on the back of feeble global cues and extended their downfall to touch intraday lows near the psychological 21,050 (Sensex) and 6,250 (Nifty) levels, but the key gauges got solid support around those intraday low levels as they convalesced from thereon as investors went for beaten down but fundamentally strong stocks. 

Some support also came in from better-than-expected trade deficit data. India’s imports fell the most in four years, by 16.37% annually to $33.8 billion in November, leaving narrower trade deficit of $9.22 billion as against $17.2 billion deficit in November 2012, as per the latest data released by the Ministry of Commerce and Industry. Cumulatively, for the April-November period, the trade balance recorded a deficit of $99.9 billion. While, imports cumulatively declined by just 5.39% at $303.89 billion during this period. Country’s exports grew by 5.86% year-on-year in November to $24.6 billion and cumulatively rose by 6.27% to $203.98 billion in the year through November.

Firm opening in European counters too supported the recovery in domestic markets. CAC, DAX and FTSE traded higher in early deals on Wednesday. However, lower closure in Asian markets dampened the sentiments. Hong Kong’s benchmarks Hang Seng Index declined by over one and a half percent on report that Chinese four state-owned banks and a former state policy bank will issue a total of 19 billion yuan ($3.1 billion) worth of negotiable certificates of deposit - another step in China’s move toward liberalized interest rates, raising concerns about short-term pressure on bank profits.

Back home, weakness in rupee too dampened the sentiments rupee snapping its five-day rising streak against the American currency and fell by 26 paise at 61.30 per dollar at the time of equity markets closing at the Interbank Foreign Exchange market on fresh dollar demand by importers. Selling got intensified after Standard and Poor’s (S&P) said that India’s sovereign rating may come under pressure if the general elections due by May next year end up with a hung parliament or with a government unable to push through reforms.

Selling in Auto space too weighed down sentiments after car sales in India fell 8 percent to 1.42 lakh units in November from 1.55 lakh units a year ago, the second consecutive month of decline as demand fell after the festive season. Additionally, select power stocks struggling to get some traction after the central power regulator issued a new set of draft tariff guidelines for state-owned power utilities, wherein some of the operational norms have been tightened and the financial incentives for achieving transmission and generation targets have been sharply pruned. The new guidelines will be applicable for five years starting April 2014.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points, but managed to hold the psychological 6,300 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over eighty points, to end below the psychological 21,200 mark.

Moreover, broader markets too struggled for traction through the day and ended the session mixed. The market breadth remained in favor of decliners, as there were 1,134 shares on the gaining side against 1,356 shares on the losing side, while 165 shares remained unchanged.

Finally, the BSE Sensex plunged by 83.85 points or 0.39%, to settle at 21171.41, while the CNX Nifty lost 24.95 points or 0.39% to settle at 6,307.90.

The BSE Sensex touched a high and a low of 21215.94 and 21069.45, respectively. The BSE Mid cap index was down by 0.10%, while the Small cap index gained 0.08%.

The top gainers on the Sensex were NTPC up 2.43%, HDFC up 1.63%, Coal India up 1.16%, ITC up 0.99%, and Wipro up 0.34%, on the flip side Tata Motors down 3.25%, SBI down 2.59%, BHEL down 2.17%, Bharti Airtel down 2.15%, and ONGC down 2.08%, were the top losers on the index.

On the BSE Sectoral front, FMCG up by 0.56%, was the only gainer, while, Capital Goods down by 1.39%, Auto down by 1.05%, PSU down by 0.86%, Oil & Gas down by 0.86%, and Metal down by 0.63%, were the top losers on the sectoral front.

Meanwhile, amid rising concerns over the deteriorating macro-economic indicators of the country, the Reserve Bank of India (RBI) Governor Raghuram Rajan highlighted that the focus of the central bank will remain on inflation. Mentioning that growth in the country seemed to have stabilised, however, cautioned that it was too early to say that it had bottomed out. Indian wholesale price index (WPI) accelerated to eight-month high at 7% in the month of October on y-o-y basis. Rising inflation in the country has become a concern for the central bank, which has been continually raising the policy rates over the past few months in order to trim the inflation. Meanwhile, Indian economy grew at 4.8% in July- September quarter as against the four-year low figure of 4.4% in April-June quarter of current fiscal.

By adding further, Rajan underscored that Indian rupee has stabilised, but said there is no room for complacency and also suggested the government to continue its efforts to contain the fiscal deficit. The governor further reiterated that the central bank is also keen to strengthen debt markets by introducing more products and would introduce measures to improve liquidity and depth in government bonds, widely known as G-secs in India. Referring to the rising non-performing assets of the banks, the RBI governor proclaimed that loan defaults has become a problem and the central bank will take steps soon to make borrowing costlier, especially for uncooperative and willful defaulters.

The governor has also expressed the need to improve the financial system by clarifying monetary policy framework, strengthening the banking structure through new entry or bank expansion and broadening financial markets, among others. The RBI will soon introduce interest rate futures on 10-year government bonds and has also allowed exchanges to launch these derivatives in other smaller tenor securities in the future.

The CNX Nifty touched a high and low of 6,326.60 and 6,280.25 respectively.

The top gainers on the Nifty were NTPC up by 2.32%, HDFC up by 1.86%, HCL Technologies up by 1.74%, Axis Bank up by 1.36%, and Coal India up by 1.26%, On the other hand, Tata Motors down by 3.38%, Bank of Baroda down by 2.17%, State Bank of India down by 2.13%, BPCL down by 2.12%, and Tata Power Company down by 2.11%, 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 0.19%, and United Kingdom's FTSE 100 was up by 0.10%.

The Asian markets concluded Wednesday’s trade in red as liberalization pressure weighed on Chinese banks, while a stronger yen weighed on Japanese stocks. The Shanghai Composite lost and Hong Kong’s Hang Seng Index dropped after news that China’s four state-owned banks and a former state policy bank will issue a total of 19 billion yuan ($3.1 billion) worth of negotiable certificates of deposit - another step in China’s move toward liberalized interest rates, raising concerns about short-term pressure on bank profits. Indonesian businesses expressed concern that the government’s plan to impose higher taxes on shipments of goods from abroad may drag down earnings of importers and hurt consumer spending.

New home purchases in China continued to rise at a slow pace in the first 11 months of this year. The value of new homes sold across the country between January and November rose 31.1% percent on-year to 5.87 trillion yuan ($962 billion), slower than the 32.6-percent growth in the first 10 months and a 34.5-percent gain in the first three quarters. Japanese core machinery orders rose 0.6% in October from the previous month as some demand ahead of a planned sales tax hike leveled off. The rise was squarely in line with the 0.6% rise expected. It also came after a 2.1% decline in September.